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Financial Accounting An Integrated Statements Approach 2nd Edition Jonathan E. Duchac, James M. Reeve, Carl S. Warren - Solutions

After its second year of operations, the following amounts were taken from the accounting records of Rainbow Consulting Services, Inc., as of July 31, 2008. Rainbow Consulting Services began its operations on August 1, 2006.Capital stock ............ $ 40,000Cash ................
The financial statements at the end of Flagstone Consulting, Inc.€™s first month of operation are shown below. By analyzing the interrelationships between the financial statements, fill in the proper amounts for (a) through(t).
Pulmonary Consulting, Inc., organized April 1, 2007, is operated by Dr. Tobin. How many errors can you find in the following financial statements for Pulmonary Consulting, Inc., prepared after its first month of operation?Pulmonary Consulting, Inc.Retained Earnings StatementApril 30, 2008Net
Condensed financial statements for Wm. Wrigley Jr. Company for 2004 and 2003 are shown in Exhibits 9 and 10 of this chapter. Based upon these financial statements, answer the following questions:1. Using the accounting equation, Assets = Liabilities = Stockholders’ Equity, fill in the amounts
The balance sheets (in millions), on the following page, were adapted from the December 31, 2004 and 2003 financial statements of Boeing Co.Instructions1. Prepare a comparative vertical analysis of the balance sheets for 2004 and 2003. Round to one decimal place.2. Based upon (1), what is your
The following income statement data (in millions) for Dell Computer Corporation and Apple Computer Inc. were taken from their recent annual reports:1. Prepare a vertical analysis of the income statement for Dell. Round to one decimal place.2. Prepare a vertical analysis of the income statement for
Yahoo.com’s finance Internet site provides summary financial information about public companies, such as stock quotes, recent financial filings with the Securities and Exchange Commission, and recent news stories. Go to Yahoo.com’s financial Web site (finance.yahoo.com/) and enter Wm. Wrigley
In the March 30, 2005, issue of The Chicago Sun Times, there is an article by Eric Herman, entitled “Wrigley Opening Facilities Here and Around the World.” Read the article and answer the following questions:1. Is the article favorable, neutral, or unfavorable regarding future prospects for Wm.
The following comparative income statement information was provided by AMR Corp., the parent company of American Airlines for the years ended December 31, 2004 and 2003.1. Provide a vertical analysis for the comparative years.2. Interpret yourresults.
Assume that you are considering developing a nationwide chain of women’s clothing stores. You have contacted a Houston-based firm that specializes in financing new business ventures and enterprises. Such firms, called venture capital firms, finance new businesses in exchange for a percentage of
Kristin Stokes and Marikay Blair both graduated from State University in June 2007. After graduation, Marikay took a job as a staff accountant in the Chicago office of PricewaterhouseCoopers, an international public accounting firm. Kristin began working as a manager in Kleen Electronics, a
Would General Electric and Xerox use the cash basis or the accrual basis of accounting? Explain.
Which of the following accounts would appear only in an accrual basis accounting system, and which could appear in either a cash basis or an accrual basis accounting system? (a) Capital Stock, (b) Fees Earned, (c) Accounts Payable, (d) Land, (e) Utilities Expense, and (f) Accounts Receivable.
If the effect of an adjustment is to increase the balance of a liability account, which of the following statements describes the effect of the adjustment on the other account?a. Increases the balance of a revenue account.b. Increases the balance of an expense account.c. Increases the balance of an
Chico Urgent Care is owned and operated by Dr. Janet Scanlon, the sole stockholder. During July 2007, Chico Urgent Care entered into the following transactions:a. Dr. Scanlon invested $10,000 in Chico Urgent Care in exchange for capital stock.b. Paid $3,600 for an insurance premium on a one-year
Using the data from Exercise 3-1, record the adjusting entries at the end of July to record the insurance expense and supplies expense. There were $280 of supplies on hand as of July 31. Identify the adjusting entry for insurance as (a1) and supplies as (a2).
Neal Hastings established Ember Services, P.C., a professional corporation, on January 1 of the current year. Ember Services offers financial planning advice to its clients. The effect of each transaction on the balance sheet and the balances after each transaction for January are as follows. Each
The following accounts were taken from the unadjusted trial balance of Dobro Co., a congressional lobbying firm. Indicate whether or not each account would normally require an adjusting entry. If the account normally requires an adjusting entry, use the following notation to indicate the type of
The prepaid insurance account had a balance of $2,750 at the beginning of the year. The account was increased for $1,500 for premiums on policies purchased during the year. What is the adjustment required at the end of the year for each of the following independent situations: (a) The amount of
For the years ending June 30, 2004 and 2003, Microsoft Corporation reported short-term unearned revenue of $6,514 million and $7,225 million, respectively. For the year ending June 30, 2004, Microsoft also reported total revenues of $36,835 million. (a) What adjustment for unearned revenue did
Townes Realty Co. pays weekly salaries of $15,000 on Friday for a five-day week ending on that day. What is the adjustment at the end of the accounting period, assuming that the period ends? (a) On Tuesday, (b) On Wednesday? Indicate each account affected, whether the account is increased or
Accrued salaries of $2,180 owed to employees for December 30 and 31 are not considered in preparing the financial statements for the year ended December 31, 2006. Indicate which items will be erroneously stated, because of the error, on (a) The income statement for December 2006 and (b) The
Assume that the error in Exercise 3-15 was not corrected and that the $2,180 of accrued salaries was included in the first salary payment in January 2007. Indicate which items will be erroneously stated, because of failure to correct the initial error, on (a) The income statement for January 2007
The accountant for Glacier Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) Unearned revenue earned during the year ($6,900) and (b) Accrued wages ($3,740).(a) Indicate the effect of each error, considered individually, on the income statement for the
At the end of the current year, $11,310 of fees have been earned but have not been billed to clients.a. What is the adjustment to record the accrued fees? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.b. If the cash basis
The balance in the unearned fees account, before adjustment at the end of the year, is $67,250. Of these fees, $18,000 have been earned. In addition, $10,200 of fees have been earned but have not been billed. What are the adjustments? (a) To adjust the unearned fees account and (b) To record the
Time Warner Inc. reported short-term deferred revenue of $1,497 million and $1,731 million as of December 31, 2004 and 2003, respectively. For the year ending December 31, 2004, Time Warner reported total revenues of $42,089 million. (a) What was the amount of the adjustment for unearned revenue
The estimated amount of depreciation on equipment for the current year is $5,000. (a) How is the adjustment recorded? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease. (b) If the adjustment in (a) was omitted, which items
The Quasar Company is a consulting firm specializing in pollution control. The following adjustments were made for The Quasar Company:AdjustmentsAccount Increase (Decrease)Accounts Receivable .............. $ 7,140Supplies .................... (1,715)Prepaid Insurance
Barnes & Noble Inc. reported Property, Plant, and Equipment of $1,677,836,000 and Accumulated Depreciation of $991,187,000 at January 31, 2004.a. What was the book value of the fixed assets at January 31, 2004?b. Would the book values of Barnes & Noble’s fixed assets normally approximate their
At the balance sheet date, a business owes a mortgage note payable of $775,000, the terms of which provide for monthly payments of $4,150. Explain how the liability should be classified on the balance sheet.
Tudor Co. offers personal weight reduction consulting services to individuals. After all the accounts have been closed on April 30, 2006, the end of the current fiscal year, the balances of selected accounts from the ledger of Tudor Co. are as follows:Prepare a classified balance sheet that
La-Z-Boy Inc. is one of the world’s largest manufacturers of furniture that is best known for its reclining chairs. The following data (in thousands) were adapted from the 2004 annual report of La-Z-Boy Inc.:Accounts payable ............. $122,576Accounts receivable ............
List the errors you find in the following balance sheet. Prepare a corrected balancesheet.
Answer each of the following independent questions concerning supplies and the adjustment for supplies. (a) The balance in the supplies account, before adjustment at the end of the year, is $2,100. What is the amount of the adjustment if the amount of supplies on hand at the end of the year is
The balance in the unearned fees account, before adjustment at the end of the year, is $9,750. What is the adjustment if the amount of unearned fees at the end of the year is $5,600? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or
The balances of the two wages accounts at December 31, after adjustments at the end of the first year of operations, are Wages Payable, $5,750, and Wages Expense, $133,400. Determine the amount of wages paid during the year.
For a recent period, Circuit City Stores reported accrued expenses of $202,675 thousand. For the same period, Circuit City reported a loss before income taxes of $1,240 thousand. If accrued expenses had not been recorded, what would have been the income (loss) before income taxes?
The balance sheet for Ford Motor Company as of December 31, 2004, includes $31,187 million of accrued expenses as liabilities. Before taxes, Ford Motor Company reported a net income of $4,853 million. If the accruals had not been recorded at December 31, 2004, how much would net income or net loss
Wizard Health Care, Inc., is owned and operated by Dr. Chandra Rains, the sole stockholder. During January 2007, Wizard Health Care entered into the following transactions:Jan. 1 Received $8,100 from Goulash Company as rent for the use of a vacant office in Wizard Health Care's building. Goulash
Adjustment data for Wizard Health Care, Inc., for January are as follows:1. Insurance expired, $300.2. Supplies on hand on January 31, $585.3. Depreciation on building, $1,800.4. Unearned rent revenue earned, $1,350.5. Wages owed employees but not paid, $1,440.6. Services provided but not billed to
Data for Wizard Health Care for January are provided in Problems 3-1A and 3-2A.InstructionsPrepare an income statement, retained earnings statement, and a classified balance sheet for January. The notes payable is due in 2013.
Data for Wizard Health Care for January are provided in Problems 3-1A, 3-2A, and 3-3A.Instructions1. Prepare a statement of cash flows for January.2. Reconcile the net cash flows from operating activities with the net income for January.
At the end of July, the first month of operations, the following selected data were taken from the financial statements of Kay Lopez, Attorney-at-Law, P.C.Net income for July ......... $124,350Total assets at July 31 ......... 500,000Total liabilities at July 31 ....... 125,000Total
Adjustment data for Nocturnal Laundry, Inc., for the year ended August 31, 2007, are as follows:a. Wages accrued but not paid at August 31, $3,200.b. Depreciation of equipment during the year, $15,000.c. Laundry supplies on hand at August 31, $2,500.d. Insurance premiums expired,
Tyro Health Care, Inc., is owned and operated by Dr. Ricky Owens, the sole stockholder. DuringMarch, Tyro Health Care entered into the following transactions:Mar. 2 Received $10,800 from Mutton Company as rent for the use of a vacant office inTyro Health Care's building. Mutton prepays the rent six
Adjustment data for Tyro Health Care Inc. for March are as follows:1. Insurance expired, $360.2. Supplies on hand on March 31, $870.3. Depreciation on building, $1,200.4. Unearned rent revenue earned, $1,800.5. Wages owed employees but not paid, $850.6. Services provided but not billed to patients,
Data for Tyro Health Care Inc. for March are provided in Problems 3-1B and 3-2B.InstructionsPrepare an income statement, retained earnings statement, and a classified balance sheet for March. The notes payable is due in 2018.
Data for Tyro Health Care for March are provided in Problems 3-1B, 3-2B, and 3-3B.Instructions1. Prepare a statement of cash flows for March.2. Reconcile the net cash flows from operating activities with the net income for March.
At the end of November, the first month of operations, the following selected data were taken from the financial statements of Jaime McCune, Attorney-at-Law, P.C.Net income for November ..........$207,320Total assets at November 30 ........ 440,960Total liabilities at November 30 ........
Adjustment data for Giddy Laundry, Inc., for the year ended July 31, 2007, are as follows:a. Wages accrued but not paid at July 31, $2,000.b. Depreciation of equipment during the year, $8,000.c. Laundry supplies on hand at July 31, $1,250.d. Insurance premiums expired during the year,
Walgreen Company and CVS Corporation operate national chains of drugstores that sell prescription drugs, over-the-counter drugs, and other general merchandise such as greeting cards, beauty and cosmetics, household items, food, and beverages. Walgreen operates 4,579 stores, while CVS Corporation
The following operating data (in thousands) were adapted from the 2004 SEC 10-K filings of Walgreen and CVS:1. Using the preceding data, adjust the operating income for CVS and Walgreen shown in Case 3-1 to an adjusted cash basis. 2. Compute the net difference between the operating income under the
The local minor league baseball team, The Hampton Hounds, began their season in late April, with five home dates (and no road games) in April. The team’s owner is seeking a short-term loan from the local bank to help fund some improvements. As a result, a statement of cash receipts and
On September 11, 2001, two United Airlines aircraft were hijacked and destroyed in terrorist attacks on the World Trade Center in New York City and in a crash near Johnstown, Pennsylvania. In addition to the loss of all passengers and crew on board the aircraft, these attacks resulted in numerous
The following data (in millions) for 2004, 2003, and 2002 were taken from 10-K filings with the Securities and Exchange Commission:1. Match each of the following companies with the data for Company A, B, C, or D:Amazon.comCoca-Cola Inc.Delta Air LinesKroger2. Explain the logic underlying
Home Depot and Lowe's operate national chains of home improvement stores that sell a wide assortment of building materials and home improvement, lawn, and garden products, such as lumber, paint, wall coverings, lawn mowers, plumbing, and electrical supplies. Home Depot operates approximately 1,707
Comparative income statements for two video game developers, Activision, Inc., and Electronic Arts, Inc., are provided for a recent fiscal year as follows:The cost of goods sold represents the total cost of manufacturing and packaging a game, plus royalties and licenses paid to independent game
On December 30, 2006, you buy a Ford Expedition. It comes with a three-year, 36,000-mile warranty. On January 18, 2007, you return the Expedition to the dealership for some basic repairs covered under the warranty. The cost of the repairs to the dealership is $725. In what year, 2006 or 2007,
Omaha College requires students to pay tuition each term before classes begin. Students who have not paid their tuition are not allowed to enroll or to attend classes. What accounts do you think would be used by Omaha College to record the receipt of the students’ tuition payments? Describe the
The following is an excerpt from a conversation between Nathan Cisneros and Sonya Lucas just before they boarded a flight to Paris on American Airlines. They are going to Paris to attend their company€™s annual sales conference.Nathan: Sonya, aren€™t you taking an introductory
Several years ago, your brother opened Chestnut Television Repair. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular intervals. As the business grew, he hired an assistant. He is now considering adding
When you registered for this class and paid your tuition, you interacted with the college’s information systems.(a) Are the registration and tuition payment systems business information systems? (b) Which system is part of the college’s accounting system?
What is the difference between an account and a ledger? Discuss.
Regan Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of August 31 has a credit balance of $1,200, and there is no undeposited cash on hand. (a) Assuming that no errors occurred during journalizing or posting, what
Tull Company performed services in June for a specific customer for a fee of $2,230. Payment was received the following July. (a) Was the revenue earned in June or July? (b) What accounts should be debited and credited in (1) June and (2) July?
Assume that when a purchase of supplies of $1,030 for cash was recorded, both the debit and the credit were journalized and posted as $1,300. (a) Would this error cause the trial balance to be out of balance? (b) Would the trial balance be out of balance if the $1,030 entry had been journalized
Banks rely heavily upon customers’ deposits as a source of funds. Demand deposits normally pay interest to the customer, who is entitled to withdraw at any time without prior notice to the bank. Checking and NOW (negotiable order of withdrawal) accounts are the most common form of demand deposits
For each account listed in Exercise 4-1, indicate whether its normal balance is a debit or a credit.
The following accounts have been adapted from recent financial statements of Time Warner:Accounts ReceivableAccumulated DepreciationAdvertising RevenuesCable Television EquipmentCompact Discs and DVD MerchandiseInterest ExpenseMusic Catalogs and CopyrightsNotes Payable (due December 6,
For each account listed in Exercise 4-3, indicate whether its normal balance is a debit or a credit.
During the month, Gilbert Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) Debit entries only,(b) Credit entries only, or (c) Both debit and credit entries.1. Accounts Payable 2. Accounts Receivable
Identify each of the following accounts of Haifa Services Co. as asset, liability, stockholders’ equity, revenue, or expense, and state in each case whether the normal balance is a debit or a credit.a. Accounts Payableb. Accounts Receivablec. Cashd. Capital Stocke. Dividendsf. Equipmentg. Fees
The following table summarizes the rules of debit and credit. For each of the items (a) through (n), indicate whether the proper answer is a debit or acredit.
Malta Co. is a travel agency. The nine transactions recorded by Malta during February 2006, its first month of operations, are indicated in the following T accounts:Indicate for each debit and each credit:(a) Whether an asset, liability, stockholders' equity, dividends, revenue, or expense account
Based upon the T accounts in Exercise 4–8, prepare the nine journal entries from which the postings were made.
Based upon the data presented in Exercise 4–8, prepare a trial balance, listing the accounts in their proper order.
The following accounts (in millions) were adapted from the financial statements of AppleComputer, Inc., for the year ending September 25, 2004:(a) Identify each account as either a balance sheet account or an income statement account.(b) For each balance sheet account, identify it as an asset, a
Using the data from Exercise 4-11, prepare a trial balance for Apple Computer, Inc., as of September 25, 2004. List the accounts in the order they would appear in the ledger of Apple Computer.
Using the data from Exercises 4-11 and 4-12, prepare(a) An income statement and(b) A retained earnings statement for the year ending September 25, 2004, for Apple Computer, Inc.
Using the data from Exercises 4-11 and 4-12,(a) Journalize the closing entries and(b) Prepare a post-closing trial balance for Apple Computer, Inc.
During the month, Wembley Co. received $212,500 in cash and paid out $183,750 in cash.a. Do the data indicate that Wembley Co. earned $28,750 during the month? Explain.b. If the balance of the cash account is $36,300 at the end of the month, what was the cash balance at the beginning of the month?
a. On April 1, the cash account balance was $7,850. During April, cash receipts totaled $41,850, and the April 30 balance was $9,150. Determine the cash payments made during April.b. On July 1, the accounts receivable account balance was $15,500. During July, $61,000 was collected from customers
The Zuni Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Capital Stock; Dividends; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense. Journalize the following selected transactions in a
On October 27, 2006, Lintel Co. purchased $1,320 of supplies on account.a. Journalize the October 27, 2006, transaction.b. Prepare a T account for Supplies. Enter a debit balance of $585 as of October 1, 2006.c. Prepare a T account for Accounts Payable. Enter a credit balance of $6,150 as of
The following selected transactions were completed during May of the current year:1. Billed customers for fees earned, $12,190.2. Purchased supplies on account, $1,250.3. Received cash from customers on account, $9,150.4. Paid creditors on account, $750.a. Journalize the above transactions in a
The accounts in the ledger of Haleakala Park Co. as of March 31, 2006, are listed in alphabetical order, as follows. All accounts have normal balances. The balance of the cash account has been intentionally omitted.Prepare a trial balance, listing the accounts in their proper order and inserting
Indicate which of the following errors, each considered individually, would cause the trial balance totals to be unequal:a. A payment of $7,000 for equipment purchased was posted as a debit of $700 to Equipment and a credit of $700 to Cash.b. Payment of a cash dividend of $12,000 was journalized
The following preliminary trial balance of Escalade Co., a sports ticket agency, does not balance:When the ledger and other records are reviewed, you discover the following: (1) The debits and credits in the cash account total $47,350 and $33,975, respectively; (2) A billing of $2,500 to a customer
The following errors occurred in posting from a two-column journal:1. A debit of $1,250 to Supplies was posted twice.2. A debit of $3,575 to Wages Expense was posted as $3,557.3. A credit of $4,175 to Accounts Payable was not posted.4. A debit of $400 to Accounts Payable was posted as a credit.5.
How many errors can you find in the following trial balance? All accounts have normalbalances.
On January 31, the end of the current year, the following data were accumulated to assist the accountant in preparing the adjusting entries for Edsel Realty:a. The supplies account balance on January 31 is $2,750. The supplies on hand on January 31 are $645.b. The unearned rent account balance on
Ithaca Services Co. offers cleaning services to business clients. The trial balance for Ithaca Services Co. before adjustments is shown on below.The data for year-end adjustments are as follows:a. Fees earned but not yet billed $7.b. Supplies on hand, $3.c. Insurance premiums expired, $6.d.
Based upon the data in Exercise 4-26, adjust the account balances shown and prepare an adjusted trial balance for Ithaca Services Co.
Based upon the data in Exercise 4-27, prepare an income statement, retained earnings statement, and balance sheet for Ithaca Services Co.
Based upon the data in Exercises 4-26 and 4-27, prepare the closing entries for Ithaca Services Co.
Synthesis Systems Co. offers its services to residents in the Dillon City area. Selected accounts from the ledger of Synthesis Systems Co. for the current fiscal year ended October 31, 2006, are as follows:Prepare a retained earnings statement for the year ending October 31,2006.
Selected accounts from the ledger of Bobcat Sports for the current fiscal year ended August 31, 2006, are as follows:Prepare a retained earnings statement for theyear.
The Digital Express Company disclosed a net income of $12,000 on revenues of $400,000 for fiscal year ending December 31, 2007. The company had $500,000 of 6% debt outstanding during the year. In addition, the company had depreciation and amortization expenses of $32,000. The company’s 2007 tax
Condensed income statements for Comcast Corp., the largest U.S. cable operator, and DirecTV Group, Inc., a satellite-based entertainment company, for a recent year are provided below (in millions).a. Determine EBITDA for each company.b. Determine EBITDA divided by revenues for each company.c.

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