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Financial Accounting Information For Decisions 6th Edition Robert w Ingram, Thomas L Albright - Solutions
Costantino Company just started in business. The first seven transactions have been entered into and processed by the company€™s computerized accounting information system. To be sure the accounting system is operating properly, Jim Costantino, the owner, has printed out the financial
Assume that you began a small business in May 2004 by(1) Investing $10,000(2) Borrowing $30,000 from a bank.(3) Purchased equipment for $25,000 cash(4) Purchased merchandise for $12,000 using cash. During the first month of operations, your company(5) Sold merchandise for $27,000 in cash.(6) The
Refer to the information about financial statements below.1. The statement provides information about resources consumed during an accounting period.2. The statement is dated as of a specific point in time.3. The amounts that are owed to other organizations or individuals are reported.4. The total
The accounting staff at Moonbeam Enterprises prepares monthly financial statements. At the end of April 2004 the company had the following account balances:Land ..................$45,000Notes payable ............. 33,000Merchandise inventory ........... 12,480Buildings ............... 50,000Cash
Larrisa Enterprises, Inc., owns and operates a chain of mini-mart stores in a popular summer resort area. Business is highly seasonal with about 80% of annual sales occurring during June, July, and August. Shown below are transactions that occurred during the first week of June.June 3 Merchandise
Refer to the information provided in P2-14.Required Identify each transaction in P2-14 as a financing, investing, or operating activity.
During January, The College Shop had the following cash flows:Cash paid for merchandise ..............$ 4,000Cash paid for rent ................ 5,300Cash received from sales to customers ........ 13,000Cash paid for utilities ................ 200Cash received from owners ............. 9,000Cash
Holiday Travel Store is a retailer that sells merchandise at a family campground. The company’s most recent income statement and balance sheet are presented below:Holiday Travel StoreIncome StatementFor the Year Ended December 31, 2004Sales revenue .............. $75,000Cost of goods sold
Multiple Choice Questions1. Which of the following is a financing activity?a. A manufacturing company purchases supplies.b. A retail company borrows $40,000 from a bank.c. A manufacturing company acquires a new building.d. A service organization pays the monthly utility bill.2. If a company borrows
Millie and Milo Wermz are the owners of The Book Wermz. The business is operated as a corporation. The Wermz invested $100,000 in the company when they started it in 1996. This investment represents the company’s stockholders’ equity. The company’s account balances on September 30, 2004—the
For about a year, Frank Poppa has been operating a hot dog stand in the parking lot of a major discount retailer in a suburban area. The stand appears to be a pushcart but is actually a small trailer that is towed from home each day. Frank cleverly designed the stand to include storage
Environmental Housing Company designs and builds log homes. Financing is provided by owners and creditors, primarily banks. The company owns buildings and equipment it uses in the management, design, transportation, and construction process. It purchases logs and other building materials from other
How do we know how much profit our business has earned?
Why isn’t cash basis accounting the preferred method of reporting on the economic consequences of an organization’s activities?
A friend observes that “in the long run, accrual and cash flow measurements equal out to the same amount. It’s only in the short run that they differ.” Do you agree or disagree? Explain.
How is it possible that a company could be very profitable yet be forced to go out of business because it cannot pay its bills?
How does Accounts Receivable “link” Revenue and Cash?
Where does the account Unearned Revenue appear in the financial statements? How does Unearned Revenue link Cash with Sales Revenue?
Accrued revenue and deferred revenue are both accrual concepts. Explain the order in which cash is received and revenue is recognized for each concept.
On May 31, a company paid $900 rent for June to its landlord. Would you recommend that this expenditure be presented in the end-of-May financial statements as an asset (Prepaid Rent) or as an expense (Rent Expense)? Why?
Quick Computer Company just spent $35,000 of its cash to purchase merchandise for later resale to customers. Would you agree that since $35,000 of cash has been used up, a $35,000 expense has been incurred in this transaction? Why or why not?
What is the difference between a subsidiary account and a control account?
Why are control account balances reported in external financial statements while subsidiary account balances are not? Are subsidiary account balances useful to anyone? Who?
The textbook lists depreciation as an example of a period cost that often must be updated in the accounting records at the end of a fiscal period. What other examples of period costs that must be updated at period-end can you identify? Why is it necessary to update these items?
A friend observes that “one of the most useful pieces of information found on a balance sheet is the current market value of assets such as buildings and land.” Do you agree or disagree? Why?
Explain why accountants prepare a summary of general ledger account balances prior to preparing the financial statements.
Why do accountants close revenue and expense accounts prior to preparing the financial statements?
Is a payment to owners considered an expense? Explain.
Why are good accounting practices the first line of defense against unethical behavior in business?
Why is an accounting system with adequate controls a legal requirement for companies that sell shares of stock to the public?
Accountants prepare a post-closing summary of account balances as one step of the accounting cycle. Which types of accounts have non-zero balances? Which types of accounts have zero balances?
Jon Harland is a wheat farmer. He owns farm equipment and buildings that cost $600,000 when purchased several years ago. He owes a local bank $425,000 for loans used to purchase these assets. In 2004, Jon sold $650,000 of wheat he raised during the year. He incurred operating costs of $585,000 to
Jeni Arrington drives for a large moving company. The company contacts Jeni when it has a job for her and furnishes a truck for her use. Jeni picks up the truck, drives to the customer’s home, and loads, transports, and delivers the customer’s belongings. She returns the truck to the company
The Hardware Shoppe sold $222,500 of goods during September. It collected $75,000 from these sales plus $165,000 from sales of prior months. Complete the followingtable:
Holes ‘R’ Us, a blasting services company, has the following information available on December 31, the last day of the company’s fiscal year. Each item involves an adjusting entry that must be made before financial statements can be prepared and the books closed for the year. Show how these
Record each transaction of Rose’s Flower Shop.a. Purchased merchandise for sale on October 1 for $3,600, to be paid by October 30.b. Sold merchandise for $900 cash on October 3. The merchandise cost Rose’s $270.c. Sold merchandise for $1,800 on credit on October 6. The merchandise cost Rose’s
Complete the following table. Each column represents a different company. All receivables are collected in the year followingsale.
Silberman Company transactions are listed below. Indicate the amount of revenue, expense, and cash flow that results from each. Use the format provided and place the appropriate amount in each section of the table. Use a separate table for each transaction.a. $5,000 of supplies were purchased in
The Get Well Medical Clinic paid $50,000 in wages during June. Of this, $5,800 was for wages earned in May. An additional $4,200 of wages was owed to employees for services provided in June. These wages will be paid in July. Complete the followingtable:
George Carver borrowed $150,000 on January 1 to open a peanut processing plant. Interest on the loan is $3,750 each quarter. The first interest payment will be made on March 31. Complete the followingtable:
Rapid Recovery Chemical Company manufactures prescription drugs. On January 1, 2003, the company purchased new equipment for $450,000 in cash. The company will depreciate the equipment over a 3-year period at $150,000 each year. Complete the following table:Explain the difference between cash flows
Tasaka Company manufactures oriental rugs. It pays utility bills at the end of the month in which services are received. The company received the following bills for April, May, and June, respectively: $850, $1,025, $1,150. Complete the following table:When are cash and accrual basis measures
Each of the following independent situations relates to information available on the last day of the year. Each involves an adjustment that must be made to the accounting system before financial statements can be prepared. Show the effects of each adjusting entry on the accounting system.a. A
On August 30, 2004, Goya Co. purchased $20,000 of canvas material from a supplier, Ramirez, Inc., on credit. The material is cut into smaller pieces for sale to customers. Prior to the purchase, Goya’s merchandise inventory account had a balance of $135,000 and its accounts payable account had a
On December 31, 2004, Bert’s Farm Store had the following account balances in its accounting system. All year-end adjustments had been entered, but the books had not yet been closed.a. What is the purpose of closing the books?b. Prepare all necessary closing entries.c. After closing, what is
Constantino Company presented the following general ledger account balances for the month ended December 31, 2005.Assets:Cash ...............20,600Accounts Receivable ........ 2,250Equipment .............11,000Total Assets ............33,850Liabilities:Wages Payable ........... 250Payable to
The accounting department at Klinger Realty sent the financial reports, as shown below, to Robin Garrison, general manager. Attached was a note indicating that both sets of data are based on the same set of events, which occurred during the quarter just completed. Robin was only recently promoted
Hardy Rock is proprietor of a jewelry store. In January, he applied for a bank loan and was asked to submit an income statement for the past year, ending in December. Near the end of the prior year, Hardy had purchased merchandise for resale that cost him $60,000. He still owed $45,000 for this
Daisy Political Consultants has been in existence for many years. During the month of November, the following events occurred:1. The owners contributed an additional $6,500 to the business to finance an expansion of operations.2. Consulting services totaling $11,000 were performed on credit during
On March 15, the Spinnaker Company received $4,000 in cash from a customer who ordered a custom sail for her racing yacht. The company completed the sail and delivered it on April 30. The Spinnaker Company incurred costs of $2,500 in making the sail. Assume the company recorded the manufacturing
On January 1, Taylor Manufacturing Company purchased a 12-month insurance policy for $1,200 and recorded it as Prepaid Insurance. On December 31 the bookkeeper observed the prepaid insurance account had a $1,200 balance representing the insurance purchased on January 1.RequiredA. Record the
The local chapter of Helping Hands, a social service organization, had the following economic events occur during the month of May:1. A luncheon honoring volunteers was held at a cost of $950. By month end the bill hadn’t been received or paid.2. New letterhead and envelopes were printed at a
On March 1, Carl Caldwell started Caldwell Furniture Repair Company. He invested $2,000 of his own money, borrowed $16,000 from his father-in-law at 9% annual interest, and obtained an additional $3,000, 12% loan from Maxibank. He purchased $15,000 of tools and equipment (some new, some used) and
Consider each of the five independent situations below.1. Asia Tea Company purchased a 3-month property insurance policy on March 1 at a cost of $3,600. The insurance became effective immediately although payment was due and paid 45 days later.2. On February 1, Big Bang Chemical Company signed a
The Desert Harbor Inn has been in business for more than 100 years but was recently renovated. On January 1, 2004, the balance sheet of the company was as shown on the next page. During 2004, the inn earned $165,000 from room rentals and another $35,000 from parking, the gift shop, and other guest
At December 31, 2004, the accountant at Puget Sounds, a recording studio, has entered all the firm’s transactions into the accounting system and is beginning the end-of-period process. He asks your help in identifying the necessary adjusting entries. In the first column on page F121, the
Encanto Properties, Inc., uses the accounts listed below. A. Prepaid Insurance B. Retained Earnings C. Accumulated Depreciation D. Wages Expense E. Commissions Revenue F. Interest Payable G. Supplies H. Insurance Expense I. Unearned Rent J. Prepaid AdvertisingK. Notes PayableL. Cost of Goods SoldM.
Ethel Spikes works for Hard Rock Candy Company. She enters customer orders in the company’s accounting system. The orders are written on prepared forms by the company’s sales representatives (reps). The company employs ten sales reps, who work different territories. The reps are paid on a
Flora Wiser is the daughter of the owner of Wiser Florist Company. She recently completed college with a major in biology and has taken the job of assistant manager. Her primary duties involve purchasing inventory from suppliers. Flora has little understanding of accounting, and you have been asked
Multiple-Choice Questions1. The primary difference between control accounts and subsidiary accounts is that a. control accounts appear on the balance sheet but subsidiary accounts appear on the income statement.b. subsidiary accounts provide detailed information; control accounts provide summary
The problem in Chapter F2 provided account balances for The Book Wermz on September 30, 2004, the end of the company’s fiscal year: Cash $4,238.72, Inventory of Books $235,892.35, Supplies $2,343.28, Equipment $43,297.00, Notes Payable $123,452.88, Investment by Owners $100,000, and Retained
Flash Newton is national sales director at Bright & Shiny Toothpaste Company. The firm manufactures and distributes a full line of premium-priced personal care products sold through a carefully selected set of distributors nationwide. The popularity and profit margins of the Bright & Shiny product
Summary account balances for Mom’s Cookie Company at the end of February are presented below. The summary includes all transactions for February, not just those described in this chapter. In particular, additional sales transactions have been included.Mom’s Cookie CompanyAccount
How do we report earnings and financial position to stockholders?
Are dividends an expense? Sometimes? Always? Never? Explain.
Identify three questions that can be answered by reviewing a firm's income statement but that cannot be answered by reviewing the firm's balance sheet or statement of stockholders' equity. Be specific.
Identify three questions that can be answered by reviewing a firm's balance sheet but that cannot be answered by reviewing the firm's income statement or statement of stockholders' equity. Be specific.
Why are there so many different sections of information on an income statement?
Why does a parent company prepare consolidated financial statements?
A friend says, "The income statement doesn't reveal anything about the amount of cash that was received from sales during a fiscal period." Do you agree with this statement? Why or why not?
Explain the difference between a classified balance sheet and a comparative balance sheet.
Assume you are reviewing a balance sheet that has assets listed on the left side and liabilities and owners' equity on the right side. What question or questions are answered by looking at the information on the left side of the balance sheet? What question or questions are answered by looking at
If all of the stockholders' equity accounts are reported on the balance sheet, why is the statement of stockholders' equity necessary?
The statement of stockholders' equity can be thought of as a bridge between the income statement and the balance sheet? Why?
What does the term articulation mean as applied to accounting and financial reporting?
How do the purpose of the income statement, the purpose of the balance sheet, and the purpose of the statement of stockholders' equity differ?
Why is the use of historical cost information a limitation of financial statements?
It is often said that measuring performance for a fiscal period requires periodic measurement and the use of estimates and approximations. Do you agree that this is true? Why or why not?
A list of information contained in financial statements is provided below. For each item, indicate which financial statement provides the information.a. Changes in a corporation's stockholders' equity for a fiscal periodb. The dollar amount of resources available at a particular datec. The amount
For each of the items listed below, indicate the financial statement (or statements) for which the information is true. Use I to indicate income statement, B to indicate balance sheet, and SE to indicate statement of stockholders' equity. If the item below is not true for any of the three financial
Alex didn't study very hard when he took accounting because he thought he wouldn't ever use it on the job at Valentine Company. Yesterday, after preparing all end-of-the-month adjusting entries, both of the company's accounting staff became ill. The company owner, knowing that Alex had taken
Slotnick Company sells, rents, and services ski equipment. Information about the company's financial performance for a recent fiscal period is provided below.Average shares outstanding ............ 20,000Cost of goods sold ................$34,000Debt outstanding ................ 65,000General and
Flowers by Freddie presented the income statement below for its most recent fiscal year. The items have been numbered for convenience in analysis.(1) Sales revenue ......... $371,923(2) Cost of goods sold ...... 201,668(3) Gross profit ......... 170,255(4) Operating expenses ......
SuperQuick Computer Corporation reported the following income statement for a recent quarter.Consolidated Statement of IncomeFor the Quarter Ended December 31, 2004Sales ..................$719,150Cost of sales ............... 549,313169,837Research and development costs ....... 16,900Selling
Listed below are selected account balances for Hemmingway Company for June 30, 2004.Determine each of the following amounts.a. Current assetsb. Current liabilitiesc. Property, plant, and equipmentd. Total assetse. Long-term liabilitiesf. Total liabilitiesg. Stockholders' equityh. Total liabilities
Styles Unlimited reported the following information at January 31.Accounts payable .............$ 250Accounts receivable ............1,057Accrued expenses (current) ......... 348Cash and equivalents ........... 321Contributed capital .............. 319Deferred income taxes (liabilities) ......
The accounting staff at Marvelous Enterprises prepares monthly financial statements. At the end of April, the company's ledger accounts have the following balances. All adjusting entries have been made and the next step is to prepare the financial statements. The company has 18,200 shares of stock
Listed below are account balances and other data for Hands & Eyes, Inc., a company that sells crafts and decorative supplies, for the fiscal year ended December 31, 2004.From the data presented above, determine the amount of each of the items that follow.1. Gross profit2. Operating income3. Net
Listed below are typical accounts or titles that appear on financial statements. For each item, identify the financial statement(s) on which it appears.a. Loss on sale of equipmentb. Taxes payablec. Trademarkd. Accumulated other comprehensive incomee. Current assetsf. Investmentsg. Rental revenueh.
A list of financial statement items is given below.1. Accounts receivable2. Rent payable3. Retained earnings4. Cost of sales5. Prepaid rent6. Supplies expense7. Equipment8. Dividends9. Depreciation expense10. Copyrights11. Accrued liabilities12. Wages payable13. Land14. Notes payable15. Service
Listed below are financial statements for the Sunflower Company.Income StatementFor the Year Ended December 31, 2004Sales revenue ............$ 20,000Cost of sales .............. (12,000)Gross profit ............. 8,000Operating expenses .......... (4,000)Selling and administrative expenses ...
Crane Pool Corporation reported the following selected information for its 2004 fiscal year.Contributed capital at June 30, 2003 ......$ 657Retained earnings at June 30, 2003 ........1,536Dividends .................. 222Net income ................ 953Common stock issued ............ 243Use this
Use the information provided in Exercise 4-13.a. Prepare an income statement following the format shown in Exhibit 1. (List expenses separately.)b. Prepare a statement of stockholders' equity in good form.For each statement, use a three-line heading on the statement that includes(1) The name of the
Assume you are a financial manager with a U.S. corporation. A. Suliman is a recently employed manager in the Middle Eastern division of your corporation and a visitor to the United States. He has little familiarity with financial reporting practices in the United States. Your boss has given you the
Flower Childs is a regional sales manager for Green-Grow, Inc., a producer of garden supplies. The company's fiscal year ends on April 30. In mid-April, Flower is contacted by the president of Green-Grow. He indicates that the company is facing a financial problem. Two years ago, the company
Just after preparing the adjusting entries for the year, the long-time controller at Parrot Company took a leave of absence. Her inexperienced assistant did his best to prepare financial statements from the information the controller had left behind. He had particular difficulty with the income
The Lo Company imports and sells Chinese furniture in the United States. Its new accountant has been assigned the task of preparing the income statement. She knows that the FASB is now requiring that certain unrealized gains and losses be reported as part of comprehensive income. She has the
Ceramics, Inc. reported the following balance sheet for the year 2004.Balance SheetFor the year ending December 31, 2004Assets:Cash ................$ 2,000Accounts payable ........... 500Inventory ............... 900Equipment .............. 1,000Land ................. 1,500Total assets
Argyle Company has the following account balances at December 31, 2004. During the year, Argyle had 10,000 shares of stock outstanding.Argyle CompanyAccount Balancesat December 31, 2004Account BalanceCash ................. $ 4,650Accounts receivable ........... 16,350Inventory ...............
The following account balances are provided for Rustic Company at December 31, 2004. Revenues and expense accounts cover the fiscal year ending on that date. All numbers are dollars except shares outstanding. Account AmountAccounts payable ............... $ 14,000Accounts
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