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Cornerstones of Financial and Managerial Accounting 1st Edition Rich Jones, Mowen, Hansen, Heitger - Solutions
Obtain General Electric’s 2008 annual report either through the “Investor Relations” portion of its Web site (do a web search for GE investor relations) or go to www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).”Required:Answer the following
Refer to the financial statements of Abercrombie & Fitch and Aeropostale that are supplied with this text.Required:Answer the following questions:1. Determine the amounts in the accounting equation for the year ending February 3, 2007 for each company. Does the accounting equation balance?2.
Ehrlich Smith, the owner of The Shoe Box, has asked you to help him understand the proper way to account for certain accounting items as he prepares his 2009 financial statements. Smith has provided the following information and observations:a. A three-year fire insurance policy was purchased on
How does accrual-basis net income differ from cash-basis net income?
Explain when revenue may be recognized in the accounting records.
What happens during the accounting cycle?
Provide two examples of transactions that begin and end at a particular point-in-time and two examples of continuous transactions.
Why are adjusting entries needed?
What accounting concepts require that adjusting entries be employed?
Describe the recording of transactions that begin and end at a particular point-in-time and continuous transactions. In your answer, be sure to refer to within-period journal entries and adjusting entries.
For each of the four categories of adjusting entries, describe the business activity that produces circumstances requiring adjustment.
What is the difference between an accrual and a deferral?
Which type of adjustment will? (a) Increase both assets and revenues, (b) Increase revenues and decrease liabilities, (c) Increase expenses and decrease assets, (d) Increase both expenses and liabilities?
How is the amount for an interest expense (or interest revenue) adjustment determined?
Describe the effect on the financial statements when an adjustment is prepared that record (a) Unrecorded revenue and (b) Unrecorded expense.
On the basis of what you have learned about adjustments, why do you think that adjusting entries are made on the last day of the accounting period rather than at several earlier times during the accounting period?
Describe the four steps in the closing process.
Identify each of the following categories of accounts as temporary or permanent: assets, liabilities, equity, revenues, expenses, dividends. How is the distinction between temporary and permanent accounts related to the closing process?
Why are only the balance sheet accounts permanent?
List the seven steps in the accounting cycle in the order in which they occur.
What is the relationship between the accounting cycle and the worksheet?
Describe the structure of the worksheet and the accounting information it contains.
Multiple-Choice Questions1. Which of the following statements is true?a. Under cash-basis accounting, revenues are recorded when earned and expenses are recorded when incurred.b. Generally accepted accounting principles require companies to use cash-basis accounting.c. The key elements of
Multiple Choice Questions1. Ron’s Diner received the following bills for December 2009 utilities:Electricity: $400 on December 29, 2009Telephone: $150 on January 5, 2010Both bills were paid on January 10, 2010. On the December 31, 2009 balance sheet, Ron’s Diner will report accrued expenses
McDonald Music sells used CDs for $2.00 each. During the month of April, McDonald Music sold 21,200 CDs for cash and 7,300 CDs on credit. McDonald's cash collections in April included the $42,400 for the 21,200 CDs sold for cash, $11,800 for CDs sold on credit during the previous month, and $8,100
Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $120,000 in fuel costs. Speedy paid $90,000 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort
Heartstrings Gift Shoppe sells an assortment of gifts for any occasion. During October, Heartstrings started a Gift-of-the-Month program. Under the terms of this program, Heartstrings would select and deliver a random gift each month, over the next 12 months, to the person the customer selects as a
The following information describes transactions for Morgenstern Advertising Company during July:a. On July 5, Morgenstern purchased and received $21,500 of supplies on credit from Drexel Supply Inc. Morgenstern paid $18,500 cash to Drexel and used $16,200 of the supplies during July.b. Morgenstern
Singleton, Inc., had the following transactions during the year.a. Merchandise was sold to customers on credit.b. Purchased equipment to be used in the operation of its business.c. A two-year insurance contract was purchased.d. Received cash for services to be performed over the next year.e. Paid
Powers Rental Service had the following items that require adjustment at year-end.a. Earned $6,420 of revenue from the rental of equipment for which the customer had not yet paid.b. Interest of $400 on a note receivable has been earned but not yet received.Required:1. Prepare the adjusting entries
Manning Manufacturing Inc. had the following items that require adjustment at yearend.a. Salaries of $3,180 which were earned in December are unrecorded and unpaid.b. Used $2,598 of utilities in December which are unrecorded and unpaid.c. Interest of $1,200 on a note payable has not been recorded
Olney Cleaning Company had the following items that require adjustment at year-end.a. For one cleaning contract, $14,000 cash was received in advance. The cash was credited to unearned revenue upon receipt. At year-end, $3,750 of the service revenue was still unearned.b. For another cleaning
Best Company had the following items that require adjustment at year-end.a. Cash for equipment rental in the amount of $4,200 was paid in advance. The $4,200 was debited to prepaid equipment rent when paid. At year-end, $3,150 of the prepaid rent had been used.b. Cash for insurance in the amount of
Pain-Free Dental Group, Inc., purchased dental supplies of $15,500 during the year. At the end of the year, a physical count of supplies showed $2,300 of supplies on hand.Required:1. Prepare the adjusting entry needed at the end of year.2. What is the amount of supplies reported on Pain-Free’s
LaGarde Company has a machine that it purchased for $125,000 on January 1. Annual depreciation on the machine is estimated to be $11,400.Required:1. Prepare the adjusting entry needed at the end of the year.2. What is the book value of the machine reported on LaGarde’s balance sheet at the end
When adjusting entries were made at the end of the year, the accountant for Parker Company did not make the following adjustments.a. $2,900 of wages had been earned but were unpaidb. $3,750 of revenue had been earned but was uncollected and unrecorded.c. $2,400 of revenue had been earned. The
Sparrow Company had the following adjusted trial balance at December 31, 2009.Required:Prepare a single-step income statement for Sparrow Company for2009.
Refer to the adjusted trial balance in Cornerstone Exercise 3-24.Required:Prepare a statement of retained earnings for Sparrow Company for 2009.
Refer to the adjusted trial balance in Cornerstone Exercise 3-24.Required:Prepare a classified balance sheet for Sparrow Company at December 31, 2009.
Refer to the adjusted trial balance in Cornerstone Exercise 3-24.Required:1. Prepare the closing entries for Sparrow Company at December 31, 2009.2. How does the closing process affect retained earnings?
The following is a list of steps in the accounting cycle.a. Post to the ledgerb. Close the accountsc. Analyze transactionsd. Adjust the accountse. Prepare financial statementsf. Journalize transactionsg. Prepare a trial balanceRequired:1. Arrange the steps of the accounting cycle in proper order.2.
The following information is taken from the accrual accounting records of Kroger Sales Company:a. During January, Kroger paid $8,500 for supplies to be used in sales to customers during the next two months (February and March). The supplies will be used evenly over the next two months.b. Kroger
Each of the following situations relates to the recognition of revenue:a. A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January.b. A furniture store sells furniture in June with no payments and no interest for six months.c. An
Electronic Repair Company repaired a high-definition television for Sarah Merrifield in December 2009. Sarah paid $50 at the time of the repair and agreed to pay Electronic Repair Company $50 each month for five months beginning on January 15, 2010. Electronic Repair Company used $80 of supplies,
The records of Summers Building Company reveal the following information for 2009.a. Cash receipts during 2009 (including $50,000 paid by stockholders in exchange for common stock) were $220,000.b. Cash payments during 2009 (including $8,000 of dividends paid to stockholders) were $132,000.c. Total
Treadway Dental Services gives each of its patients a toothbrush with the name and phone number of the dentist office and a logo imprinted on the brush. Treadway purchased 15,000 of the toothbrushes in October 2009 for $3,000. The toothbrushes were delivered in November and paid for in December
Carrico Advertising Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico's activities during 2009.a. At the beginning of 2009, customers owed Carrico $43,700 for advertising services performed during 2008. During 2009, Carrico performed
Conklin Services prepares financial statements only once per year using an annual accounting period ending on December 31. Each of the following statements describes an entry made by Conklin on December 31 of a recent year.a. On December 31, Conklin completed a service agreement for Pizza Planet
Medina Motor Service is preparing adjusting entries for the year ended December 31, 2009. The following items describe Medina's continuous transactions during 2009:a. Medina's salaried employees are paid on the last day of every month.b. Medina's hourly employees are paid every other Friday for the
Sentry Transport, Inc., of Atlanta provides in-town parcel delivery services in addition to a full range of passenger services. Sentry engaged in the following activities during the current year:a. Sentry received $1,200 cash in advance from Rich's Department Store for an estimated 200 deliveries
Faraday Electronic Service repairs stereos and DVD players. During a recent year, Faraday engaged in the following activities:a. On September 1, Faraday paid Wausau Insurance $1,860 for its liability insurance for the next 12 months. The full amount of the prepayment was debited to prepaid
Greensboro Properties, Inc., owns a building in which it leases office space to small businesses and professionals. During 2009, Greensboro Properties engaged in the following transactions:a. On March 1, Greensboro Properties paid $14,400 in advance to Patterson Account Services for billing
JDM, Inc., made the following prepayments for expense items during 2009:a. Prepaid building rent for one year on April 1. JDM paid $6,300, debiting prepaid rent for the amount paid.b. Prepaid six months’ insurance on October 1 by paying $870. Prepaid insurance was debited.c. Purchased $3,750 of
The downtown Chicago Nieman Marcus store purchases large quantities of supplies, including plastic garment bags and paper bags and boxes. At December 31, 2009, the following information is available concerning these supplies:Supplies inventory, 1/1/2009 ........$ 4,150Supplies inventory, 12/31/2009
Allentown Services, Inc., is preparing adjusting entries for the year ending December 31, 2009. The following data are available:a. Interest is owed at December 31, 2009, on a six-month, 9 percent note. Allentown borrowed $100,000 from NBD on September 1, 2009.b. Allentown provides daily building
Reynolds Computer Service offers data processing services to retail clothing stores. The following data have been collected to aid in the preparation of adjusting entries for Reynolds Computer Service for 2009:a. Computer equipment was purchased from IBM in 2006 at a cost of $540,000. Annual
VanBrush Enterprises, a painting contractor, prepared the following adjusting entries at year-end:a. Wages Expense ......... 3,700Wages Payable ........ 3,700b. Accounts Receivable ...... 6,500Service Revenue ...... 6,500c. Unearned Revenue ........ 5,245Service Revenue,Advertising
Grand Rapids Consulting, Inc., began 2009 with a retained earnings balance of $38,100 and has the following accounts and balances at year-end:Sales Revenue ............$155,000Salaries Expense ........... 83,000Rent Expense ........... 15,000Utilities Expense ........... 7,900Office Supplies
James and Susan Morley recently converted a large turn-of-the-century house into a hotel and incorporated the business as Saginaw Enterprises. Their accountant is inexperienced and has made the following closing entries at the end of Saginaw€™s first year of operations:Required:1.
Unadjusted account balances at December 31, 2009, for Rapisarda Company at the top of the next page.The following data are not yet recorded:a. Depreciation on the equipment is $25,000.b. Unrecorded wages owed at December 31, 2009: $2,000.c. Prepaid rent at December 31, 2009: $10,000.d. Income tax
George Hathaway, an electrician, entered into an agreement with a real estate management company to perform all maintenance of basic electrical systems and air-conditioning equipment in the apartment buildings under the company's management. The agreement, which is subject to annual renewal,
Security Specialists performs security services for local businesses. During 2009, Security Specialists performed $900,000 of security services and collected $930,000 cash from customers. Security Specialist's employees earned salaries of $42,000 per month. During 2009, Security Services paid
Kuepper's Day Care is a large day-care center in South Orange, New Jersey. The day-care center serves several nearby businesses, as well as a number of individual families. The businesses pay $6,180 per child per year for day-care services for their employees' children. The businesses pay in
Bartow Photographic Services takes wedding and graduation photographs, At December 31, the end of Bartow's accounting period, the following information is available:a. All wedding photographs are paid for in advance, and all cash collected for them is credited to unearned revenue. Except for a
Four adjusting entries are shown below.a. Wages Expense ........ 2,490Wages Payable ...... 2,490b. Accounts Receivable ..... 3,350Service Revenue ..... 3,350c. Rent Expense ......... 1,760Prepaid Rent ........ 1,760d. Unearned Service Revenue ... 4,130Service Revenue
You have the following unadjusted trial balance for Rogers Corporation at December31, 2009:At year-end, you have the following data for adjustments:a. An analysis indicates that prepaid rent on December 31 should be $7,900.b. A physical inventory shows that $1,100 of office supplies is on hand.c.
The following schedule shows all the accounts of Fresno Travel Agency that received year-end adjusting entries:Required:1. Calculate the missing amounts identified by the numbers (a) through (e).2. Prepare the five adjusting entries that must have been made to cause the account changes asindicated.
Round Grove Alarm Company provides security services to homes in northwestern Indiana. At year-end 2009, after adjusting entries have been made, the following list of account balances is prepared:Accounts Receivable ................$ 37,000Accounts Payable ................ 23,000Accumulated
Tarkington Freight Service provides delivery of merchandise to retail grocery stores in the Northeast. At the beginning of 2009, the following account balances were available:Cash ................... $ 92,100Accounts Receivable .............. 361,500Supplies ................... 24,600Prepaid
Marsteller Properties, Inc., owns apartments that it rents to university students. At December 31, 2009, the following unadjusted account balances were available:Cash ..................... $ 4,600Rent Receivable ................ 32,500Supplies .................... 4,700Prepaid Insurance
Martin Sharp, who repairs lawn mowers, collects cash from his customers when the repair services are completed. He maintains an inventory of repair parts that are purchased from a wholesale supplier. Martin’s records show the following information for the first three months of 2009.Required:1.
Aunt Bea’s Catering Service provides catering service for special occasions. During 2009, Aunt Bea performed $125,000 of catering services and collected $118,500 of cash from customers. Salaries earned by Aunt Bea’s employees during 2009 were $38,500. Aunt Bea paid employees $35,000 during
Morgan Dance Inc. provides ballet, tap, and jazz dancing instruction to promising young dancers. Morgan began operations in January 2010 and is preparing its monthly financial statements for January 2010. The following items describe Morgan’s transactions in January 2010:a. Morgan requires that
West Beach Resort operates a resort complex that specializes in hosting small business and professional meetings. West Beach closes its fiscal year on January 31, a time when it has few meetings under way. At January 31, 2010, the following data are available:a. A training meeting is under way for
Four adjusting entries are shown below:a. Interest Expense ....... 1,458Interest Payable .... 1,458b. Interest Receivable ..... 839Interest Revenue .... 839c. Insurance Expense ...... 3,160Prepaid Insurance ...... 3,160d. Unearned Rent Revenue ... 5,721Rent Revenue ......
The unadjusted trial balance for Mitchell Pharmacy appears below.The following information is available at year-end for adjustments:a. An analysis of insurance policies indicates that $1,400 of the prepaid insurance is coverage for 2010.b. Depreciation expense for 2009 is $8,800.c. Four months'
The following schedule shows all the accounts of Eagle Imports that received year-end adjusting entries:Required:1. Calculate the missing amounts identified by the numbers (a) through (e).2. Prepare the five adjusting entries that must have been made to cause the account changes asindicated.
Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2009. The following are the adjusted account balances:Sales Revenue ................$578,500Interest Revenue ............... 8,100Accounts Payable .............. 8,330Wages Expense .............. 405,300Accounts
Wilburton Riding Stables provides stables, care for animals, and grounds for riding and showing horses. The account balances at the beginning of 2009 were:Cash ....................$ 2,200Accounts Receivable ............. 4,400Supplies, Feed ................. 24,100Supplies, Straw ................
Flint, Inc., operates a cable television system. At December 31, 2009, the following unadjusted account balances were available:Cash ...................... $ 2,000Accounts Receivable ............... 89,000Office Supplies .................. 5,000Land ......................$ 37,000Building
Katie Vote owns a small business that rents computers to students at the local university. Katie's typical rental contract requires the student to pay the year's rent of $900 ($100 per month) in advance. When Katie prepares financial statements at the end of December, her accountant requires that
Jackson Dunlap is president of New Miami Maintenance Inc. which provides building maintenance services. On October 15, 2009, Mr. Dunlap signed a service contract with Western College. Under the contract, New Miami will provide maintenance services for all of Western's buildings for a period of two
Beth Rader purchased North Shore Health Club in June 2009. Beth wanted to increase the size of the business by selling five-year memberships for $5,000, payable at the beginning of the membership period. The normal yearly membership fee is $1,500. Since few prospective members were expected to want
Newman Properties Inc. completed construction of a new shopping center in July 2009. During the first six months of 2009, Newman spent $750,000 for salaries, preparation of documents, travel, and other similar activities associated with securing tenants for the center. Newman was successful
Cal-Lite Products, Inc., manufactures a line of food products that appeals to persons interested in weight loss. To stimulate sales, Cal-Lite includes cash refund coupons in many of its products. Cal-Lite issues the purchaser a check when the coupon is returned to the company, which may be many
Link Pictures, Inc., sells (licenses) the rights to exhibit motion pictures to theaters. Under the sales contract, the theater promises to pay a license fee equal to the larger of a guaranteed minimum or a percentage of the box office receipts. In addition, the contract requires the guaranteed
Don Berthrong, the manager of the local Books-A-Million, is wondering whether adjusting entries will affect his financial statements. Don's business has grown steadily for several years, and Don expects it to continue to grow for the next several years at a rate of 5 to 10 percent per year. Nearly
Barnes Building Systems made the following closing entries at the end of a recent year:a. Income Summary ........ 384,300Retained Earnings ..... 384,300b. Retained Earnings ....... 35,000Dividends ......... 35,000c. Sales Revenue ........425,700Income Summary ..... 425,700d. Income
Obtain FedEx Corporation's 2007 annual report either through the “Investor Relations” portion of their website (do a web search for FedEx investor relations) or go to www.sec.gov and click “Search for company filings” under “Filings & Forms (EDGAR)”Required:Answer the following
Refer to the financial statements of Abercrombie & Fitch and Aeropostale that are supplied with this text.Required:Answer the following questions:1. Does each company apply the revenue recognition principle to sales to customers and to gift cards in the same manner?2. Which accounts on the
When is revenue recognized?
Explain the criteria for revenue recognition.
What four criteria has the SEC issued as further guidance for revenue recognition?
How is net sales revenue calculated?
Why might users of financial statements prefer the separate disclosure of gross sales revenue and sales returns and allowances to the disclosure of a single net sales revenue amount?
Why are sales discounts offered?
What are sales allowances? How do sales allowances differ from sales discounts?
What are trade discounts and quantity discounts? From an accounting viewpoint, how does the effect of trade and quantity discounts on selling (or invoice) price differ from the effect of sales discounts?
What documents must be present to trigger the recording of a sale (and associated receivable) in the accounting records?
Describe the documents that underlie the typical accounting system for sales. Give an example of a failure of internal control that might occur if these documents were not properly prepared.
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