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Accounting 21st Edition Carl s. warren, James m. reeve, Philip e. fess - Solutions

Blue Ribbon Flies Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Blue Ribbon Flies prepared the partially completed aging-of-receivables schedule as of the end of business on December 31, 2006,
Kiohertz Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording uncollectible accounts expense has been used during the entire period. Because of substantial increases in sales volume and amount of uncollectible
Matrix Co. wholesales bathroom fixtures. During the current fiscal year, Matrix Co. received the following notes.Instructions1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.2. Journalize the entry to record the dishonor of
The following were selected from among the transactions completed by Rimrock Co. during the current year. Rimrock Co. sells and installs home and business security systems.Jan. 10. Loaned $12,000 cash to Brenda Norby, receiving a 90-day, 8% note.Feb. 4. Sold merchandise on account to Emerson and
The following transactions, adjusting entries, and closing entries were completed by The Eagle Rock Gallery during the year ended December 31, 2006:Feb. 24. Reinstated the account of Dina Ibis, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1,025 cash
Vanity Wigs Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest. The accounts receivable clerk for Vanity Wigs prepared the following partially completed aging-of-receivables schedule as of the end of business on December 31, 2006:The
Blue Goose Company, which operates a chain of 50 electronics supply stores, has just completed its fourth year of operations. The direct write-off method of recording uncollectible accounts expense has been used during the entire period. Because of substantial increases in sales volume and amount
Incubate Co. produces advertising videos. During the last six months of the current fiscal year, Incubate Co. received the following notes.Instructions1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.2. Journalize the entry
The following data relate to notes receivable and interest for Sciatic Co., a financial services company. (All notes are dated as of the day they are received.)Mar. 3. Received a $14,000, 9%, 60-day note on account.21. Received a $9,500, 8%, 90-day note on account.May 2. Received $14,210 on note of
The following were selected from among the transactions completed during the current year by Westphal Co., an appliance wholesale company:Jan. 6. Sold merchandise on account to Alta Co., $10,500. The cost of merchandise sold was $6,300.Mar. 9. Accepted a 60-day, 8% note for $10,500 from Alta Co. on
Precilla Strauss, vice-president of operations for Sturgis National Bank, has instructed the bank's computer programmer to use a 365-day year to compute interest on depository accounts (payables). Precilla also instructed the programmer to use a 360 day year to compute interest on loans
The following is an excerpt from a conversation between the office manager, Tamie Mauro, and the president of Stonecipher Construction Supplies Co., Bruce Vogel.Stonecipher sells building supplies to local contractors.Tamie: Bruce, we're going to have to do something about these overdue accounts
The following is an excerpt from a conversation between Pam Cahill, the president and owner of Mullion Wholesale Co., and Eric Hogg, Mullion controller. The conversation took place on January 3, 2006, shortly after Eric began preparing the financial statements for the year ending December 31,
For several years, sales have been on a "cash only" basis. On January 1, 2003, however, Filet Co. began offering credit on terms of n/30. The amount of the adjusting entry to record the estimated uncollectible receivables at the end of each year has been 1/4 of 1% of credit sales, which is the rate
Wang Office Equipment Co. has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Lake City Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be reported on the balance sheet of(a) Wang
Muskegon Co. acquired an adjacent vacant lot with the hope of selling it in the future at a gain. The lot is not intended to be used in Muskegon's business operations.Where should such real estate be listed in the balance sheet?
Redding Company solicited bids from several contractors to construct an addition to its office building. The lowest bid received was for $420,000. Redding Company decided to construct the addition itself at a cost of $375,000. What amount should be recorded in the building account?
Lowell Company purchased a machine that has a manufacturer's suggested life of 18 years. The company plans to use the machine on a special project that will last 12 years. At the completion of the project, the machine will be sold.Over how many years should the machine be depreciated?
Immediately after a used truck is acquired, a new motor is installed and the tires are replaced at a total cost of $5,750. Is this a capital expenditure or a revenue expenditure?
Prior to adjustment at the end of the year, the balance in Trucks is $182,600 and the balance in Accumulated Depreciationâ€”Trucks is $75,500. Details of the subsidiary ledger are as follows:a. Determine the depreciation rates per mile and the amount to be credited to the accumulated
Jacobs Company replaced carpeting throughout its general offices. The old carpet was removed at a cost of $1,500 on March 15. The book value of the old carpet was $6,000 on March 15 ($18,000 original cost less $12,000 accumulated depreciation).New carpet was purchased and installed during the last
A printing press priced at $315,000 is acquired by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press.a. Assuming that the trade-in allowance is $110,000, what is the amount of cash given?b. Assuming that the book value of the
Assume the same facts as in Exercise 10-20, except that the book value of the press traded in is $128,500. (a) What is the amount of cash given? (b) What is the cost of the new press for financial reporting purposes?
On July 1, Jaguar Co., a water distiller, acquired new bottling equipment with a list price of $385,000. Jaguar received a trade-in allowance of $100,000 on the old equipment of a similar type, paid cash of $35,000, and gave a series of five notes payable for the remainder. The following
On April 1, O'Dell Co. acquired a new truck with a list price of $80,000. O'Dell received a trade-in allowance of $29,000 on an old truck of similar type, paid cash of$11,000, and gave a series of five notes payable for the remainder. The following information about the old truck is obtained from
MarketNet Co. is a computer software company marketing products in the United States and Canada. While MarketNet Co. has over 90 sales offices, all accounting is handled at the company's headquarters in Phoenix, Arizona.MarketNet Co. keeps all its fixed asset records on a computerized system. The
Discovery Co. acquired mineral rights for $80,000,000. The mineral deposit is estimated at 100,000,000 tons. During the current year, 15,500,000 tons were mined and sold for $16,500,000.a. Determine the amount of depletion expense for the current year.b. Journalize the adjusting entry to recognize
List the errors you find in the following partial balancesheet:
The following data were taken from recent annual reports of Intuit Inc., a developer and distributor of financial planning software:a. Compute the ratio of fixed assets to long-term liabilities for the current and preceding year. Round to one decimal place.b. What conclusions can youdraw?
The financial statements of Home Depot are presented in Appendix E at the end of the text.a. Compute the ratio of fixed assets to long-term liabilities for 2002 and 2001.b. What conclusions can you draw?
Based on the data in Exercise 10-9, determine the depreciation for the backhoe for each of the first two years, using the sum-of-the-years-digits depreciation method.Round to the nearest dollar.
Based on the data in Exercise 10-10, determine the depreciation for the dairy storage tank for each of the first two years, using the sum-of-the-years-digits depreciation method. Round to the nearest dollar.
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.a. Finder€™s fee paid to real estate agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
New tire retreading equipment, acquired at a cost of $160,000 at the beginning of a fiscal year, has an estimated useful life of 4 years and an estimated residual value of $16,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense
The following transactions, adjusting entries, and closing entries were completed by Yellowstone Furniture Co. during a 3-year period. All are related to the use of delivery equipment. The declining-balance method (at twice the straight-line rate) of depreciation is used.2005 Jan. 2 Purchased a
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:a. Goodwill in the amount of $29,500,000 was purchased on January 18.b. Governmental and legal costs of $225,600 were incurred on July 5 in obtaining a patent with an
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk.a. Fee paid to attorney for title search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,500b. Cost
Red Tiger Company purchased packaging equipment on January 3, 2005, for $180,000. The equipment was expected to have a useful life of 3 years, or 22,320 operating hours, and a residual value of $12,600. The equipment was used for 12,500 hours during 2005, 6,000 hours in 2006, and 3,820 hours in
New lithographic equipment, acquired at a cost of $100,000 at the beginning of a fiscal year, has an estimated useful life of 5 years and an estimated residual value of $8,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:a. Timber rights on a tract of land were purchased for $720,000 on July 11. The stand of timber is estimated at 2,250,000 board feet. During the current year, 600,000
On the first day of the fiscal year, a delivery truck with a list price of $55,000 was acquired in exchange for an old delivery truck and $30,000 cash. The old truck had a book value of $28,250 at the date of the exchange.a. Determine the depreciable cost for financial reporting purposes.b.
a. Identify the federal taxes that most employers are required to withhold from employees.b. Give the titles of the accounts to which the amounts withheld are credited.
The "Questions and Answers Technical Hotline" in the Journal of Accountancy included the following question:Several years ago, Company B instituted legal action against Company A. Under a memorandum of settlement and agreement, Company A agreed to pay Company B a total of $17,500 in three
Web World Magazine Inc. sold 6,900 annual subscriptions of Web World for $30 during December 2006. These new subscribers will receive monthly issues, beginning in January 2007. In addition, the business had taxable income of $120,000 during the first calendar quarter of 2007. The federal tax rate
Builder's Supply issues a 90-day note for $200,000 to Gem Lighting Co. for merchandise inventory. Gem Lighting Co. discounts the note at 8%.a. Journalize Builder's Supply's entries to record:1. The issuance of the note.2. The payment of the note at maturity.b. Journalize Gem Lighting Co.'s entries
A borrower has two alternatives for a loan: (1) Issue a $90,000, 90-day, 6% note (2) Issue a $90,000, 90-day note that the creditor discounts at 6%.a. Calculate the amount of the interest expense for each option.b. Determine the proceeds received by the borrower in each situation.c. Which
A business issued a 60-day, 5% note for $9,000 to a creditor on account. Journalize the entries to record(a) The issuance of the note(b) The payment of the note at maturity, including interest.
On June 30, Mystic Mountain Game Company purchased land for $250,000 and a building for $730,000, paying $180,000 cash and issuing an 8% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $40,000 on the principal plus the
WD-40 Co., the manufacturer and marketer of WD-40® lubricant, reported the following information about its long-term debt in the notes to a recent financial statement:Term loans are long-term notes payable, while a bank line of credit is usually due within the current period.a. How much was
Crystal Audio Company warrants its products for one year. The estimated product warranty is 2% of sales. Assume that sales were $750,000 for January. In February, a customer received warranty repairs requiring $390 of parts and $570 of labor.a. Journalize the adjusting entry required at January 31,
Ford Motor Company disclosed estimated product warranty payable for comparative years as follows.Fordâ€™s sales were $130,800 million in 2001 and increased to $134,400 million in 2002.Assume that the total cash paid on warranty claims during 2002 was $12,000 million.a. Why are short-and
Several months ago, Satin Cover Paint Company experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $390,000. The company is contesting the fine. In addition, an employee is seeking $600,000 damages related to the
The following note accompanied recent financial statements for Goodyear Tire and Rubber Company:Goodyear is a defendant in numerous lawsuits involving at December 31, 2002, approximately 62,000 claimants alleging various asbestos related personal injuries purported to result from exposure to
An employee earns $18 per hour and 11/2 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 50 hours during the week, and that the gross pay prior to the current week totaled $38,540. Assume further that the social security tax rate was 6.0% (on earnings up
Omega Business Consultants has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:For the current pay period, the computer programmer worked 46 hours and the administrator worked 44 hours. The federal income
In the following summary of data for a payroll period, some amounts have been intentionally omitted:Earnings:1. At regular rate ........... ?2. At overtime rate ...........$ 44,2003. Total earnings ........... ?Deductions:4. Social security tax .......... 15,7305. Medicare tax ............ 4,0356.
Opry Sounds is a retail store specializing in the sale of country music. The store employs 3 full-time and 10 part-time workers. The store's weekly payroll averages $2,200 for all 13 workers.Opry Sounds uses a personal computer to assist in preparing paychecks. Each week, the store's accountant
Shop-Aid Tools is a small manufacturer of home workshop power tools. The company employs 30 production workers and 10 administrative persons. The following procedures are used to process the company's weekly payroll:a. Paychecks are signed by using a check-signing machine. This machine is located
According to a summary of the payroll of Glamour Publishing Co., $480,000 was subject to the 6.0% social security tax and $540,000 was subject to the 1.5% Medicare tax. Also, $12,000 was subject to state and federal unemployment taxes.a. Calculate the employer's payroll taxes, using the following
The fiscal year for Tip Top Stores Inc. ends on June 30. In addition, the company computes and reports payroll taxes on a fiscal-year basis. Thus, it applies social security and FUTA maximum earnings limitations to the fiscal-year payroll.What is wrong with these procedures for accounting for
A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $165,120. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record
Keepsake Photos Inc. operates a chain of photography stores. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Boston Funds, by the fifteenth of the month following the end of each quarter. Assuming
In a recent year's financial statements, Procter & Gamble Co. showed an unfunded pension liability of $1,032 million and a periodic pension cost of $151 million.Explain the meaning of the $1,032 million unfunded pension liability and the $151 million periodic pension cost.
The Office-to-Go Furniture Company had the following current assets and liabilities for two comparative years:a. Determine the quick ratio for December 31, 2006 and 2005.b. Interpret the change in the quick ratio between the two balance sheetdates.
The current assets and current liabilities for Apple Computer Inc. and Dell Computer Corp. are shown as follows at the end of a recent fiscal period:a. Determine the quick ratio for both companies.b. Interpret the quick ratio difference between the twocompanies.
The following items were selected from among the transactions completed by Made Rite Products Co. during the current year:Feb. 15. Purchased merchandise on account from Ranier Co., $30,000, terms n/30.Mar. 17. Issued a 30-day, 5% note for $30,000 to Ranier Co., on account.Apr. 16. Paid Ranier Co.
The following information about the payroll for the week ended December 30 was obtained from the records of Capstone Suppy Co.:Tax rates assumed:Social security, 6% on first $100,000 of employee annual earningsMedicare, 1.5%State unemployment (employer only), 4.2%Federal unemployment (employer
Wholesome Dairy Co. began business on January 2, 2005. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly
The payroll register for Scottish Heritage Stores, Inc., for the week ended December 12, 2006, is presented in the working papers.Instructions1. Journalize the entry to record the payroll for the week.2. Journalize the entry to record the issuance of the checks to employees.3. Journalize the entry
The following data for Southern Home Products Inc. relate to the payroll for the week ended December 7, 2006:Employees O and T are office staff and all of the other employees are sales personnel.All sales personnel are paid 11/2 times the regular rate for all hours in excess of 40 hours per week.
The following accounts, with the balances indicated, appear in the ledger of Brownie Points Gifts Inc. on December 1 of the current year:The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:Dec. 2. Issued Check No. 728 for $2,400 to First
The following items were selected from among the transactions completed by ElectronicUniverse Stores during the current year:Apr. 7. Borrowed $20,000 from First Financial Corporation, issuing a 60-day, 6% note for that amount.May 10. Purchased equipment by issuing a $90,000, 120-day note to Milford
The following information about the payroll for the week ended December 30 was obtained from the records of Sparta Co.:Tax rates assumed:Social security, 6% on first $100,000 of employee annual earningsMedicare, 1.5%State unemployment (employer only), 3.8%Federal unemployment (employer only),
Diamond Distribution Company began business on January 2, 2005. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the
The payroll register for Goyi Guitar Co. for the week ended December 12, 2006, is presented in the working papers.Instructions1. Journalize the entry to record the payroll for the week.2. Journalize the entry to record the issuance of the checks to employees.3. Journalize the entry to record the
The following data for College Publishing Co. relate to the payroll for the week ended December 7, 2006:Employees C and H are office staff and all of the other employees are sales personnel.All sales personnel are paid 11/2 times the regular rate for all hours in excess of 40 hours per week. The
The following accounts, with the balances indicated, appear in the ledger of Acadia Outdoor Equipment Company on December 1 of the current year:The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:Dec. 1. Issued Check No. 728 to Pico
Selected transactions completed by Calico Interiors, Inc., during its first fiscal year ending December 31 were as follows:Jan. 2. Issued a check to establish a petty cash fund of $800.Mar. 1. Replenished the petty cash fund, based on the following summary of petty cash receipts: office supplies,
Sarah Lindsay is a certified public accountant (CPA) and staff assistant for Kim and Horkin, a local CPA firm. It had been the policy of the firm to provide a holiday bonus equal to two weeks' salary to all employees. The firm's new management team announced on November 25 that a bonus equal to
The annual examination of Horizon Company's financial statements by its external public accounting firm (auditors) is nearing completion. The following conversation took place between the controller of Horizon Company (Peter) and the audit manager from the public accounting firm (Connie).Connie:
Mark Cary, the owner of Cary Trucking Company, initiated an executive bonus plan for his chief executive officer (CEO). The new plan provides a bonus to the CEO equal to 3% of the income before taxes. Upon learning of the new bonus arrangement, the CEO issued instructions to change the company's
Carl Mason was discussing summer employment with Kevin Cross, president of Juniper Landscaping Service:Kevin: I'm glad that you're thinking about joining us for the summer. We could certainly use the help.Carl: Sounds good. I enjoy outdoor work, and I could use the money to help with next year's
Of two corporations organized at approximately the same time and engaged in competing businesses, one issued $75 par common stock, and the other issued $1 par common stock. Do the par designations provide any indication as to which stock is preferable as an investment? Explain.
A stockbroker advises a client to “buy cumulative preferred stock. . . . With that type of stock, . . . [you] will never have to worry about losing the dividends.” Is the broker right?
A corporation reacquires 10,000 shares of its own $25 par common stock for $420,000, recording it at cost. (a) What effect does this transaction have on revenue or expense of the period? (b) What effect does it have on stockholders’ equity?
The treasury stock in Question 8 is resold for $500,000. (a) What is the effect on the corporation’s revenue of the period? (b) What is the effect on stockholders’ equity?
A corporation with both cumulative preferred stock and common stock outstanding has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of $250,000 each
An owner of 150 shares of Morse Company common stock receives a stock dividend of 3 shares. (a) What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? (b) How does the total equity of 153 shares compare with the total equity of 150 shares
What are the three classifications of appropriations and how are appropriations normally reported in the financial statements?
Megaton Corp., an electric guitar retailer, was organized by Bonita Eaves, Helen Brock, and Freida Sager. The charter authorized 400,000 shares of common stock with a par of $10. The following transactions affecting stockholders’ equity were completed during the first year of operations:a. Issued
Aspen Inc. bottles and distributes spring water. On August 1 of the current year, Aspen Inc. reacquired 12,000 shares of its common stock at $36 per share. On September 23, Aspen Inc. sold 7,500 of the reacquired shares at $38 per share. The remaining 4,500 shares were sold at $33 per share on
The following accounts and their balances were selected from the unadjusted trial balance of Sailors Inc., a freight forwarder, at August 31, the end of the current fiscal year:Preferred 2% Stock, $100 par................ $ 750,000Paid-In Capital in Excess of Par—Preferred Stock .........
The following accounts and their balances appear in the ledger of Dimension Inc. on June 30 of the current year:Common Stock, $25 par .............$ 750,000Paid-In Capital in Excess of Par .......... 120,000Paid-In Capital from Sale of Treasury Stock ..... 25,000Retained Earnings
Bravo Corporation, a manufacturer of industrial pumps, reports the following results for the year ending July 31, 2006:Retained earnings, August 1, 2005 ........$2,213,400Net income .................. 558,000Cash dividends declared ............ 180,000Stock dividends declared ............
List the errors in the following Stockholdersâ€™ Equity section of the balance sheet prepared as of the end of the currentyear.
In 2002, Hershey Foods Corporation paid dividends of $1.26 per share to its common stockholders (excluding its Class B Common Stock). The market price of Hershey’s common stock on December 31, 2002, was $67.44.a. Determine Hershey’s dividend yield on its common stock as of December 31, 2002.b.
Alan Biles and Joan Crandall joined together to form a partnership. Is it possible for them to lose a greater amount than the amount of their investment in the partnership? Explain.
Paul Boyer, Fran Carrick, and Ed DiPano are contemplating the formation of a partnership. According to the partnership agreement, Boyer is to invest $60,000 and devote one-half time, Carrick is to invest $40,000 and devote three-fourths time, and DiPano is to make no investment and devote full
What are the required disclosures in the statement of stockholders’ equity for a corporation?

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