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Financial Accounting 7th Edition LibbyShort - Solutions

Matching Definitions with Income Statement Related TermsFollowing are terms related to the income statement. Match each definition with its related term by entering the appropriate letter in the spaceprovided.
Inferring Income Statement ValuesSupply the missing dollar amounts for the 2012 income statement of NexTech Company for each of the following independent cases.
Inferring Income Statement ValuesSupply the missing dollar amounts for the 2012 income statement of BGT Company for each of the following independent cases.
Preparing a Multiple-Step Income StatementThe following data were taken from the records of Township Corporation at December 31, 2012:Sales revenue $79,000Gross profit
Preparing a Multiple-Step Income StatementThe following data were taken from the records of Cofelt Appliances, Incorporated, at December 31, 2011:Sales revenue
Determining the Effects of Transactions on Balance Sheet and Income Statement CategoriesHasbro is one of the world€™s leading toy manufacturers and maker of such popular board games as Monopoly, Scrabble, and Clue, among others. Listed here are selected aggregate transactions from the
Determining the Effects of Transactions on Balance Sheet, Income Statement, and Statement of Cash Flows CategoriesListed here are selected aggregate transactions for ModernStyle Furniture Company from the first quarter of a recent year (dollars in millions). Complete the following tabulation,
Preparing a Simple Statement of Cash Flows Using the Indirect MethodAvalos Corporation is preparing its annual financial statements at December 31, 2011. Listed here are the items on its statement of cash flows presented in alphabetical order. Parentheses indicate that a listed amount should be
Analyzing and Interpreting Return on AssetsTiffany & Co. is one of the world€™s premier jewelers and a designer of other fine gifts and housewares. Presented here are selected income statement and balance sheet amounts (dollars in thousands).Required:1. Compute ROA for the current and
Analyzing and Evaluating Return on Assets from a Security Analyst€™s PerspectivePapa John€™s is one of the fastest-growing pizza delivery and carry-out restaurant chains in the country. Presented here are selected income statement and balance sheet amounts (dollars in
Matching Players in the Accounting Communication Process with Their Definitions Match each player with the related definition by entering the appropriate letter in the space provided.Players___ (1) Independent auditor___ (2) CEO and CFO___ (3) Users___ (4) Financial analystDefinitionsA. Adviser who
Identifying the Disclosure SequenceIndicate the order in which the following disclosures or reports are normally issued by public companies. No. Title_________________ Form 10-K_____ Earnings press release_____ Annual report
Finding Financial Information: Matching Financial Statements with the Elements of Financial StatementsMatch each financial statement with the items presented on it by entering the appropriate letter in the space provided.Elements of Financial Statements Financial Statements___ (1) Expenses
Determining the Effects of Transactions on Balance Sheet and Income Statement CategoriesComplete the following tabulation, indicating the sign of the effect (+ for increase, ˆ’ for decrease, and NE for no effect) of each transaction. Consider each item independently.a. Recorded sales on
Determining Financial Statement Effects of Sales and Cost of Goods Sold and Issuance of Par Value StockUsing the following categories, indicate the effects of the following transactions. Use + for increase and − for decrease and indicate the accounts affected and the amounts.a. Sales on account
Recording Sales and Cost of Goods Sold and Issuance of Par Value StockPrepare journal entries for each transaction listed in M5-5.Data from M5-5a. Sales on account were $800 and related cost of goods sold was $350.b. Issued 5,000 shares of $1 par value stock for $80,000 cash.
Computing and Interpreting Return on AssetsSaunders, Inc., recently reported the following December 31 amounts in its financial statements (dollars in thousands):Compute return on assets for the current year. What does this ratiomeasure?
Matching Transactions with ConceptsFollowing are the concepts of accounting covered in Chapters 2 through 5. Match each transaction or definition with its related concept by entering the appropriate letter in the space provided. Use one letter for eachblank.
Matching Definitions with Balance Sheet€“Related TermsFollowing are terms related to the balance sheet that were discussed in Chapters 2 through 5. Match each definition with its related term by entering the appropriate letter in the spaceprovided.
Preparing a Balance Sheet and Analyzing Some of Its Parts Exquisite Jewelers is developing its annual financial statements for 2012. The following amounts were correct at December 31, 2012: cash, $58,000; accounts receivable, $71,000; merchandise inventory, $154,000; prepaid insurance, $1,500;
Reporting Stockholders€™ Equity on a Balance Sheet and Recording the Issuance of StockAt the end of the 2011 annual reporting period, Barnard Corporation€™s balance sheet showed the following:During 2012, the following selected transactions (summarized) were completed:a. Sold
Preparing a Multiple-Step Income StatementAeropostale, Inc., is a mall-based specialty retailer of casual apparel and accessories. The company concept is to provide the customer with a focused selection of high-quality, active-oriented fashions at compelling values. The items reported on its income
Preparing Both an Income Statement and a Balance Sheet from a Trial BalanceJordan Sales Company (organized as a corporation on April 1, 2011) has completed the accounting cycle for the second year, ended March 31, 2013. Jordan also has completed a correct trial balance as follows:Required:Complete
Determining and Interpreting the Effects of Transactions on Income Statement Categories and Return on AssetsCreative Technology, a computer hardware company based in Singapore, developed the modern standard for computer sound cards in the early 1990s. Recently, Creative has released a line of
Supplement) Preparing a Multiple-Step Income Statement with Discontinued Operations and Cumulative Effects of Accounting ChangesNewell Rubbermaid Inc. manufactures and markets a broad array of office products, tools and hardware, and home products under a variety of brand names, including Sharpie,
Preparing a Balance Sheet and Analyzing Some of Its Parts TangoCo is developing its annual financial statements for 2012. The following amounts were correct at December 31, 2012: cash, $48,800; investment in stock of PIL Corporation (long-term), $36,400; store equipment, $67,200; accounts
Reporting Stockholders€™ Equity on a Balance Sheet and Recording the Issuance of StockAt the end of the 2011 annual reporting period, Mesa Industries€™s balance sheet showed the following:During 2012, the following selected transactions (summarized) were completed:a. Sold and
Preparing Both an Income Statement and a Balance Sheet from a Trial BalanceDynamite Sales (organized as a corporation on September 1, 2010) has completed the accounting cycle for the second year, ended August 31, 2012. Dynamite also has completed a correct trial balance as
Determining and Interpreting the Effects of Transactions on Income Statement Categories and Return on AssetsAvon Products, Inc., is a leading manufacturer and marketer of beauty products and related merchandise. The company sells its products in 110 countries through a combination of direct selling
Finding Financial InformationRefer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. At the bottom of each statement, the company warns readers to “Refer to Notes to Consolidated Financial Statements.” The following questions illustrate the
Finding Financial InformationRefer to the financial statements of Urban Outfitters given in Appendix C at the end of this book.At the bottom of each statement, the company warns readers that “The accompanying notes are an integral part of these financial statements.” The following questions
Comparing Companies within an IndustryRefer to the financial statements of American Eagle Outfitters (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book.Required:1. Compute return on assets for the most recent year. Which company
Using Financial Reports: Financial Statement InferencesThe following amounts were selected from the annual financial statements for Genesis Corporation at December 31, 2012 (end of the third year of operations):From the 2012 income statement:Sales revenue....................$275,000Cost of goods
Making Decisions as a Manager: Evaluating the Effects of Business Strategy on Return on AssetsSony is a world leader in the manufacture of consumer and commercial electronics as well as in the entertainment and insurance industries. Its ROA has decreased over the last three years.Required:Indicate
Making a Decision as an Auditor: Effects of Errors on Income, Assets, and LiabilitiesMegan Company (not a corporation) was careless about its financial records during its first year of operations, 2010. It is December 31, 2010, the end of the annual accounting period. An outside CPA has examined
Evaluating an Ethical Dilemma: Management Incentives and Fraudulent FinancialStatementsNetherlands-based Royal Ahold ranks among the world’s three largest food retailers. In the United States it operates the Stop & Shop and Giant supermarket chains. Dutch and U.S regulators and prosecutors have
Explain the difference between sales revenue and net sales.
What is gross profit or gross margin on sales? How is the gross profit ratio computed? In your explanation, assume that net sales revenue was $100,000 and cost of goods sold was $60,000.
What is a credit card discount? How does it affect amounts reported on the income statement?
What is a sales discount? Use 1/10, n/30 in your explanation.
What is the distinction between sales allowances and sales discounts?
Differentiate accounts receivable from notes receivable.
Which basic accounting principle is the allowance method of accounting for bad debts designed to satisfy?
Using the allowance method, is bad debt expense recognized in (a) The period in which sales related to the uncollectible account are made or(b) The period in which the seller learns that the customer is unable to pay?
What is the effect of the write-off of bad debts (using the allowance method) on (a) Net income and (b) Accounts receivable, net?
Does an increase in the receivables turnover ratio generally indicate faster or slower collection of receivables? Explain.
Define cash and cash equivalents in the context of accounting. Indicate the types of items that should be included and excluded.
Summarize the primary characteristics of an effective internal control system for cash.
Why should cash-handling and cash-recording activities be separated? How is this separation accomplished?
What are the purposes of a bank reconciliation? What balances are reconciled?
Briefly explain how the total amount of cash reported on the balance sheet is computed.
Supplement Under the gross method of recording sales discounts discussed in this chapter, is the amount of sales discount taken recorded (a) At the time the sale is recorded or (b) At the time the collection of the account is recorded?
Multiple Choice Question 1. Sales discounts with terms 2/10, n/30 mean:a. 10 percent discount for payment within 30 days.b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days.c. Two-tenths of a percent discount for payment within 30 days.d. None of
Reporting Net Sales with Credit Sales and Sales DiscountsDuring the months of January and February, Silver Corporation sold goods to three customers. The sequence of events was as follows:Jan. 6 Sold goods for $850 to S. Green and billed that amount subject to terms 2/10, n/30.6 Sold goods to M.
Reporting Net Sales with Credit Sales, Sales Discounts, and Credit Card SalesThe following transactions were selected from the records of OceanView Company:July 12 Sold merchandise to Customer R, who charged the $3,000 purchase on his Visa credit card. Visa charges OceanView a 2 percent credit card
Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales The following transactions were selected from among those completed by Cadence Retailers in 2011:Nov. 20 Sold 20 items of merchandise to Customer B at an invoice price of $5,500 (total); terms3/10, n/30.25
Determining the Effects of Credit Sales, Sales Discounts, Credit Card Sales, and Sales Returns and Allowances on Income Statement CategoriesBrazen Shoe Company records Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts as contra-revenues. Complete the following tabulation,
Evaluating the Annual Interest Rate Implicit in a Sales Discount with Discussion of Management Choice of Financing StrategyClark’s Landscaping bills customers subject to terms 3/10, n/50.Required:1. Compute the annual interest rate implicit in the sales discount. (Round to two decimal places.)2.
Analyzing Gross Profit Percentage on the Basis of an Income Statement and Within-Industry ComparisonWolverine World Wide Inc. prides itself as being the "world's leading marketer of U.S. branded nonathletic footwear." It competes in many markets with Deckers, often offering products at a lower
Analyzing Gross Profit Percentage on the Basis of an Income StatementThe following summarized data were provided by the records of Slate, Incorporated, for the year ended December 31, 2012:Required:1. Based on these data, prepare an income statement (showing both gross profit and income from
Recording Bad Debt Expense Estimates and Write-Offs Using the Percentage of Credit Sales Method During 2011, Crandell Productions, Inc., recorded credit sales of $800,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales.Required:Prepare journal entries for each
Recording Bad Debt Expense Estimates and Write-Offs Using the Percentage of Credit Sales MethodDuring 2011, Soto Electronics, Incorporated, recorded credit sales of $790,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales.Required:Prepare journal entries for each
Determining Financial Statement Effects of Bad Debts Using the Percentage of Credit Sales Method Using the following categories, indicate the effects of the transactions listed in E6-9. Use + for increase and − for decrease and indicate the accounts affected and the amounts.Assets =
Recording and Determining the Effects of Bad Debt Transactions on Income Statement Categories Using the Percentage of Credit Sales MethodDuring 2012, Giatras Electronics recorded credit sales of $680,000. Based on prior experience, it estimates a 3.5 percent bad debt rate on credit
Computing Bad Debt Expense Using Aging AnalysisGary’s Dairy uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $16,000, (2) up to 120 days past due, $5,500, and (3) more than 120 days
Recording and Reporting a Bad Debt Estimate Using Aging AnalysisCasilda Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $50,000, (2) up to 180 days past due, $14,000, and (3)
Recording and Reporting a Bad Debt Estimate Using Aging AnalysisFrederick Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $275,000, (2) up to 120 days past due, $50,000, and
Interpreting Bad Debt DisclosuresSiemens is one of the world€™s largest electrical engineering and electronics companies. Headquartered in Germany, the company has been in business for over 160 years and operates in 190 countries. In a recent annual report, it disclosed the following
Inferring Bad Debt Write-Offs and Cash Collections from CustomersMicrosoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts
Inferring Bad Debt Expense and Determining the Impact of Uncollectible Accounts on Income and Working CapitalA recent annual report for Target contained the following information (dollars in thousands) at the end of its fiscal year:A footnote to the financial statements disclosed that
Recording, Reporting, and Evaluating a Bad Debt EstimateDuring 2012, Robby’s Camera Shop had sales revenue of $170,000, of which $75,000 was on credit. At the start of 2012, Accounts Receivable showed a $16,000 debit balance, and the Allowance for Doubtful Accounts showed a $900 credit balance.
Recording, Reporting, and Evaluating a Bad Debt EstimateDuring 2011, Dorothy’s Ceramics Shop had sales revenue of $70,000, of which $25,000 was on credit. At the start of 2011, Accounts Receivable showed a $4,000 debit balance, and the Allowance for Doubtful Accounts showed a $300 credit
Computing and Interpreting the Receivables Turnover RatioA recent annual report for FedEx contained the following data:Required:1. Determine the receivables turnover ratio and average days sales in receivables for the current year.2. Explain the meaning of eachnumber.
Computing and Interpreting the Receivables Turnover RatioA recent annual report for Dell, Inc., contained the following data:Required:1. Determine the receivables turnover ratio and average days sales in receivables for the current year.2. Explain the meaning of eachnumber.
Interpreting the Effects of Sales Declines and Changes in Receivables on Cash Flow from OperationsStride Rite Corporation manufactures and markets shoes under the brand names Stride Rite, Keds, and Sperry Top-Sider. Three recent years produced a combination of declining sales revenue and net income
Preparing Bank Reconciliation, Entries, and Reporting CashJackson Company€™s June 30, 2011, bank statement and June ledger accounts for cash are summarized below:Required:1. Reconcile the bank account. A comparison of the checks written with the checks that have cleared the bank shows
Preparing Bank Reconciliation, Entries, and Reporting CashThe September 30, 2011, bank statement for Bennett Company and the September ledger accounts for cash are summarized here:No outstanding checks and no deposits in transit were carried over from August; however, there are deposits in transit
Supplement Recording Credit Sales, Sales Discounts, Sales Returns, and Credit Card SalesThe following transactions were selected from among those completed by Hailey Retailers in 2010: Nov. 20 Sold two items of merchandise to Customer B, who charged the $450 sales price on her Visa credit card.
Interpreting the Revenue PrincipleIndicate the most likely time you expect sales revenue to be recorded for each of the listedtransactions.
Reporting Net Sales with Sales DiscountsMerchandise invoiced at $8,500 is sold on terms 1/10, n/30. If the buyer pays within the discount period, what amount will be reported on the income statement as net sales?
Reporting Net Sales with Sales Discounts, Credit Card Discounts, and Sales ReturnsTotal gross sales for the period include the following:Credit card sales (discount 3%) $ 9,400Sales on account (2/15, n/60) $10,500Sales returns related to sales on account were $500. All returns were made
Computing and Interpreting the Gross Profit PercentageNet sales for the period was $45,000 and cost of sales was $28,000. Compute the gross profit percentage for the current year. What does this ratio measure?
Recording Bad DebtsPrepare journal entries for each transaction listed.a. During the period, bad debts are written off in the amount of $19,000.b. At the end of the period, bad debt expense is estimated to be $13,000.
Determining Financial Statement Effects of Bad DebtsUsing the following categories, indicate the effects of the following transactions. Use + for increase and − for decrease and indicate the accounts affected and the amounts.a. At the end of the period, bad debt expense is estimated to be
Determining the Effects of Credit Policy Changes on Receivables Turnover RatioIndicate the most likely effect of the following changes in credit policy on the receivables turnover ratio (+ for increase, − for decrease, and NE for no effect).a. Granted credit with shorter payment deadlines.b.
Matching Reconciling Items to the Bank ReconciliationIndicate whether the following items would be added (+) or subtracted (ˆ’) from the company€™s books or the bank statement during the construction of a bankreconciliation.
Supplement Recording Sales DiscountsA sale is made for $8,000; terms are 2/10, n/30. At what amount should the sale be recorded under the gross method of recording sales discounts? Give the required entry. Also give the collection entry, assuming that it is during the discount period.
Applying the Revenue PrincipleAt what point should revenue be recognized in each of the following independent cases?Case A. For Christmas presents, a Wendy’s restaurant sells coupon books for $15. Each of the $1 coupons may be used in the restaurant any time during the following 12 months. The
Reporting Net Sales and Expenses with Discounts, Returns, and Bad DebtsThe following data were selected from the records of Sykes Company for the year ended December 31, 2011.Balances January 1, 2011Accounts receivable (various customers) $115,000Allowance for doubtful accounts 7,000In
Understanding the Income Statement Based on the Gross Profit PercentageThe following data presented in income statement order were taken from the year-end records of Berugu Export Company. Fill in all of the missing amounts and show computations.
Recording Bad Debts and Interpreting Disclosure of Allowance for Doubtful AccountsPeet€™s Coffee & Tea, Inc., is a specialty coffee roaster and marketer of branded fresh roasted whole bean coffee. It recently disclosed the following information concerning the Allowance for Doubtful
Determining Bad Debt Expense Based on Aging AnalysisBlue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as
Preparing an Income Statement and Computing the Gross Profit Percentage and Receivables Turnover Ratio with Discounts, Returns, and Bad DebtsTungsten Company, Inc., sells heavy construction equipment. There are 10,000 shares of capital stock outstanding. The annual fiscal period ends on December
Computing Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal EntriesThe August 2011 bank statement for Allison Company and the August 2011 ledger account for cash follow:Outstanding checks at the end of July were for $270, $430, and $320. No deposits were in
Supplement Recording Sales, Returns, and Bad DebtsUse the data presented in P6-2, which were selected from the records of Sykes Company for the year ended December 31, 2011.Required:1. Give the journal entries for these transactions, including the write-off of the uncollectible account and the
Reporting Net Sales and Expenses with Discounts, Returns, and Bad DebtsThe following data were selected from the records of Sharkim Company for the year ended December 31, 2012.Balances January 1, 2012:Accounts receivable (various customers) $116,000Allowance for doubtful accounts
Recording Bad Debts and Interpreting Disclosure of Allowance for Doubtful AccountsUnder various registered brand names, Saucony, Inc., and its subsidiaries develop, manufacture, and market bicycles and component parts, athletic apparel, and athletic shoes. It recently disclosed the following
Determining Bad Debt Expense Based on Aging Analysis (P6-5)Briggs & Stratton Engines Inc. uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/45. The balance of each account receivable is aged on the basis of four time
Preparing an Income Statement and Computing the Gross Profit Percentage and Receivables Turnover Ratio with Discounts, Returns, and Bad DebtsPerry Corporation is a local grocery store organized seven years ago as a corporation. At that time, a total of 10,000 shares of common stock were issued to

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