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accounting principles
Accounting Principles A Business Perspective Financial Accounting Chapter 1-8 1st Edition James Edwards, Roger Hermanson, Bill Buxton - Solutions
The following transactions occurred between Companies C and D in June 2010:June 10 Company C purchased merchandise from Company D for USD 80,000; terms 2/10/EOM, n/60, FOB destination, freight prepaid.11 Company D paid freight of USD 1,200.14 Company C received an allowance of USD 4,000 from the
Prepare a work sheet and closing entries for a merchandising company (Appendix).
Prepare a classified income statement.
Determine cost of goods sold.
Group project F Your team of students should obtain a copy of the report, "Improving Business Reporting—A Customer Focus" by the AICPA Special Committee on Financial Reporting (1994). Your library might have a copy. If not, it can be obtained from the AICPA [Product No. 019303, Order Department,
Group project E With one or two other students and using library sources, write a paper on the history and achievements of the Financial Accounting Standards Board. This board is responsible for establishing the accounting standards and principles for financial accounting in the private sector. It
Group project D In teams of two or three students, go to the library to locate one company's annual report for the most recent year. (As an alternative, annual reports can be downloaded from the SEC's EDGAR site at www.sec.gov/edgar.shtml) Examine the "Summary of accounting policies", which is part
Ethics – A writing experience C Refer to the item "An ethical perspective: Maplehurst company". Write out the answers to the following questions:Is management being ethical in this situation? Explain.Is the accountant correct in believing that management's position could not be successfully
Annual report analysis B Refer to the "Summary of significant accounting policies" in the annual report of The Limited, Inc. List the policies discussed. For each of the policies, explain in writing what the company is trying to communicate.
A completely depreciated machine was still being used. The accountant left the asset and its related accumulated depreciation on the books, stopped recording depreciation on the machine, and did not go back and correct earlier years' net income and reduce accumulated depreciation. (Ch. 10)The
Business decision case A Jim Casey recently received his accounting degree from State University and went to work for a Big-Four CPA firm. After he had been with the firm for about six months, he was sent to the Ling Clothing Company to work on the audit. He was not very confident of his knowledge
The basic elements of financial statements consist of:a. Terms and their definitions.b. The objectives of financial reporting.c. The qualitative characteristics.d. The new income statement format.
To be reliable, information must (identify the incorrect quality):a. Be verifiable.b. Be timely.c. Have representational faithfulness.d. Be neutral.
A pervasive constraint of accounting information is that:a. Benefits must exceed costs.b. The information must be timely.c. The information must be neutral.d. The information must be verifiable.
The two primary qualitative characteristics are:a. Predictive value and feedback value.b. Timeliness and verifiability.c. Comparability and neutrality.d. Relevance and reliability.
Alternate problem E Select the best answer to each of the following questions:In the conceptual framework project, how many financial reporting objectives were identified by the FASB?a. One.b. Two.c. Three.d. Four.
Alternate problem D In each of these circumstances, the accounting practices may be questioned. Indicate whether you agree or disagree with the accounting practice employed and state the assumptions, concepts, or principles that justify your position.The salaries paid to the top officers of the
Alternate problem C The following contract prices and costs relate to all of Orlando Construction Company's long-term construction projects (in millions of dollars):Costs Incurred Cost to Be Contract Prior to In Incurred in Price 2010 2010 Future Years On projects completed in 2010 $46 $4 $36 $0 On
Alternate problem B Nevada Real Estate Sales Company sells lots in its development in Dry Creek Canyon under terms calling for small cash down payments with monthly installment payments spread over a few years. Following are data on the company's operations for its first three years:2008 2009 2010
Which of the following statements is false?a. The exchange-price principle is also called the cost principle.b. The matching principle is closely related to the revenue recognition principle.c. The installment sales method recognizes revenue sooner than it would normally be recognized.d. The
Which of the following statements is true?a. All assets are carried indefinitely at their original costs in the financial statements.b. Liabilities are measured in the cash to be paid or the value of services to be performed to satisfy the liabilities.c. Accounting principles are derived by merely
Which of the following statements is true?a. When the substance of a transaction conflicts with the legal form of the transaction, the accountant should be guided by the legal form in recording the transaction.b. The consistency concept prohibits a change in accounting principle even when such a
Alternate problem A Select the best answer to each of the following questions:A set of basic concepts and assumptions and related principles that explain and guide the accountant's actions in identifying, measuring, and communicating economic information is called:a. Accounting theory.b. Accounting
A supply of printed stationery, checks, and invoices with a cost of USD 8,500 was treated as a current asset at year-end even though it had no value to others.A tract of land acquired for USD 180,000 was recorded at that price even though it was appraised at USD 230,000, and the company would have
Problem D For each of the following numbered items, state the letter or letters of the principle(s), assumption(s), or concept(s) used to justify the accounting procedure followed. The accounting procedures are all correct.a. Business entity.b. Conservatism.c. Earning principle of revenue
Problem C The following data relate to Merit Construction Company's long-term construction projects for the year 2010:Completed Incomplete Projects Projects Contract price.................................... $20,000,000 $100,000,000 Costs incurred prior to 2010 ............... ..... 3,700,000
Problem B Ramirez Video, Inc., sells video recorders under terms calling for a small down payment and monthly payments spread over three years. Following are data for the first three years of the company's operations:2008 2009 2010 Gross margin rate 30% 40% 50%Cash collected in 2010:From sales
Recording revenue only after the seller has obtained the right to receive payment from the buyer for merchandise sold or services performed is called the:a. Earning principle.b. Installment basis.c. Realization principle.d. Completed-contract method.
Assume that a company has paid for advertising and that the ad has already appeared. The company chose to report the item as prepaid advertising and includes it among the assets on the balance sheet. Previously, the company had always expensed expenditures such as this. This practice is a violation
Companies should use liquidation values to report assets if which of the following conditions exists?a. There are changes in the value of the dollar.b. The periodicity assumption is applied.c. The company is not a going concern and will be dissolved.d. The accrual basis of accounting is not used.
Problem A Select the best answer to each of the following questions:The assumption that each business has an existence separate from its owners, creditors, employees, customers, other interested parties, and other businesses is the:a. Going-concern assumption.b. Business entity concept.c. Separate
Exercise E Match the descriptions in Column B with the accounting qualities in Column A. Use some descriptions more than once.Column A: Accounting qualities Column B: Descriptions Relevance.a. Users of accounting information.Feedback value.b. Pervasive constraint.Decision makers. c . User-specific
Exercise D A company follows a practice of expensing the premium on its fire insurance policy when the policy is paid. In 2010, the company charged to expense the USD 6,000 premium paid on a three-year policy covering the period 2010 July 1, to 2010 June 30. In 2010, a premium of USD 5,400 was
Exercise C A company has a contract to build a ship at a price of USD 500 million and an estimated cost of USD 400 million. Costs of USD 100 million were incurred. Under the percentage-ofcompletion method, how much revenue would be recognized?
Exercise B Parker Clothing Company sells its products on an installment sales basis. Data for 2010 and 2011 follow:2010 2011 Installment sales......................... $800,000 $960,000 Cost of goods sold on installment sales ..... 560,000 720,000 Other expenses.......................... 120,000
Exercise A Match the items in Column A with the proper descriptions in Column B.Column A Column B Going concern (continuity).a. An assumption relied on in the preparation of the primary financial statements that would be unreasonable when the inflation rate is high.Consistency.b. Concerned with
Which of the following is not part of the conceptual framework project?a. Objectives of financial reporting.b. Quantitative characteristics.c. Qualitative characteristics.d. Basic elements of financial statements.
The revenue that should be recognized this period is:a. USD 3,000,000.b. USD 4,500,000.c. USD 5,000,000.d. USD 6,500,000.
Assume the following facts regarding the construction of a bridge:Construction costs this period...... USD 3,000,000 Total estimated construction costs...10,000,000 Total sales price............... 15,000,000
The concept that requires companies to use the same accounting practices and reporting practices through time is:a. Substance over form.b. Consistency.c. Articulation.d. None of the above.
The underlying assumptions of accounting includes all the following except:a. Business entity.b. Going concern.c. Matching.d. Money measurement and periodicity.
o The conceptual framework project resulted in identifying two primary qualitative characteristics that accounting information should possess—relevance and reliability.true or false.
o Immaterial items do not have to be recorded at all.true or false.
o Exceptions to the realization principle include the installment basis of revenue recognition for sales revenue and the completed-contract method for long-term construction projects.true or false.
o The matching principle is fundamental to the accrual basis of accounting.true or false.
o When the substance of a transaction differs from its legal form, the accountant should record the economic substance.true or false.
The business entity concept assumes that each business has an existence separate from all parties except its owners.true or false.
Group project E With a small group of students, obtain an annual report of a company in which you have some interest. You may obtain the annual report from your instructor, the library, the Internet, or the company. Describe the nature of each item on the classified balance sheet. You may have to
Group project D In teams of two or three students, interview a management accountant.Management accountants may have the title of chief financial officer (CFO), controller, or some other accounting title within a company. Seek information on the advantages and disadvantages of working as a
Business decision case A Heather and Dan Holt met while both were employed in the interior trim and upholstery department of an auto manufacturer. After their marriage, they decided to earn some extra income by doing small jobs involving canvas, vinyl, and upholstered products. Their work was
Alternate problem E The following trial balance and additional data are for Roswell Interior Decorators, Inc.:ROSWELL INTERIOR DECORATORS, INC Trial Balance 2010 December 31 Debits Credits Cash $ 85,400 Accounts Receivable 81,600 Supplies on Hand 4,000 Prepaid Rent 12,240 Prepaid Advertising 2,880
Alternate problem D The following trial balance and additional data are for Best-Friend Pet Hospital, Inc.BEST-FRIEND PET HOSPITAL, INC.Trial Balance 2010 December 31 Debits Credits Cash $ 16,490 Accounts Receivable 54,390 Supplies on Hand 900 Prepaid Fire Insurance 1,800 Prepaid Rent 21,600
Alternate problem C The following trial balance and additional data are for Ramon Data Processing Company:RAMON DATA PROCESSING COMPANY Trial Balance 2010 December 31 Debits Credits Cash $ 76,000 Accounts Receivable 98,000 Prepaid Rent 7,200 Prepaid Insurance 2,400 Equipment 80,000 Accumulated
Alternate problem B The adjusted trial balance for Penrod Insurance Consultants, Inc., follows:Penrod Insurance Consultants, Inc.Adjusted Trial Balance 2010 December 31 Debits Credits Cash $ 107,200 Accounts Receivable 68,000 Interest Receivable 400 Notes Receivable 20,000 Prepaid Insurance 2,400
Alternate problem A The following adjusted trial balance is for Dream Home Realty Company:DREAM HOME REALTY COMPANY Adjusted Trial Balance 2010 June 30 Debits Credits Cash $ 98,000 Accounts Receivable 40,000 Office Equipment 35,000 Accumulated Depreciation—Office Equipment $ 14,000 Automobiles
Problem E The following trial balance and additional data are for Florida Time-Share Property Management Company:FLORIDA TIME-SHARE PROPERTY MANAGEMENT COMPANY Trial Balance 2010 December 31 Debits Credits Cash $ 424,000 Prepaid Rent 28,800 Prepaid Insurance 7,680 Supplies on Hand 2,400 Office
Problem D The following trial balance and additional data are for South Sea Tours, Inc.:SOUTH SEA TOURS, INC.Trial Balance 2010 December 31 Debits Credits Cash $ 109,050 Accounts Receivable 133,750 Prepaid Insurance 4,350 Prepaid Advertising 18,000 Notes Receivable 11,250 Land 90,000 Buildings
Problem C The following trial balance and additional data are for Sure Sale Reality Company SURE SALE REALTY COMPANY Trial Balance 2010 December 31 Debits Credits Cash $ 62,800 Accounts Receivable 117,120 Prepaid Rent 46,080 Equipment 173,760 Accumulated Depreciation—Equipment $ 21,120 Accounts
Problem B The adjusted trial balance for Denver Architects , Inc., follows:DENVER ARCHITECTS, INC.Adjusted Trial Balance 2010 December 31 Debits Credits Cash $ 90,000 Accounts Receivable 20,000 Interest Receivable 200 Notes Receivable 4,000 Prepaid Insurance 960 Prepaid Rent 2,400 Supplies on Hand
Problem A The following adjusted trial balance is for Jasper Appliance Repair Company:JASPER APPLIANCE REPAIR COMPANY Adjusted Trial Balance 2010 June 30 Debits Credits Cash $ 63,000 Accounts Receivable 42,000 Trucks 110,000 Accumulated Depreciation—Trucks $ 30,000 Accounts Payable 10,800 Notes
Exercise O The following data are from the 2001 annual report of The Procter & Gamble Company and its subsidiaries. This company markets a broad range of laundry, cleaning, paper, beauty care, health care, food, and beverage products in more than 140 countries around the world. Leading brands
Exercise N Using the legend at the right, determine the category (number) into which you would place each of these items.Item Legenda. Land. 1. Current assets.b. Marketable securities. 2. Long-term investments.c. Notes payable, due in three years. 3. Property, plant, and equipment.d. Taxes withheld
Exercise M Which of the following accounts are likely to appear in the post-closing trial balance for the Blake Company? Accounts Receivable Cash Service Revenue Buildings Salaries Expense Capital Stock Dividends Accounts Payable Income Summary Unearned Subscription
Exercise L The following account balances appeared in the Income Statement columns of the work sheet entries prepared for Liu Company for the year ended 2010 December 31:Account Titles Income Statement Debit Credit Service Revenue 330,000 Advertising Expense 1,350 Salaries Expense 130,000 Utilities
Exercise K After adjustment, these selected account balances of Cold Stream Campground are:Debits Credits Retained earnings $540,000.00 Rental revenue 960000 Salaries expense $336,000.00 Depreciated expense – Buildings 64000 Utilities expense 208000 Dividends 32000 In T-account format, show how
Exercise J The Income Statement column totals on a work sheet prepared at 2010 December 31, are debit, USD 500,000; and credit, USD 900,000. In T-account format, show how the postings to the Income Summary account would appear as a result of the closing process. Identify what each posting
Exercise I Refer to the work sheet prepared in the Printer Repair Company exercise. Prepare the adjusting and closing journal entries.
Exercise H Rubino Company reported net income of USD 100,000 for the current year.Examination of the work sheet and supporting data indicates that the following items were ignored:Accrued salaries were USD 6,000 at December 31. Depreciation on equipment acquired on July 1 amounted to USD
Exercise G Texban Corporation had a 2010 January 1, balance in its Retained Earnings account of USD 90,000. For the year 2010, net income was USD 50,000 and dividends declared and paid were USD 24,000. Prepare a statement of retained earnings for the year ended 2010 December 31.
Exercise F The Trial Balance of the Printer Repair Company at 2010 December 31, contains the following account balances listed in alphabetical order to increase your skill in sorting amounts to the proper work sheet columns.Printer Repair Company Trial Balance Account Balances 2010 December 31
Exercise E Damon Davis was preparing the work sheet for Drano Plumbing Company. He calculated the net income to be USD 50,000. When he totaled the Balance Sheet columns, the column totals were debit, USD 400,000; and credit, USD 300,000. What was the probable cause of this difference? If this was
Exercise D In the previous exercise, if there was a debit balance of USD 216,000 in the Retained Earnings account as of the beginning of the year and a net loss of USD 192,000 for the year, show how these would be treated in the work sheet.
Exercise C Assume a beginning balance in Retained Earnings of USD 84,000 and net income for the year of USD 36,000. Illustrate how these would appear in the Statement of Retained Earnings columns and Balance Sheet columns in the work sheet.
Exercise A List the steps in the accounting cycle. Would the system still work if any of the steps were performed out of order?
Real world question Referring to the Annual report appendix in your text, identify the classifications (or categories) of liabilities used by The Limited in its balance sheet.
Real world question Referring to the Annual report appendix in your text, identify the classifications (or categories) of assets used by The Limited in its balance sheet.
The senior accountant needs management skills in addition to technical skills. Partners become increasingly involved in technical matters and have less and less interaction with people.
Real world question Refer to "A broader perspective: Skills for the long haul" to answer the following true-false questions: The same skills are needed at each level in a CPA firm. The two most important traits at the staff accountant level are a positive attitude and the ability to learn
What is the purpose of a post-closing trial balance?
A company has net income of USD 50,000 for the year. In which columns of the work sheet would net income appear?
What is the purpose of closing entries? What accounts are not affected by closing entries?
The work sheet for Bridges Company shows net income of USD 40,000. The following four adjustments were ignored: Subscriptions Fees earned, USD 1,200. Depreciation of equipment, USD 4,000. Depreciation of building, USD 10,000. Salaries accrued, USD 3,000. What is the correct net
· Which of the following statements is true regarding the classified balance sheet?o Current assets include cash, accounts receivable, and equipment.o Plant, property, and equipment is one category of long-term assets.o Current liabilities include accounts payable, salaries payable, and notes
· Which of the following statements is false regarding the closing process?o The Dividends account is closed to Income Summary.o The closing of expense accounts results in a debit to Income Summary.o The closing of revenues results in a credit to Income Summary.o The Income Summary account is
· Net income for a period appears in all but which one of the following?o Income Statement debit column of the work sheet.o Statement of Retained Earnings credit column of the work sheet.o Statement of retained earnings.o Balance sheet.
· If the Balance Sheet columns do not balance, the error is most likely to exist in the:o General journal.o General ledger.o Last six columns of the work sheet.o First six columns of the work sheet.
Which of the following accounts is least likely to be adjusted on the work sheet?o Supplies on Hand.o Land.o Prepaid Rent.Unearned Delivery Fees.
· All accounting systems currently in use are computerized. true or false
Balance columns to determine the amounts in the Adjusted Trial Balance columns. true or false
· The amounts in the Adjustments columns are always added to the amounts in the Trial
At the end of the accounting period, three trial balances are prepared. true or false
This problem involves using a work sheet for Green Hills Riding Stable, Incorporated, for the month ended 2010 July 31, and performing the closing process. The trial balance for Green Hills Riding Stable, Incorporated, as of 2010 July 31, was as follows:GREEN HILLS RIDING STABLE, INCORPORATED Trial
Define debit and credit. Name the types of accounts that are: Increased by a debit. Decreased by a debit.Increased by a credit. Decreased by a credit.
Group project D With one or two other students and using library and internet sources, write a paper on Statement of Accounting Standards No. 106, “Accounting for Postretirement Benefits Other Than Pensions”. This standard resulted in some of the largest adjusting entries ever made. Companies
Group project C In teams of two or three students, go to the library to locate one company’s annual report for the most recent year. Identify the name of the company and the major products or services offered, as well as gross revenues, major expenses, and the trend of profits over the last three
Business decision case B A friend of yours, Jack Andrews, is quite excited over the opportunity he has to purchase the land and several miscellaneous assets of Drake Bowling Lanes Company for USD 400,000. Andrews tells you that Mr and Mrs Drake (the sole stockholders in the company) are moving due
Business decision case A You have just been hired by Top Executive Employment Agency, Inc., to help prepare adjusting entries at the end of an accounting period. It becomes obvious to you that management does not seem to have much of an understanding about the necessity or adjusting entries or
Alternate problem E On 2010 June 1, Richard Cross opened a swimming pool cleaning and maintenance service, Cross Pool Company. He vaguely recalled the process of making journal entries and establishing ledger accounts from a high school bookkeeping course he had taken some years ago.At the end of
Alternate problem D The reported net income amounts for Safety Waste Control Company were 2010, USD 200,000; and 2011, USD 230,000. No annual adjusting entries were made at either yearend for any of these transactions:a. A building was rented on 2010 April 1. Cash of USD 14,400 was paid on that
Alternate problem C Nevada Camping Equipment Rental Company occupies rented quarters on the main street of Las Vegas. To get this location, the company rented a store larger than needed and subleased (rented) a portion of the area to Max’s Restaurant. The partial trial balance of Nevada Camping
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