Accounting Workbook For Dummies 1st Edition John A. Tracy - Solutions

Suppose the business held its books open for several days into the next year. It recorded an additional $200,000 of payments from customers as if they had been received on December 31 (the last day of its fiscal year) even though the money wasn’t actually received and deposited in its bank
Suppose that just before the end of the year, the business paid an additional$400,000 of its accounts payable. Normally, it would not have accelerated payments of accounts payable, but the order to do so came down from “on high,” and the payments were made. Why do you think the business may
Suppose the business sold only services and not products. Which account(s) would you not expect to see in its balance sheet?
Suppose the business was very conservative and didn’t borrow money. Which account(s) would you not expect to see in its balance sheet?Solve It
Suppose the business didn’t own any of its fixed assets (long-term operating assets).Instead, it entered into long-term leases for all these assets (buildings, machinery, equipment, trucks, and so on). Which account(s) would you not expect to see in its balance sheet?
Suppose the business didn’t make credit sales and made only cash sales. Which account(s) would you not expect to see in its balance sheet?Solve It
The business introduced in Question 7 manufactured its first batch of products. It has not yet sold any of these products. The balance sheet changes caused by the first production run are summarized in the following journal entry:Using the portrait format, prepare its balance sheet after giving
A new business has just been organized. A group of investors put $5,000,000 in the business and the business issued 5,000,000 shares of capital stock to them. The business borrowed $2,500,000 from a local bank on the basis of a long-term note payable.(Several of the investors had to guarantee this
Following its initial financing and investing transactions in Question 5, the business manufactured its first batch of products.The cost of products manufactured was$650,000, depreciation was $20,000, and accounts payable increased $185,000. To provide additional cash, the business borrowed
Instead of the initial financing and investing transactions presented in the preceding example questions, assume the business issued 100,000 capital stock shares for$1,500,000, borrowed $2,000,000 on a longterm note payable, and invested $2,800,000 in fixed assets. Using the landscape (horizontal)
A business has $3,600,000 total assets and$4,600,000 total liabilities. Present three balance sheet formats for the business.Solve It
A business has $2,500,000 total assets and$1,000,000 total liabilities. Present three balance sheet formats for the business.Solve It
The comprehensive entry for this business summarizing the changes in assets and liabilities from its sales and expenses for the year is as follows:For the business’s board of directors, prepare a schedule of changes in assets and liabilities that summarizes the effects on the business’s
Refer to the summary income tax expense entry earlier in this section. Assume that the business overpaid its income tax for the year; the total of installment payments during the year was $50,000 more than its$910,000 income tax for the year. The overpayment will be refunded to the business.Prepare
Refer to the summary selling and general expenses entry earlier in this section.Assume that prepaid expenses didn’t change during the year. The amounts for depreciation expense and the increases in accounts payable and accrued expenses payable are the same as in the summary journal entry. Selling
Refer to the summary cost of goods sold expense entry earlier in this section.Assume that inventory decreased $500,000 during the year because the business sold more products than it purchased. And assume that accounts payable decreased$250,000 during the year because the business paid more of its
Refer to the summary sales revenue entry earlier in this section. Assume that accounts receivable increased $500,000 instead of the $1,000,000 increase in that entry. Prepare the summary journal entry for sales revenue.Solve It
Some years ago, businesses in the cosmetic industry did not report sales revenue and cost of goods sold expense. Their income statements started with the gross margin line, and their gross margins were a very large percent of sales revenue (over 70 percent). The companies argued that if their
A business’s income statement doesn’t disclose its advertising expenses for the year.Give an argument for not disclosing this expense, and give an argument for disclosing this expense.Solve It
The sales revenue and expenses of a business for the year just ended are as follows:Cost of goods sold expense $6,358,000 Income tax expense $458,000 Interest expense $684,000 Selling and general expenses $4,375,000 Sales revenue $13,125,000 Prepare the annual income statement of the business in
A business reports $836,000 loss for the year just ended. In its statement of cash flows for the year (see Chapter 8), the business reports that its cash flow from operating activities (from its loss for the year) is a negative $675,000. In other words, its cash balance decreased $675,000 from its
A business reports $5,250,000 net income for the year just ended. In its statement of cash flows for the year (see Chapter 8), the business reports that its cash flow from operating activities (from its profit for the year) is $4,650,000. In other words, its cash balance increased $4,650,000 from
A business reports $3,800,000 loss for the year just ended. Determine two valid scenarios for changes in its assets and liabilities resulting from its loss for the year.Solve It
A business reports $346,000 net income(profit) for the year just ended. Determine two valid scenarios for changes in its assets and liabilities resulting from its profit for the year.Solve It
The purchasing manager of the business has authority to issue purchase orders. He also inspects shipments as they arrive, approves vendors’ invoices for payment, and mails checks to the vendors. Do you see any potential problems here?Solve It
The business is organized legally as a partnership and therefore doesn’t pay income tax. (A partnership’s annual taxable income or loss is passed through to its partners who pick up their share of profit or loss in their individual income tax returns.) Year-end adjusting entries have been
At the end of the year, the business counts and inspects its ending inventory of products on hand, which is stored in its warehouse and retail sales areas. Usually, employees discover some damaged and spoiled products that can’t be sold. This year is no exception. The cost of spoiled and damaged
At the end of the year, the business owes$10,000,000 on interest-bearing notes payable. During the year, it records interest expense as it’s paid to lenders. Accordingly, the business recorded $515,400 interest expense during the year. At the close of the year, it owes $97,500 interest that
Based on the final determination of its federal income tax for the year, the business owes $431,500. During the year, it made$3,978,500 total installment payments towards its income tax, which were charged (debited) to its income tax expense account. The $431,500 balance still owed to the
At the end of the year, the business owes its employees $58,300 for accumulated vacation and sick pay. This amount will be paid when employees actually take their vacations and time off for sick leave. No entry has been made for this accrued liability. What adjusting entry is made at the end of the
The business has more cash than it needs for day-to-day operations, so the excess cash is invested in short-term marketable securities that pay interest. During the year, the business receives interest checks, which it records in the interest income account. At the end of the year, $48,500 interest
A business makes almost all credit sales. At the end of the year, the business has$485,000 total accounts receivable. This ending balance doesn’t include $28,500 specific accounts receivable that were written off during the period. The business estimates that customers will not pay$6,500 of the
The business signs a ten-year contract with the inventor of a secret process that it will use in its manufacturing operations. As an incentive to agree to the contract, the business immediately pays the inventor$1,000,000. In addition, the business agrees to pay the inventor a royalty equal to five
A business pays the owner of a patent$500,000 for the right to use the patent for a period of five years.a. What entry should be made for the purchase of the patent right?b. What adjusting entry should be made one year later?Solve It
On the last day of the year, a particular piece of equipment that originally cost$87,500 many years ago was removed from the production line and put on the shipping dock. The equipment is of no further use to the business and will be hauled away to the junk heap in a few days. The asset is fully
A bookkeeper who was recently hired by a business recorded the depreciation expense on delivery trucks for the year as follows:Depreciation Expense — $215,000 Delivery Trucks Delivery Trucks $215,000 Is this entry wrong?
Based on its depreciation schedules, the annual depreciation on the business’s machinery is $420,000. The business uses the straight-line depreciation method. The business recorded a machinery depreciation expense at the end of each quarter during the year, but no entry has been made for the
In the hustle and bustle of the end-of-year accounting activities, the bookkeeper simply forgot to record the business’s social security taxes on its last payroll in the year. As you may know, a business employer pays social security taxes equal to the amount withheld from employees’paychecks.
The $1,500 trash collection bill for the last month of the fiscal year normally arrives before the end of the month. However, the waste management company didn’t get its bills out on time, so the expense hasn’t been recorded. What adjusting entry should be made to correct this error?Solve It
In its year-end review for errors, a business discovers that an order of products was shipped to a customer, and the cost of the products was correctly charged to cost of goods sold expense. However, the paperwork for this particular sales order wasn’t sent to the bookkeeping department on time.
A business has had a very good year; its$58,000,000 net income for the year is an all-time high. Being in a generous mood, its board of directors declares a whopping cash distribution of $30,000,000 based on the business’s record-setting performance.What journal entry should be made for this
A business corporation needed more capital to expand and grow, so it issued additional stock shares for a total of$25,000,000. What journal entry should be made for this financing transaction?Solve It
A few days after recording the purchase of products on credit, the business discovers that some of the products are defective.The business hasn’t paid for the purchase yet, and the vendor agrees to accept return of these defective products for full credit.The products returned to the vendor
The business enters into a contract with a major supplier in which it agrees to buys a minimum amount of products every month over the next five years. Also, set prices are established in the contract. As of yet, the business hasn’t made a purchase under this contract, but it expects to do so in
The business receives $49,000 from customers in payment for their previous purchases on credit from the business. To encourage prompt payment, the business offered its customers a 2 percent discount off the sales invoice amount if they paid within ten days of sale, and all the customers took
The business buys on credit a large supply of shipping containers that should be enough for the next six months of deliveries. The bill for the purchase is $26,500, and the business will pay it in about 30 days. What journal entry should be made for this transaction?Solve It
Unfortunately, one of the major customers of the business declared bankruptcy. This customer owes the business $35,000. The business has already recorded the credit sale to the customer and the cost of goods sold for the sale. After careful analysis, the business comes to the conclusion that it
Its actuarial firm informs the business that the cost of its employees’ retirement pension benefit for the period is $565,000.According to the contract with its employees, the business decides to transfer$300,000 to the trustee of the pension plan and to defer payment of the remainder until a
The business just received a bill for $15,000 from the outside security firm that guards its warehouse and offices. No entry has been made for this expense yet, and the business normally waits several weeks to pay this bill. What journal entry should be made for this expense?Solve It
The business’s cost of goods sold for its sales during the period is $938,450. The sales revenue for these sales has been recorded. What journal entry should be made for this expense?Solve It
A business invests in short-term government securities to earn income on excess cash that it doesn’t need for its day-to-day operations. It just received a $4,500 check from the government for interest earned over the last six months. None of this income has been recorded yet. How should this
Over the course of a business day, a few customers return products to the business.For the day, the total of customer returns is$2,300, and the business refunds cash to these customers. How should the product returns be recorded? (Use the journal entry format shown in the preceding example
For the day, a business makes $48,000 credit card sales to individuals. It immediately sends the credit card information to its bank, which deducts 1.5 percent on credit card charges and puts the remainder in the business’s checking account.How should these credit card sales be recorded? (Use the
For the day, a business makes $38,900 credit sales to other businesses. How should these credit sales be recorded?(Use the journal entry format shown in the preceding example answer.)Solve It
The business pays a note payable that came due in the amount of $5,000. (Ignore interest expense.) How should this transaction be recorded in the accounts?Solve It
The business pays the $425 liability for the operating expenses noted in the example question’s transaction list. How should this transaction be recorded in the accounts?Solve It
The business purchases products for inventory and pays $3,500 cash for the purchase. How should this transaction be recorded in the accounts?Solve It
A good friend is reading the most recent financial report of your business. In the balance sheet, she comes across an account called “Owners’ equity — Retained earnings.” She asks you, “Is this an asset account? If it is, is it money in the bank?” How do you answer?
The following condensed balance sheet presents eight core accounts of a business. Which of the eight accounts have a high frequency of transactions recorded in them during the year, and which have a low frequency of transactions? In other words, which of these eight are busy accounts, and which are
This question focuses on just two accounts taken from the chart of accounts of a business that makes credit sales. (Even a small business keeps hundreds of accounts.) The first is a real account, accounts receivable.The second is a nominal account, sales revenue. Are increases and decreases
Suppose a business just opened its doors on the first day of the year. Not a single transaction has taken place yet in the new year. Which of the following accounts have balances in them, and which don’t?• Cash• Notes payable• Sales revenue• Owners’ equity — Invested capital• Wages
The income tax Form 1120 for business corporations requires the reporting of the following assets: trade notes and accounts receivables; buildings and other depreciable assets; and loans to shareholders.Should the business include separate accounts for each of these assets in its chart of accounts?
A business employs a typical range of employees — janitors, salespeople, bookkeepers, truck drivers, managers, and so on. It provides a basic retirement plan and pays the premiums for employees’ medical and hospital insurance. The annual income tax return filed with the IRS requires the
A business borrows money from its bank.Identify the liability account and the expense account that it should include in its chart of accounts for the borrowing of money.
A business rents the building that houses its retail store, its warehouse, and its administrative offices. It pays rent in cash, so obviously the business needs a cash account. Should the business include an expense account for rent in its chart of accounts?Solve It
Building on your answer to Question 19, assume that the business had other non-profit transactions during the year, as follows:Increased its interest-bearing liabilities $100,000.Paid $80,000 distribution from profit to its shareowners Taking into account these additional transactions, what is the
Starting with the financial condition of the business at the beginning of the year (see “Seeing Both Sides of Business Transactions” earlier in this chapter) and the changes caused by its profitmaking activities during the year (see “Concentrating on the Composite Effect of Profit and
Suppose that sales for the year caused the following changes in the company’s financial condition:What is the composite effect on financial condition from the company’s profit-making activities for the year? (Assume that changes in financial condition from expenses are the same.) Condensed
Suppose that expenses for the year caused the following changes in the company’s financial condition:What is the composite effect on financial condition from the company’s profit-making activities for the year? (Assume that changes in financial condition from its sales are the same.) Condensed
A business decides to engage in accounting fraud to improve its profit performance for the year.Of course this is unethical and illegal, but the chief executive of the business is desperate, and the chief accountant agrees to conspire with the chief executive to carry out this accounting fraud.They
A business was just about ready to prepare its financial statements for the year when a sharpeyed bookkeeper noticed that the business had failed to accrue (record) certain liabilities for unpaid expenses at the end of the year. So, a correcting entry has to be made. The amount of these liabilities
A business leases all its long-term operating assets (buildings, machines, vehicles, and so on). Thus, it has no depreciation expense. For the year just ended, the business recorded $2,450,000 total expenses. Expenses caused $75,000 increase in operating liabilities. Inventory increased $45,000
A business recorded $4,500,000 total expenses for the year. The expenses caused $100,000 increase in its operating liabilities, and a $200,000 depreciation expense was recorded in the year.There was no change in inventory during the year (which is unusual). How did expenses change the financial
During its first year of business, a company made $6,250,000 credit sales. The business collected$5,600,000 cash from customers during the year from these sales. Unfortunately, a few customers didn’t pay despite repeated requests and threats of legal action. The business cut off credit to these
During the year, a business made $3,650,000 cash sales. The business has a very liberal product return policy and therefore accepted product returns from customers and refunded $450,000 cash. What are the effects of these returns on the business’s financial condition?
A business requires advance payments on all sales. In other words, it collects cash from customers before products are delivered to them later. During the year, the business received $12,500,000 in advance payments from customers. By the end of the year, the business had delivered 85 percent of
A business sells only to other businesses and makes all sales on credit; it doesn’t have any cash sales or advance payment sales. During the year, the business made $35,000,000 sales. From these sales, the business collected $31,500,000 during the year, and it also collected the $3,250,000
A note payable liability came due (meaning it reached its maturity date) during the year, and the business decided not to renew (or rollover) this loan. Accordingly, the business paid $500,000 to the lender, and the note payable was cancelled. (All interest expense on this debt was recorded
A freak flood caused extensive damage to inventory. Unfortunately these losses weren’t insured, and the business had to write off $175,000 of its inventory. Ignoring the income tax effects of this write-off, how does this event change the business’s financial condition?
During the year, a business borrowed $850,000 and used $750,000 of those funds to invest in new long-term operating assets. How do these actions change its financial condition?
Suppose that all revenue transactions during the year increase cash and that all expense transactions during the year decrease cash. In other words, suppose no other assets and no operating liabilities are affected by the profit-making activities of the business during the year (this scenario
A business records the cost of electricity and gas used during the period. Which type of transaction is this?Solve It
A business records employees’ wages and salaries for the period. Which type of transaction is this?Solve It
A business’s shareowners invest additional capital in the business. Which type of transaction is this?Solve It
Suppose a business commits accounting fraud by deliberately not recording $465,000 liabilities for unpaid expenses at the end of the year. How should its balance sheet be adjusted to correct for this accounting fraud, ignoring income tax effects? (Use the answer template provided.)
Suppose a business commits accounting fraud by deliberately not writing down its inventory of$268,000, which is the cost of certain products that it can no longer sell and will be thrown in the junk heap. How should its balance sheet be adjusted to correct for this accounting fraud, ignoring income
Three of the four components of cash flow for the year of a business are as follows:Cash flow from operating ????activities Cash flow from investing ($480,000)activities Cash flow from financing ($150,000)activities Net increase (decrease) $150,000 in cash during the year Determine cash flow from
Three of the four components of cash flow for the year of a business are as follows:Cash flow from operating $650,000 activities Cash flow from investing ($925,000)activities Cash flow from financing ????activities Net increase (decrease) ($65,000)in cash during the year Determine cash flow from
Three of the four components of cash flow for the year of a business are as follows:Cash flow from operating $2,680,000 activities Cash flow from investing ????activities Cash flow from financing $1,250,000 activities Net increase (decrease) $400,000 in cash during the year Determine cash flow from
Three of the four components of cash flow for the year of a business are as follows:Cash flow from operating $450,000 activities Cash flow from investing ($725,000)activities Cash flow from financing $50,000 activities Net increase (decrease) ????in cash during the year Determine the increase or
In a balance sheet, assets usually are listed in the order of their “nearness” to cash.Cash is listed first, followed by the asset closest to being converted into cash, and so on. Is the sequence of assets according to normal rules for presenting assets in balance sheets?
Can you tell the amount of profit the business earned in the period just ended?Solve It
It appears that the business can’t pay its liabilities. The two liabilities total $938,000, but the business has a cash balance of only$396,000. Do you agree?Solve It
Suppose $950,000 of owners’ equity consists of profit earned and not distributed by the business. What is this amount usually called in the balance sheet? And, what is the other amount of owners’ equity called in the balance sheet?Solve It
Please refer to the income statement for the answer to the example question.Suppose the business distributed $650,000 cash to its shareowners from its profit (net income) for the year. Is this cash disbursement treated as an expense?
No specific rule governs income statement disclosure of executive-level compensation. Suppose the $10,010,000 “Other expenses” in the income statement for the answer to the example question includes$3,000,000 of executive-level compensation that includes both base salaries and generous bonuses.
No specific rule governs income statement disclosure of advertising expense. Suppose the $10,010,000 “Other expenses” in the income statement for the answer to the example question includes $5,000,000 of advertising expense. Would you favor reporting this as a separate expense in the income
One rule of income statement reporting is that interest expense and income tax expense be reported separately. The$10,010,000 “Other expenses” in the income statement for the answer to the example question includes $350,000 interest expense and $910,000 income tax.Rebuild the income statement
Based on the changes for the example given in Questions 5, 6, and 7, determine the profit or loss of the business for its first year.
What would be the amount of accrual-basis other expenses for the year if the business’s liability for unpaid expenses at yearend had been $30,000?Solve It

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Accounting Workbook For Dummies 1st Edition John A. Tracy - Solutions

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