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College Accounting Ch 1-14 1st Edition John Wild, Vernon Richardson, Ken Shaw - Solutions
Review the “You Call It” on page 285, which illustrates an ethical challenge associated with purchase discounts.Required 1. In your view, is the company currently abusing its suppliers’ cash discount policy? Explain.2. Is it appropriate to indicate that the late payments are due to computer
Prepare journal entries to record the following merchandising transactions of Blink Company.July 1 Purchased merchandise from Boden Company for \($6,000\) under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.3 Paid \($125\) cash for freight charges on the purchase of July 1.9
Prepare journal entries to record the following merchandising transactions of Sheng Company.Aug. 1 Purchased merchandise from Arotek Company for \($7,500\) under credit terms of 1/10, n/30, invoice dated August 1.8 Purchased merchandise from Waters Corporation for \($5,400\) under credit terms of
Valley Company’s adjusted trial balance on August 31, 2008, its fiscal year-end, follows. (Also, merchandise inventory was \($41,000\) on August 31, 2008.)Required1. Compute the company’s net sales for the year.2. Compute the company’s total cost of merchandise available for sale.3. Compute
Prepare journal entries to record the following merchandising transactions of Yarvelle Company.May. 2 Purchased merchandise from Havel Co. for \($10,000\) under credit terms of 1/15, n/30, FOB shipping point, invoice dated May 2.5 Paid \($250\) cash for freight charges on the purchase of May 2.10
Prepare journal entries to record the following merchandising transactions of Mason Company.July. 3 Purchased merchandise from OLB Corp. for \($15,000\) under credit terms of 1/10, n/30, FOB destination, invoice dated July 3.10 Purchased merchandise from Rupert Corporation for \($14,200\) under
Barkley Company’s adjusted trial balance on March 31, 2008, its fiscal year-end, follows.On March 31, 2008, merchandise inventory was \($56,500.\)Required 1. Calculate the company’s net sales for the year.2. Calculate the company’s total cost of merchandise available for sale.3. Compute
Johnson Corp. has the following credit purchase transactions in the month of January.Jan. 5 Purchased merchandise from Bethany Inc. under the following terms: \($725,\) invoice date 1/4, credit terms 2/10, n/30; freight \($65.\)9 Purchased merchandise from Daniel Inc. under the following terms:
Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of \($24,000\) and credit terms of 3/10, n/60. The merchandise had cost Mesa \($16,000\). Santa Fe paid within the discount period. Prepare entries that Santa Fe Company should record for the merchandise
Ziegler Inc. has the following cash disbursements in April.Apr. 9 Issued check no. 210 to Kitt Corp. to buy store supplies for \($650.\)Apr. 17 Issued check no. 211 for \($1,400\) to pay off a note payable to City Bank.Apr. 20 Purchased merchandise for \($4,500\) on credit from ites
Scudamore had to attend to payroll, employee benefits, and taxes, among other issues, in getting hiscompany where it is today.RequiredPrepare a one-page memorandum that summarizes the types of employer payroll taxes and how they are reported. To the extent possible, reference the form to be filed
Fishing Guides Co. pays its employees each week. Employees’ gross pay is subject to these taxes.The company is preparing its payroll calculations for the week ended September 30. Payroll records show the following information for the company’s four employees.In addition to gross pay, the
Refer to Problem 10-3B. MLS Company’s tax year ends on December 31 and its federal Employer Identification Number is 548932154. It is located at 102 Grindstone Way, Columbus, Ohio 43085.Required I. Prepare a Form 8109 for MLS Company’s April 15 deposit of its March FICA and employee income
Prestige Travel reports the following summary information in its payroll register for 2007. Prestige Travel pays state unemployment tax of 2.0% of each employee’s first \($7,000\) of annual gross pay. Prestige Travel also pays federal unemployment tax of 0.8% of each employee’s first \($7,000\)
Landmark Homes began operations on January 1, 2007. The company pays workers’ compensation insurance premiums for its employees. The company’s accountant assembled the data below for Landmark Homes for 2007:Required1. Prepare the general journal entry to record Landmark Homes’ payment of its
BMX Co. has one employee, and the company is subject to the following taxes:Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). Tax Rate Applied to FICA-Social Security 6.20%
Using the data in situation a of Exercise 10-1, prepare the employer’s September 30 journal entries to record (1) the employer s payroll tax expense and its related liabilities and (2) its tax deposits. In preparing the tax deposit entry assume that the employer has already recorded liabilities
Metro Express has five sales employees, each of whom earns \($4,000\) per month and is paid on the last working day of the month. Each employee’s wages are subject to FICA Social Security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal
Premier Landscaping reports the following in its payroll register for August. The company makes monthly tax deposits.Prepare the general journal entry to record Premier Landscaping’s deposit of its federal income tax withholdings and FICA taxes (employee and employer portions) for August. Pay
A1 Construction began operations on January 1, 2007. The company pays workers’ compensation insurance premiums for its employees. The company’s accountant assembled the data below for 2007:1. Compute A1 Construction’s estimated workers’ compensation insurance premium for 2007.2. Prepare the
Paloma Co. pays its employees each week. Its employees’ gross pay is subject to these taxes:The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company’s four employees.In addition to gross pay, the company must
Warner Co. pays state unemployment tax of 2.0% of each employee’s first \($7,000\) of annual gross pay.It also pays federal unemployment tax of 0.8% of each employee’s first \($7,000\) of annual gross pay.Warner Co.’s Employer Identification Number is 778125398, its state taxpayer
Tool began operations on January 1, 2007. Precision Tool pays workers’ compensation insurance premiums for its employees. The company’s accountant assembled the data below for Precision Tool for 2007:RequiredI. Prepare the general journal entry to record Precision Tool’s payment of its
What is a Form W-2? To whom is Form W-2 sent?
What is a Form W-3? To whom is a Form W-3 sent?
The Federal Insurance Contributions Act (FICA) requires that each employer file aa. W-4.b. Form 941.c. Form 1040.d. Form 1099.e. All of the above.
Key comparative figures for both Best Buy and Circuit City follow.Required1. Compute sales-per-employee for 2005 and 2004 for each company.2. Comment on each company’s operating efficiency based on the sales-per-employee ratio. Assume an industry average of \($200,000\) for each year. Net sales
The payroll records of JK Landscape Design provided the following data for the weekly pay period ended October 7:The FICA Social Security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week’s wages paid to each employee. Use withholding tables in Exhibits 9.4 and 9.5 to
Merle Perkins operates Al Auto Repair. Information on his three employees for the payroll period (week) ending June 1, 2007, is provided below. Each employee receives one and one-half times the normal hourly pay rate for any hour worked beyond 40 in a week. The FICA Social Security tax rate is 6.2%
Refer to Problem 9-4B. Before the pay period endin g June 1, 2007, the individual employee earnings record for Andre Jones reports the following:Social Security taxes of 6.2% and Medicare taxes of 1.45% are deducted from each employee’s gross pay. Tax withholding tables are used to compute
The payroll records of Swift Company provided the following data for the weekly pay period ended December 7:The FICA Social Security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week’s wages paid to each employee. The state income tax equals 8 percent of the amount
Refer to Problem 9-4A. Before the pay period ending June 1, 2007, the individual employee earnings record for Emily Jacobs reports the following:Social Security taxes of 6.2% and Medicare taxes of 1.45% are deducted from each employee’s gross pay. Tax withholding tables are used to compute
Compute gross pay for each of the following employees. An overtime rate of one and one-half times the normal hourly wage is paid for each hour worked beyond 40 hours. Mike Mura Hourly Rate No. of Hours Worked $11 42 50 Pedro Chavez $14
BMX Co. has one employee, Keesha Parks, and the company is subject to the following taxes:Compute BMX’s amounts for FICA taxes and federal income tax withholdings as applied to Keesha’s gross earnings for September under each of three separate situations (a), (b), and (c). (Use the withholding
Using the data in situation b of Exercise 9-1, prepare the employer’s September 30 journal entries to record (1) salary expense and its related payroll liabilities for this employee and (2) payment of the pay- Payroll-related journal entries roll. BMX does not use a special payroll bank
Use withholding tables from Exhibits 9.4 and 9.5 to compute the amount of federal tax withheld from the weekly pay of the following employees: Name Gross Pay Withholding Marital Allowances Status Keisha $520 1 Single James 600 3 Single Tyrell 476 4 Married Emily... 817 2 Married
The payroll records of One Click Software show the following information about Keisha LeShon, an employee, for the weekly pay period ending September 30, 2008. LeShon is single and claims one allowance. Compute her Social Security tax (6.2%), Medicare tax ( 1.45%), federal income tax withholding,
Phildell Phoenix is paid monthly. For the month of January of the current year, he earned gross pay of \($8.288\), FICA tax for Social Security is 6.2% and the FICA tax for Medicare is 1.45%. The amount of federal income tax withheld from his earnings was \($1,375.17\). Phildell contributes
Match each of the following terms A through G with the appropriate definitions 1 through 7.A. FICA taxes B. Payroll register C. Withholding allowance D. Gross pay E. Wage bracket withholding table F. Net pay G. Payroll bank account 1. A record for a pay period that shows the pay period
Identify and describe several cash controls that Moe’s likely uses.
For each of these five separate cases, identify the basic control principle(s) that is violated. Recommend what the business should do for better control.1. Chi Han records all incoming customer cash receipts for his employer and posts the customer payments to their respective accounts.2. At Tico
The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2008.a. After all posting is complete on July 31, the company’s Cash account has a \($27,497\) debit balance, but its July bank statement shows a
1. The petty cash fund of the Brooks Agency is established at \($85\). At the end of the current period, the fund contained \($14.80\) and had the following receipts: film rentals, \($21.30\), refreshments for meetings, \($30.85\) (both expenditures to be classified as Entertainment Expense);
What control procedures would you recommend in each of the following situations?1. A concession company has one employee who sells sunscreen, T-shirts, and sunglasses at the beach.Each day, the employee is given enough sunscreen, shirts, and sunglasses to last through the day and enough cash to
Del Gato Clinic deposits all cash receipts on the day they are received and it makes all cash payments by check. At the close of business on June 30, 2008, its Cash account shows an \($11,589\) debit balance.Del Gato Clinic’s June 30 bank statement shows \($10,555\) on deposit in the bank.
Deacon Co. reported annual net sales for 2007 and 2008 of \($665,000\) and \($747,000\), respectively. Its year-end balances of accounts receivable follow: December 31, 2007, \($61,000\) ; and December 31, 2008, \($93,000\).(a) Calculate its days’ sales uncollected at the end of each year.(b)
Read the article “No Accounting for Being Disorganized” in the March 10, 2004, issue of BusinessWeek. (The book’s Website provides a free link.)Required 1. Why does Steven Cohen, the author of the article, urge small business owners to be accounting literate?2. How does Cohen suggest that
For each of the independent cases below, identify the principle of internal control that is violated, and recommend what should be done to remedy the violation.I. In order to save money, Regal Company has decided to drop its property insurance on assets and to stop bonding the cashiers who handle
Identify and explain provisions of the Sarbanes-Oxley Act that are designed to prevent fraud.
Refer to Best Buy’s financial statements in Appendix A to answer the following.I. Identify and write down the revenue recognition principle as explained in the chapter.2. Research Best Buy’s footnotes to discover how it applies the revenue recognition principle. Report what you discover.
Merchandising companies, such as Best Buy and Circuit City, sell gift cards to their customers.Best Buy and Circuit City would record these as unearned revenue, When the gift cards are redeemed, revenue is then recognized.RequiredI. Review Best Buy and Circuit City financial statements in Appendix
Recall the ethical dilemma in the “You Call It” box on page 317 that suggested delaying recognition of accrued expenses and early revenue recognition.Required1. Relying on the matching principle, discuss the rationale for revenue recognition. Explain why the delayed recognition of accrued
Merchandising companies, such as Best Buy and Circuit City, sell gift cards to their customers to generate future revenues.Required Visit the Websites of Best Buy (BestBuy.com) and Circuit City (CircuitCity.com) and compare and contrast each company’s gift card policies.
Refer to the chapter’s opening feature about Tony Lee and his Ring Masters company. Required1. At the end of each reporting period, Tony Lee makes adjusting journal entries. Give examples of each of these types of adjusting journal entries that Tony Lee might make at his steel rings factory.a.
Describe a company’s annual reporting period.
Why do companies prepare interim financial statements?
What two accounting principles most directly drive the adjusting process?
If your company pays a \($4,800\) premium on April 1, 2007, for two years’ insurance coverage, how much insurance expense is reported in 2008 using cash basis accounting? Using accrual basis accounting?
If an adjusting entry for accrued revenues of \($200\) at year-end is omitted, what is this error’s effect on the year-end income statement and balance sheet?
Describe how an accrued revenue arises. Give an example.
Why is the accrual basis of accounting generally preferred over simply using cash payments and receipts?
What is an accrued expense and where is it reported in the financial statements?
What is unearned revenue and where is it reported in financial statements?
Review the balance sheet of Best Buy in Appendix A. Identify the liability accounts that require adjust- Cad ment before annual financial statements can be prepared.What would be the effect on the income statement if these liability accounts were not adjusted?Appendix A: Consolidated Balance
Review the balance sheet of Circuit City in Appendix A.Identify two asset accounts requiring adjusting entries.Appendix A: Consolidated Balance Sheets $ in millions, except per share amounts Assets Current Assets Cash and cash equivalents Short-term investments Receivables Merchandise inventories
Adjusting for unearned revenuesa. Tao receives \($10,000\) cash in advance for 4 months of legal services on October 1, 2008, and records it by debiting Cash and crediting Unearned Revenue both for \($10,000\). It is now December 31, 2008, and Tao has provided legal services as planned. What
Preparing adjusting entries Prepare adjusting journal entries for the year ended December 31, 2008, for each of these separate sit-uations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as
Preparing adjusting entries For each of the following separate cases, prepare adjusting entries required of financial statements for the year ended December 31, 2008. Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially
Adjusting and paying accrued wages Reese Management has four part-time employees, each of whom earns \($300\) per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2007. The next week, the five employees
Adjusting and paying accrued expenses The following three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued
Refer to Best Buy’s financial statements in Appendix A to answer the following.Required 1. Assume that the amounts reported for inventories and cost of sales reflect items purchased in a form ready for resale. Compute the net cost of goods purchased for the fiscal year ended February 26, 2005.2.
Key comparative figures ($ millions) for both Best Buy and Circuit City follow.Required 1. Compute the dollar amount of gross margin and the gross margin ratio for the two years shown for both companies.2. Which company earns more in gross margin for each dollar of net sales? How does each company
Access the SEC’s EDGAR database (www.sEC.gov) and obtain the April 29, 2005, filing of its fiscal 2005 10-K report (for year ended January 29, 2005) for J. Crew Group, Inc.Required Prepare a table that reports the gross margin ratios for J. Crew using the revenues and cost of goods sold data
Refer to the opening feature about CoCaLo. Assume that Renee Pepys Lowe estimates current annual sales at approximately $10 million and reports the following income statement.CoCaLo sells to various retailers, ranging from small shops to large chains such as Target. Assume that Renee Pepys Lowe
Describe a merchandiser’s cost of goods sold.
What is gross profit for a merchandising company?
A merchandiser had \($20,000\) of beginning inventory. Its net purchases cost \($115,000\). If it has \($17,000\) of ending inventory, compute(a) merchandise available for sale and(b) cost of goods sold.
How long are the credit and discount periods when credit terms are 2/10, n/60?
Identify which items are subtracted from the list amount and not recorded when computing purchase price: (a) transportation-in; (b) trade discount; (c) purchase discount; (d) purchase return.
What does FOB mean? What does FOB destination mean?
What are the normal recording and posting procedures when using special journals and controlling accounts with subsidiary ledgers?
What is the process for posting to a subsidiary ledger and its controlling account?
How do we prove the accuracy of account balances in the general ledger and subsidiary ledgers after posting?
The accounting principle that requires revenue to be reported when earned is thea. Matching principle.b. Revenue recognition principle.c. Time period principle.d. Accrual reporting principle.e. Going-concern principle.
Adjusting entriesa. Affect only income statement accounts.b. Affect only balance sheet accounts.c. Affect both income statement and balance sheet accounts.d. Affect only cash flow statement accounts.e. Affect only equity accounts.
On May 1, 2008, a two-year insurance policy was purchased for \($12,000\) with coverage to begin immediately. What is the amount of insurance expense that appears on the company’s income statement for the year ended December 31, 2008?a. \($2,000\)b. \($4,000\)c. \($6,000\)d. \($10,000\)e.
Employees at Guthrie Co. worked three days at the end of 2008 and earned \($5,400\). They will be paid for this work at the next payroll date on January 9, 2009. What is the adjusting entry that Guthrie must make for the year ending December 31, 2008?a. Debit Wages Expense \($5,400\), Credit
Gomez Corp. has the following credit purchase transactions in the month of October.Oct. 4 Purchased merchandise from Benjamin Inc. under the following terms: \($950\) price; invoice date 10/2, credit terms n/30, freight \($62.\)7 Purchased merchandise from Rachel Inc. under the following terms:
Adriana Lopez created Success Systems on October 1, 2007. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number
On May 5, Baker purchases 1,500 units of merchandise from Allied Parts for \($14\) per unit. Baker is a retailer and purchases the units for resale. Three separate transactions a through c also occur.a. On May 7, Baker returns 200 units because they did not fit the customer’s needs.b. On May 8,
Preparing journal entries for inventory purchases and sales Journalize the following merchandising transactions for Chilton Systems.1. On November 1, Chilton Systems purchases merchandise for \($1,500\) on credit with terms of 275;n/30, FOB shipping point; invoice dated November 1.2. On November 5,
Why are sales discounts and sales returns and allowances recorded in contra revenue accounts instead of directly in the Sales account?
When merchandise is sold on credit and the seller notifies the buyer of a price allowance, does the seller create and send a credit memorandum or a debit memorandum?
How do debits and credits remain equal when credit sales are posted twice (once to Accounts Receivable and once to the customer's subsidiary account)?
How do we identify the journal from which an amount in a ledger account was posted?
How are sales taxes recorded in the context of special journals?
Merchandise inventorya. Is a long-term asset account.b. Is a current asset account.c. Includes supplies.d. Is classified with investments on the balance sheet.e. Must be sold within one month.
Net purchases includesa. Any purchase discounts.b. Any returns and allowances.c. Any necessary transportation-in costs.d. Any trade discounts.e. All of the above.
In comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use?
Refer to the income statement for Circuit City in Appendix A. What does Circuit City title its cost of a goods sold account? CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Amounts in thousands except per share data) BALANCE AT FEBRUARY 28, 2002. Net earnings and
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