Questions and Answers of Corporate Financial Accounting 16th edition

Temporary revenue and expense timing differences between income before income taxes and taxable income for four years of Jaffe Corporation’s operations are as follows:Assume that Jaffe
Everdeen Inc. had common stock of $2,300,000 and retained earnings of $865,000 at January 1, 20Y7. During 20Y7, Everdeen reported the following:The company discovered that net income for 20Y6 was
What is an example of a permanent difference between taxable income and income before income taxes?
Sprouts Farmers Market, Inc. (SFM) is a supermarket chain that offers a wide selection of fresh, natural, and organic foods. At the beginning of Year 1, the company reported no accumulated other
Temporary revenue and expense timing differences between income before income taxes and taxable income for Broadway Suites Inc.’s first four years of operations ended December 31 are as
Journalize entries for the following income-tax-related transactions for Yang & Daughters Inc. for the year ending December 31, 20Y7: 20Υ7 Apr. 15. Recorded the first quarter estimated tax
Journalize entries for the following income-tax-related transactions for Resnick & Sons Inc. for the year ending June 30, 20Y6: 20Y5 Oct. 15. Recorded the first quarter estimated tax liability
For its first year of operations ended December 31, 20Y6, Hunter-Jones Inc. reported income before income taxes of $2,800,000. By using temporary revenue and expense timing differences, Hunter- Jones
Over the life of a corporation, will the total tax expense reported on the income statement differ from the total tax paid on the tax return? Explain.
Differences between taxable income and income before income taxes may be created because an item is recognized in one period for tax purposes and in another period for income statement
Does the taxable income reported on a corporation’s tax return normally equal income before income taxes that is reported on the income statement? If not, why?
A corporation with an accounting period ending December 31 estimates that its taxable income for the year will be $1,200,000.a. When will the corporation’s first quarterly estimated tax payment be
On January 18, 20Y4, Sentinel Inc., a U.S. company, sold merchandise costing $180,000 to Outback Expeditions, located in Perth, Australia, for $650,000 Australian dollars (AUD). Outback Expeditions
On April 22, 20Y5, Beyer Inc., a U.S. company, purchased merchandise from Kindersley Co., located in Saskatchewan, Canada, for $1,000,000 Canadian dollars (CAD). Kindersley Co. requires payment in
A U.S. company sells merchandise on account (on credit) to a foreign company that pays in a foreign currency. (a) When would the U.S. company record a foreign currency exchange gain? (b)
A U.S. company purchases merchandise on account (on credit) from a foreign company that requires payment in a foreign currency. (a) When would the U.S. company record a foreign currency exchange
When would a U.S. company record a foreign currency exchange gain or loss?
On May 17, 20Y3, Summerfield LLC, a U.S. company, sold merchandise that cost $500,000 to Harman Stores, located in Riyadh, Saudi Arabia, receiving 3,000,000 Saudi riyal (SAR) at the time of sale. The
On February 3, 20Y8, Sullivan Manufacturing, a U.S. company, sold merchandise that cost $42,000 to Cikan Stores, located in Prague, Czech Republic, receiving kc 1,600,000 Czech koruna (CZK) at the
On November 15, 20Y4, Butler Wholesale, a U.S. company, purchased merchandise from Shetland Wool, located in Wellington, New Zealand, for $331,100 New Zealand dollars (NZD). Shetland Wool requires
On August 7, 20Y1, Boise Co., a U.S. company, purchased merchandise from Red Deer Inc., located in Edmonton, Canada, for $67,500 Canadian dollars (CAD). Red Deer Inc. requires payment in CAD at the
Mays Inc. purchased merchandise from Takaoka Industries located in Osaki, Japan, for ¥21,800,000 Japanese yen (JPY). Takaoka Industries requires payment in JPY at the time of sale. Assuming an
King Manufacturing Inc. received ₹1,500,000 Indian rupees (INR) from a cash sale of merchandise to Krishna LLC, located in New Delhi, India. Assuming an exchange rate of $0.014 USD per INR, how
How does the accounting for a cash transaction with a foreign company differ from a transaction with a U.S. company if (a) The payment or receipt is in USD (b) The payment or receipt is in
Pascal Inc. acquired 40% of the outstanding common stock of Andres Corporation for $1,200,000. During the year, Andres Corporation reported net income of $220,000 and paid dividends of $45,000.
Lynch Corporation owns 35% of the outstanding common stock of Katherine Interiors Inc.a. Explain how Lynch Corporation would account for its share of Katherine Interiors’ net income of $500,000.b.
Malia Industries owned the following equity investments as of December 31, 20Y3:Each of the preceding equity investments was purchased in 20Y3 and is less than 20% ownership of the issuing company.
Quan Corp. manufactures construction equipment. Journalize the entries to record the following selected equity investment transactions completed by Quan during a recent year using the fair value
Explain how a change in fair value of an equity investment with less than 20% ownership is reported on the investor’s (a) Income statement (b) Balance sheet.
In recording the change in fair value of an equity investment with less than 20% ownership, what is used to determine fair value?
Bellows Inc. purchased 10,000 shares of Nesbitt Inc.’s common stock for $7.50 per share. Nesbitt Inc. has 100,000 shares of common stock outstanding.a. What account and amount is debited by Bellows
Wheeler Inc. owned the following available-for-sale investments as of December 31, 20Y4:During 20Y5, Wheeler Inc. did not purchase or sell any available-for-sale securities. The fair value of the
What method of accounting is used to account for equity investments of less than 20% ownership?
M. Jones Inc. purchased the following available-for-sale securities during 20Y5, its first year of operations:The fair value of the various available-for-sale securities on December 31, 20Y5, was as
Williamson Inc. owns 15% of the outstanding common stock of Olson Corporation. For purposes of determining the proper accounting for Williamson Inc.’s investment in Olson Corporation, is it proper
Using the data from Assignment B1-19, assume that Giovani Foods did not purchase or sell any available-for-sale securities during its second year of operations. At the end of the second year, the
What method of accounting is used to account for investments in available-for-sale securities?
During the year ended December 31, 20Y9, trading securities were purchased for $72,600. On December 31, 20Y9, the securities had a fair value of $79,100. Journalize the December 31, 20Y9, adjusting
During the year ended December 31, 20Y3, trading securities were purchased for $346,000. On December 31, 20Y3, the securities had a fair value of $309,000. Journalize the December 31, 20Y3, adjusting
During its first year of operations, Coffman Inc. purchased trading securities with excess cash for $50,000. Coffman Inc. expects it will sell the securities within the next year. At the end of the
What method of accounting is used to account for investments in trading securities?
What is the primary investor objective of purchasing trading securities?
Gillooly Co. purchased $360,000 of 6%, 20-year Lumpkin County bonds as a held-to-maturity investment on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds
What method of accounting is used to account for held-to-maturity securities?
Staley Inc. reported the following data:Prepare the “Cash flows from (used for) operating activities” section of the statement of cash flows, using the indirect method. Net
What is the primary investor objective of purchasing held-to-maturity securities?
The stockholders’ equity T-accounts of I-Cards Inc. for the year ended December 31, 20Y9, are as follows. Prepare a statement of stockholders’ equity for the year ended December 31, 20Y9. Common
Caterpillar Inc. (CAT) is one of the world’s largest manufacturers of construction and mining equipment with revenue over $50 billion per year. The following year-end data were taken from a recent
For a recent period, the balance sheet for Costco Wholesale Corporation (COST) reported accrued expenses of $3,176 million. For the same period, Costco reported income before income taxes of $4,737
On July 1, the supplies account balance was $1,680. During July, supplies of $5,250 were purchased, and $1,810 of supplies were on hand as of July 31. Determine supplies expense for July.
The prepaid insurance account had a beginning balance of $6,000 and was debited for $12,500 of premiums paid during the year. Journalize the adjusting entry required at the end of the year,
The wages payable and wages expense accounts at February 28, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:Determine the
The estimated amount of depreciation on equipment for the current year is $33,200.Journalize the adjusting entry to record the depreciation.
Accrued salaries owed to employees for August 30 and 31 are not considered in preparing the financial statements for the year ended August 31. Indicate which items will be erroneously stated, because
For the year ending June 30, O’Keefe Medical Services Co. mistakenly omitted adjusting entries for (1) $2,000 of supplies that were used, (2) Unearned revenue of $7,500 that was earned,
When preparing the financial statements for the year ended December 31, 20Y5, accrued salaries owed to employees for December 30 and 31 were overlooked. The accrued salaries were included in the
For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance
The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.
The balance in the supplies account, before adjustment at the end of the year, is $5,175. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $615.
The balance in the prepaid insurance account, before adjustment at the end of the year, is $22,500. Journalize the adjusting entry required under each of the following alternatives for determining
The estimated amount of depreciation on equipment for the current year is $66,290. Journalize the adjusting entry to record the depreciation.
On a recent balance sheet, Microsoft Corporation (MSFT) reported Property, Plant, and Equipment of $71,807 million and Accumulated Depreciation of $35,330 million.a. What was the book value of the
Light-It-Up Company maintains and repairs warning lights, such as those found on radio towers and lighthouses. Light-It-Up Company prepared the following end-of-period spreadsheet at August 31, 20Y5,
For a recent year, the balance sheet for The Campbell Soup Company (CPB) includes accrued expenses of $609 million. The income before taxes for Campbell for the year was $979 million.a. Assume the
Amazon.com, Inc. (AMZN) is the largest Internet retailer in the United States. Best Buy, Inc. (BBY) is a leading retailer of technology and media products in the United States. Amazon and Best Buy
Data (in millions) from recent financial statements of Zynga Inc. (ZNGA), Electronic Arts Inc. (EA), and Take-Two Interactive Software, Inc. (TTWO) are as follows:a. Compute the working capital for
Foxy Investigative Services is an investigative services firm that is owned and operated by Shirley Vickers. On November 30, 20Y8, the end of the fiscal year, the accountant for Foxy Investigative
Brenda Tooley owns and operates Speedy Delivery Services. On January 1, 20Y7, Common Stock had a balance of $75,000, and Retained Earnings had a balance of $615,700. During the year, $15,000 of
Paoli Consulting is a consulting firm owned and operated by Mary Paoli. The following end-of-period spreadsheet was prepared for the year ended March 31, 20Y9:Based on the preceding spreadsheet,
After the accounts have been adjusted at June 30, the end of the fiscal year, the following balances were taken from the ledger of Classic Landscaping Co.Journalize the two entries required to close
The following year-end data were taken from recent balance sheets of Under Armour, Inc. (UA) (in millions):a. Compute the working capital and the current ratio as of December 31, Year 2 and Year 1.
Alphabet Inc. (GOOG) and Microsoft Corporation (MSFT) design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems.
The unadjusted trial balance of Epicenter Laundry at June 30, 20Y6, the end of the fiscal year, follows:The data needed to determine year-end adjustments are as follows:(a) Laundry supplies on hand
The Foot Locker, Inc. (FL) and Dick’s Sporting Goods, Inc. (DKS) are two retail chains. The current assets and current liabilities from recent balance sheets for both companies are as follows (in
The following account balances were taken from the adjusted trial balance for Shaw Messenger Service, a delivery service firm, for the fiscal year ended April 30, 20Y1:Prepare an income statement. $
Current assets and current liabilities for Brimstone Company follow:a. Determine the working capital and current ratio for 20Y4 and 20Y3.b. Does the change in the current ratio from 20Y3 to 20Y4
Easy Weight Loss Co. offers personal weight reduction consulting services to individuals. After all the accounts have been closed on November 30, 20Y7, the end of the fiscal year, the balances of
An accountant prepared the following post-closing trial balance:Prepare a corrected post-closing trial balance. Assume that all accounts have normal balances and that the amounts shown are correct.
Based on the data in Exercise 4-26, journalize the closing entries for Alert Security Services Co. Exercise 4-26Alert Security Services Co. offers security services to business clients. Complete
In Exhibit 15, Kelly Consulting reported accrual net income of $18,300. Under the cash basis of accounting, Kelly Consulting would have reported net income of $15,000.a. Why are the accrual- and
Alert Security Services Co. offers security services to business clients. The trial balance for Alert Security Services has been prepared on the following end-of-period spreadsheet for the year ended
Alert Security Services Co. offers security services to business clients. Complete the following end-of-period spreadsheet for Alert Security Services Co.: B C D E A 1 Alert Security Services
A cash T account for Pryor Consulting Services’ first month of operations ended March 31, 20Y3, is as follows:a. Classify each of the March cash transactions as an operating, investing, or
Microsoft Corporation (MSFT) is a technology company that develops, licenses, and supports a wide variety of software and hardware products, including personal computers, tablets, video games, and
Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow:a. Determine the earnings per share for 20Y5 and 20Y6.b. Is the change in the earnings per share from 20Y5 to 20Y6
Based on the data presented in Exercise 5-32, journalize the closing entries.Exercise 5-32On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a
During the current year, merchandise is sold for $186,500 cash and $1,437,200 on account. The cost of the goods sold is $900,000. What is the amount of the gross profit?
During the current year, merchandise is sold for $23,680,000. The cost of the goods sold is $13,024,000.a. What is the amount of the gross profit?b. Compute the gross profit percentage (gross profit
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:20Y1Instructions1. Journalize the entries to record the foregoing transactions.2. Indicate the
Bowers Company purchased merchandise on account from Saunders Corp. for $28,000, terms 1/10, n/30. Bowers returned merchandise with an invoice amount of $5,500 and received full credit.a. If Bowers
Journalize the following merchandise transactions:a. Sold merchandise on account, $18,000 with terms n/30. The cost of the goods sold was $10,800.b. Received payment.c. Refunded $600 to customer for
At the bottom of all its February sales receipts, Seifert Stores Inc. printed $2-off coupons. The coupons may be redeemed March 1–April 30. Seifert Stores Inc. accepts only cash, Mastercard, or
Delta Air Lines, Inc. (DAL) operates its SkyMiles loyalty program to give its members (passengers) an incentive to fly Delta. Passengers earn mileage credit (SkyMiles) by flying on Delta, which can
Goodyear Tire & Rubber Company (GT) published the following promotion on its website for the purchase of Wrangler TrailRunner AT tires: $25 back with purchase of 4 tires by rebate via Mastercard
Based on the data presented in Exercise 5-21, journalize Balboa Co.’s entries for (a) The purchase, (b) The return of the merchandise for credit, and (c) The payment of the
On June 25, Tin Roofing extended an offer of $300,000 for land that had been priced for sale at $375,000. On July 9, Tin Roofing accepted the seller’s counteroffer of $320,000. On October 1, the
On June 1 of the current year, Chris Bates established a business to manage rental property. The following transactions were completed during June:a. Opened a business bank account with a deposit of
Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. We will use Amazon as a continuing company exercise to reinforce the various tools and techniques for analyzing
The assets and liabilities of Adventure Travel Agency on December 31, 20Y5, and its revenue and expenses for the year are as follows:Common stock was $250,000 and retained earnings was $1,160,400 as
Inspiring U is a motivational consulting business. At the end of its accounting period, December 31, 20Y2, Inspiring U has assets of $690,000 and liabilities of $375,000. Using the accounting

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