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fundamental accounting

Fundamental Accounting Principles Volume 2 21st Edition John Wild, Ken Shaw, Barbara Chiappetta - Solutions

Gomez Co. had the following transactions in the last two months of its year ended December 31.Required 1. Prepare entries for these transactions under the method that records prepaid expenses as assets and records unearned revenues as liabilities. Also prepare adjusting entries at the end of the
After the success of the company’s first two months, Adria Lopez continues to operate Success Systems. (Transactions for the first two months are described in the serial problem of Chapter 2.) The November 30, 2013, unadjusted trial balance of Success Systems (reflecting its transactions for
Refer to Polaris’ financial statements in Appendix A to answer the following.1. Identify and write down the revenue recognition principle as explained in the chapter.2. Review Polaris’ footnotes to discover how it applies the revenue recognition principle and when it recognizes revenue. Report
Jessica Boland works for Sea Biscuit Co. She and Farah Smith, her manager, are preparing adjusting entries for annual financial statements. Boland computes depreciation and records it asSmith agrees with her computation but says the credit entry should be directly to the Equipment account. Smith
The class should be divided into teams. Teams are to select an industry (such as automobile COMMUNICATING IN manufacturing, airlines, defense contractors), and each team member is to select a different company in PRACTICE that industry. Each team member is to acquire the annual report of the
Access EDGAR online (www.SEC.gov) and locate the 10-K report of The Gap, Inc., (ticker GPS) filed on March 26, 2012. Review its financial statements reported for the year ended January 28, 2012, to answer the following questions.Required 1. What are Gap’s main brands?2. What is Gap’s fiscal
The following transactious and events affect the partners capital accounts in several successive partnerships. Prepare a table with six columns, one for each of the five partners along with a total column to show the effects of the following events on the five partners’ capital accounts.Part 1
Identify characteristics of partnerships and similar organizations.
For each of the following separate cases, recommend a form of business organization. With each recom¬ mendation, explain how business income would be taxed if the owners adopt the form of organization rec¬ ommended. Also list several advantages that the owners will enjoy from the form of business
Angela Moss and Autumn Barber organize a partnership on January 1. Moss’s initial net investment is $75,000, consisting of cash ($17,500), equipment ($82,500), and a note payable reflecting a bank loan for the new business ($25,000). Barber’s initial investment is cash of $31,250. These amounts
Assume that the partners of Exercise 12-5 agreed to share net income and loss by granting annual salary allowances of $50,000 to Kramer and $40,000 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally.1. Determine the partners’ shares of Kramer and Knox
Assume that the Turner, Roth, and Lowe partnership of Exercise 12-10 is a limited partnership. Turner and Roth are general partners and Lowe is a limited partner. How much of the remaining $28,000 liability should be paid by each partner? (Round amounts to the nearest dollar.)
Gibbs, Cook, and Chan are partners and share income and loss in a 5:1:4 ratio. The partnership’s capital balances are as follows: Gibbs, $606,000; Cook, $148,000; and Chan, $446,000. Gibbs decides to withdraw from the partnership, and the partners agree not to have the assets revalued upon
A company pays its one employee $3,000 per month. This company's FUTA rate is 0.8% on the first $7,000 earned; its SUTA rate is 4.0% on the first $7,000; its Social Security tax rate is
2% of the first $110,100; and its Medicare tax rate is 1.45% of all amounts earned. The entry to record this company's March payroll includes what amount for total payroll taxes expense?6. Identify whether the employer or employee or both incurs each of the following: (a) FICA taxes, ib) FUTA
A car is sold for $15,000 on June 1, 2013, with a one-year warranty on parts. Warranty expense is estimated at 1.5% of selling price at each calendar year-end. On March 1, 2014, the car is returned for warranty repairs costing $135. The amount recorded as warranty expense on March 1 is (a) $0; (6)
What three items determine the amount deducted from an employee's wages for federal income taxes?
What amount of income tax is withheld from the salary of an employee who is single with three withholding allowances and earnings of $675 in a week? (Hint: Use the wage bracket withholding table in Exhibit 11A.6.)
Which of the following steps are executed when a company draws one check for total payroll and deposits it in a special payroll bank account? (a) Write a check to the payroll bank account for the total payroll and record it with a debit to Salaries Payable and a credit to Cash, (b) Deposit a check
The following transactions and events took place at Kern Company during its recent calendar-year ’ reporting period (Kern does not use reversing entries).a. In September 2013, Kern sold $140,000 of merchandise covered by a 180-day warranty. Prior experience shows that costs of the warranty equal
Describe current and long-term liabilities and their char¬ acteristics.
Identify and describe known current liabilities.
Explain how to account for contingent liabilities
Identify and describe the details of payroll reports, records, and procedures
On December 1, a company signed a $6,()()(), 9()-day, 5% note payable, with principal plus interest due on March 1 of the fol¬ lowing year. What amount of interest expense should be ac¬ crued at December 31 on the note?a. $300b. $25c. $100d. $75e. $0
An employee earned $50,000 during the year. FICA tax for social security is 6.2% and FICA tax for Medicare is 1.45%. The employer’s share of FICA taxes isa. Zero, since the employee’s pay exceeds the FICA limit.b. Zero, since FICA is not an employer tax.c. $3,100d. $725e. $3,825
A company sells big screen televisions for $3,000 each. Each television has a two-year warranty that covers the replacement of defective parts. It is estimated that 1 % of all televisions sold will be returned under warranty at an average cost of $250 each. During July, the company sold 10,000 big
Employees earn vacation pay at the rate of 1 day per month. During October, 150 employees qualify for one vacation day each. Their average daily wage is $175 per day. What is the amount of vacation benefit expense for October?a. $26,250b. $175c. $2,100d. $63,875e. $150
" What amount of income tax is withheld from the salary of an employee who is single with two withholding allow¬ ances and earning $725 per week? What if the employee earned $625 and has no withholding allowances? (Use Exhibit 11 A.6.)
Which of the following items are normally classified as a current liability for a company that has a 15-month operating cycle?1. Note payable due in 18 months. 4. Salaries payable.2. Note payable maturing in 2 years. 5. FICA taxes payable.3. Portion of long-term note due in 15 months. 6. Note
Answer each of the following related to international accounting standards.a. In general, how similar or different are the definitions and characteristics of current liabilities between IFRS and U.S. GAAP?b. Companies reporting under IFRS often reference a set of current liabilities with the title
Using the data in situation a of Exercise 11-6, prepare the employer’s September 30 journal entries to re¬ cord salary expense and its related payroll liabilities for this employee. The employee’s federal income taxes withheld by the employer are $80 for this pay period. (Round amounts to
Using the data in situation a of Exercise 11 -6, prepare the employer’s September 30 journal entries to re¬ cord the employer’s payroll taxes expense and its related liabilities. (Round amounts to cents.)
Use the following infonnation from separate companies a through/to compute times interest earned. Which company indicates the strongest ability to pay interest expense as it comes due? (Round ratios to two decimals.) Net Income (Loss) Interest Expense Income Taxes a. $115,000 $44,000 $ 35,000 b.
Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated income taxes are accrued each month for 30% of the current month’s net income. The income taxes are paid in the first month of each quaiter for the amount accrued for the prior
Mester Company has 10 employees. FICA Social Security taxes are 6.2% of the first $110,100 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.8% and SUTA taxes are 5.4% of P2 pq the first $7,000 paid to each employee. Cumulative pay for the current year for each
Provision for product warranty Warranty provisions are estimated with consideration of historical claims statistics, the warranty period, the average time-lag between faults occurring and claims to the company and anticipated changes in quality indexes. Estimated costs for product warranties are
Francisco Company has 10 employees, each of whom earns $2,800 per month and is paid on the last day of each month. All 10 have been employed continuously at this amount since January 1. Francisco uses a payroll bank account and special payroll checks to pay its employees. On March 1, the following
31 Recorded the employer’s payroll taxes resulting from the March payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.0% of the first $7,000 paid each employee. The federal rate is 0.8%.Apr. 15 Issued check to Swift Bank in payment of the March FICA and
Fishing Guides Co. has four employees. FICA Social Security taxes are 6.2% of the first $110,100 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company’s FUTA taxes are 0.8% and SUTA taxes are 1.75%. The company is
Tavella Company’s first weekly pay period of the year ends on January 8. On that date, the column totals Jn Tavella’s payroll register indicate its sales (^mploye^s earned $34,74;^, itsToffifl employees earned ($21,2i^, and its delivery ^ployees earned'$l,030fin salaries. The employees are to
Bug-Off Exterminators provides pest control services and sells extermination products manufac¬ tured by other companies. The following six-column table contains the company’s unadjusted trial bal¬ ance as of December 31,2013The following information in a through h applies to the company at the
Refer to the financial statements of Polaris in Appendix A to answer the following.1. Compute times interest earned for the fiscal years ended 2011, 2010, and 2009. Comment on Polaris’ abil¬ ity to cover its interest expense for this period. Assume an industry average of 20 for times interest
Cameron Bly is a sales manager for an automobile dealership. He earns a bonus each year based ETHICS on revenue from the number of autos sold in the year less related warranty expenses. Actual warranty expenses CHALLENGE have varied over the prior 10 years from a low of 3% of an automobile’s
Assume that your team is in business and you must borrow $6,000 cash for short-term needs.You have been shopping banks for a loan, and you have the following two options.Q2 PI A. Sign a $6,000, 90-day, 10% interest-bearing note dated June 1.B. Sign a $6,000, 120-day, 8% interest-bearing note dated
Review the chapter’s opening feature about Karen Cooper, and her start-up company, DECISION SmartIT Staffing. Assume that she is considering expanding her business to open an office in Europe.Assume her current income statement is as followsSmartIT Staffing currently has no interest-bearing debt.
KTM, Polaris, and Arctic Cat are all competitors in the global marketplace. Comparative figures for KTM (www.KTM.com). along with selected figures from Polaris and Arctic Cat, follow.Required 1. Compute the times interest earned ratio for the most recent two years for KTM using the data shown.2.
Identify the account charged for each of the following; (a) the purchase price of a vacant lot to be used in operations and (b) the cost of paving that same vacant lot.
Compute the amount recorded as the cost of a new machine given the following payments related to its purchase; gross purchase price, $700,000; sales tax, $49,000; purchase discount taken, $21,000; freight cost—terms FOB shipping point, $3,500; normal assembly costs, $3,000; cost of necessary
On January 1, 2013, a company pays $77,000 to purchase office furniture with a zero salvage value. The furniture's useful life is somewhere between 7 and 10 years. What is the year 2013 straight-line depreciation on the furniture using (a) a 7-year useful life and (b) a 10-year useful life?
A company purchases a machine for $96,000 on January 1, 2013. Its useful life is five years or 100,000 units of product, and its salvage value is $8,000. During 2013, 10,000 units of product are produced. Compute the book value of this machine on December 31, 2013, assuming(a) straight-line
In early January 2013, a company acquires equipment for $3,800. The company estimates this equipment to have a useful life of three years and a salvage value of $200. Early in 2015, the company changes its estimates to a total four-year useful life and zero salvage value. Using the straight-line
Explain the difference between revenue expenditures and capital expenditures and how both are recorded.
What is a betterment? How is a betterment recorded?
A company acquires equipment on January 10, 2013, at a cost of $42,000. Straight-line depreciation is used with a five-year life and $7,000 salvage value. On June 27, 2014, the company sells this equipment for $32,000. Prepare the entry(ies) for June 27, 2014.
Give an exannple of a natural resource and of an intangible asset.
On January 6, 2013, a company pays $120,000 for a patent with a remaining 17-year legal life to produce a toy expected to be marketable for three years. Prepare entries to record its acquisition and the December 31, 2013, amortization entry.
On July 14, 2013, Tulsa Company pays $600,000 to acquire a fully equipped factory. The purchase * involves the following assets and informationRequired 1. Allocate the total $600,000 purchase cost among the separate assets.2. Compute the 2013 (six months) and 2014 depreciation expense for each
A company trades an old Web server for a new one. The cost of the old server is $30,000, and its accumulated depreciation at the time of the trade is $23,400. The new server has a cash price of $45,000. Prepare entries to record the trade under two different assumptions where the company receives a
Explain the cost principle for computing the cost of plant assets?
Explain depreciation for partial years and changes in estimates.?
Distinguish between revenue and capital expenditures, and account for them.?
A company paid $326,000 for property that included land, land improvements, and a building. The land was appraised at $175,000, the land improvements were appraised at $70,000, and the building was appraised at $105,000. What is the alloca¬ tion of property costs to the three assets purchased?a.
A company purchased a truck for $35,000 on January 1, 2013. The truck is estimated to have a useful life of four years and an estimated salvage value of $ 1,000. Assuming that the company uses straight-line depreciation, what is the depreciation ex¬ pense on the truck for the year ended December
A company purchased machinery for $10,800,000 on January 1, 2013. The machinery has a useful life of 10 years and an estimated salvage value of $800,000. What is the depreciation expense on the machinery for the year ended December 31, 2014, assuming that the double-declining-balance method is
A company sold a machine that originally cost $250,000 for $120,000 when accumulated depreciation on the machine was $100,000. The gain dr loss recorded on the sale of this machine isa. $0 gain or loss.b. $ 120,000 gain.c. $30,000 loss.d. $30,000 gain.e. $150,000 loss.
On its recent balance sheet in Appendix A, Arctic Cat Polaris lists its plant assets as "Property and equipment, net." What does "net" mean in this title?
Refer to the information in QS 10-3. Compute the year 2013 depreciation using the units-of-production method
Refer to the facts in QS 10-3. Assume that the Cerritos Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised
Corentine Company acqires an ore mine al a cost of $ 1,400,000. It incurs additional costs of $400,000 to access the mine, which is estimated to hold 1,000,000 Ions of ore. The estimated value of the land after the ore is removed is $200,000.1. Prepare the entry(ies) lo record the cost of the ore
On January 4 of this year, Freckles Boutique incurs a $105,000 cost to modernize its store. Improvements iiielude new floors, ceilings, wiring, and wall coverings. 4'hese improvements are estimated to yield benefits for 10 years. Freckles leases its store and has eight years remaining on the lease.
Answer each of the following related lo international accounting standards.a. Accounting for plant assets involves cost determination, depreciation, additional expenditures, and disposals. Is plant asset accounting broadly similar or dissimilar between IFRS and U.S. GAAP? Identify one notable
Rizio Co. purchases a machine for $12,500, terms 2/10, n/60, FOB shipping point. The seller prepaid the $U)0 freight charges, adding the amount to the invoice and bringing its total lo $12,860. The machine re(|nires special sleel monniing and power conneclions costing $895. Another $475 is paid to
Veradis ('oiiipany owns a building lhal iipjK’ar.s on il.s irrior year-end balance sbcci al ils original $572,000 cost IcHN $420,000 accninnlalcd dcprccialion. I'bc building is depreciated on a straighl-line basis assuming a 20-year life and no salvage value, During Ibe I'irsl week in .laniiary
()ki (’ompany pays $204,000 lor e(|uipmenl expected lo Iasi lour years and have a $20,000 salvage value.Prepare journiil enirics lo record Ibe rollowing costs relaled lo (be e(|uipnienl.1. I fill ing (be second year ol Ibe e(|iiipnienl's lil'e, $22,000 cash is paid Tor a new component expected to
Dia/, (’ompany owns a milling niaebine dial cost $250,000 and lias iicciimulaled depreciation of $182,000.Prepare Ibe entry lo record (be disposal ol die milling niuebine on .laniiary .4 under each of Ibe following independeni siliialions.1. I'bc niaebine needed extensive repairs, and il was not
Kayya Co. piircbases and inslalls a niaebine on .laniiary I, 2014, al a (olal cost of $ 105,000. Straight-line dcprccialion is laken each year for four years assinning a seven-year life and no salvage value. Tbe niiicbine is disposed of on .Inly 1,2017, dining ils fiflli year of service. I’repare
On April 2, 201.1, Monlana Mining Co. pays $.1,721,000 for an ore deposit conlaining 1,525,000 Ions. 'I'be company inslalls niaebinery in (be mine costing $21.1,500, with an eslimaled seven-year life and no .salvage value. I'be niaebinery will be abandoned wben (be ore is coniplelely mined. Monlana
Milano (iailery piircbases (be copyrigbl
On .laniiary I. 20l 1, Kobinson Company piircba.sed iTanklin Company al a price of $2,500,000, The fair inarkel value of die net as.sels piircbased eiiiials $1,800,000, 1. Wbal is Ibe amoiinl of goodwill dial Kobinson records al die piircbase dale'.’2. lixplain bow Kobinson would delermine (be
Lok Co. reports net sales of $5,836,480 for 2012 and $8,679,690 for 2013. Fuul-of-year balances for total assets are 2011, $1,686,000; 2012, $1,800,000; and 2013, $1,982,000. (a) Compute Lok's total a.sset turnover tor 2012 and 2013. (/?) Comment on Lok’s efficiency in using its assets if its
A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in • Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units; year 1,
Refer to the financial statements of Polaris in Appendix A to answer the following.1. What percent of the original cost of Polaris’ property and equipment remains to be depreciated as of December 31, 2011, and at December 31, 2010? Assume these assets have no salvage value.2. Over what length(s)
Flo Choi owns a small business and manages its accounting. Her company just finished a year ETHICS CHALLENGE in which a large amount of borrowed funds was invested in a new building addition as well as in equip¬ ment and fixture additions. Choi’s banker requires her to submit semiannual
Teams are to select an industry, and each team member is to select a differeni com|)any in lhal industry. Each team member is to act|uire the llnancial statements (Form lO-K) olTlie company selected see the company’s Website or the SliC’s EDGAR database (www..sK
Access the Yahoo! (ticker: YllOO) lO-K report for the year ended December 1,201 1, tiled on Februarv 29. 2012. at www.SKt'.gov.Required 1. What amount of goodwill is reported on Yahool’s balance sheet? What percentage of total assets does its goodwill represent? Is goodwill a major asset for
Each team member is to become an expert on one depreciation method to facilitate teani'mates’ understanding of that method, b’ollow these procedures:a. Each team member is to .select an area for expertise from one of the following depreciation methoils: straight-line, units-of-production, or
Review the chapter’s opening feature involving Iti/C’liaii'.eoni. Assume that the cimipany currently has net sales of $K,(K)(),()()(), and that it is planning an expansion that will increase net sales by $4.()()0,()()(). T(^ accomplish this expansion, Mi/C'hair.com itiust increase its average
Team up wilb one cu' nuuv (.'lassniales lor (liis activity. Klcntily companies in your community or area that must account lor at least mtc of the following assets: natural resource; patent; lease; leasehoUi improvement; ei^pyright; trademark; or goodwill. >'ini might find a company having more
Piaggio (www.Piaggio.com). Polaris and .Aretic Cat are all competitius in the global marketplace. comparitive figures for these companies’ recent annual accounting pcrioils follow.Required 1. Compute ti'tal asset turnover for the n\ost recent two years for I’iaggio using the ilata shown, 2.
Many companies require each employee to take at least one week (five consecutive days) of vacation per year. Why is a "forced vacation" policy good for internal control?
Good internal control procedures for cash include which of the following? (a) All cash disbursements, other than those for very small amounts, are made by check; (b) One employee counts cash received from sales and promptly deposits cash receipts; or (c) Cash receipts by mail are opened by one
Assume that we are auditing a company for the first time. Our audit procedures for petty cash require a surprise audit of the petty cash fund. We approach the petty cash custodian to conduct the audit and she says: "I'm busy right now. Can we do this after lunch?" Do we accommodate the request?
Prepare a bank reconciliation for Jamboree Enterprises for the month ended November 30, 2013. The fol¬ lowing information is available to reconcile Jamboree Enterprises’ book balance of cash with its bank statement balance as of November 30, 2013;a. After all posting is complete on November 30,
Bacardi Company established a $150 petty cash fund with Eminem as the petty cashier. When the fund balance reached $19 cash, Eminem prepared a petty cash payment report, which followsRequired 1. Identify four internal control weaknesses from the payment report.2. Prepare general journal entries to
Define internal control and identify its purpose and principles.
Define cash and cash equivalents and explain how to report them.
Explain and record petty cash fund transactions
Describe tbe use of documentation and verification to control cash disbursements
A company needs to replenish its $500 petty cash fund. Its petty cash box has $75 cash and petty cash receipts of $420. The journal entry to replenish the fund includesa. A debit to Cash for $75.b. A credit to Cash for $75.c. A credit to Petty Cash for $420.d. A credit to Cash Over and Short for

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