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fundamental accounting principles

Fundamental Accounting Principles 17th Edition Kermit D. Larson, John J Wild, Barbara Chiappetta - Solutions

Give an example of a natural resource and of an intangible asset.
A company pays $650,000 for an ore deposit. The deposit is estimated to have 325,000 tons of ore that will be mined over the next 10 years. During the first year, it mined, processed, and sold 91,000 tons. What is that year’s depletion expense?
On January 6, 2005, 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 31,2005, amortization entry.
What is the general rule for costs included in a plant asset?
What is the balance sheet classification for land that is held for future expansion? Why is such land not classified as a plant asset?
What accounting principle justifies charging low-cost plant asset purchases immediately to an expense account?
How does accounting for long-term assets impact the state¬ ment of cash flows?
Refer to Krispy Kreme’s balance sheet in Appendix A. What title does Krispy Kreme use for its plant assets? What is its book value of plant assets as of February 2, 2003, and February 3, 2002?
Refer to Tastykake’s balance sheet in Appen¬ dix A. How are Tastykake’s plant assets reported (with amounts) on its 2002 balance sheet?
Refer to the December 31, 2002, balance sheet Harley- of Harley-Davidson in Appendix A. What Davidson long-term assets discussed in this chapter are reported?
Identify the main difference between (1) plant assets and current assets, (2) plant assets and inven- tory, and (3) plant assets and long-term investments.
On January 2, 2005, the Crossover Band acquires sound equipment for concert performances at a cost of $55,900. The band estimates it will use this equipment for four years, during which time it anticipates performing about 120 concerts. It estimates that after four years it can sell the equipment
Refer to the facts in QS 10-3. Assume that Crossover Band chose straight-line depreciation but real- izes early in 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
1. Classify the following as either a revenue or a capital expenditure:a. Completed an addition to an office building for $250,000 cash.b. Paid $160 for the monthly cost of replacement filters on an air-conditioning system.c. Paid $300 cash per truck for the cost of their annual tune-ups.d. Paid
Which of the following assets are reported on the balance sheet as intangible assets? Which are re¬ ported as natural resources? (a) Oil well, (b) Trademark, (c) Leasehold, (d) Gold mine, (e) Building, (/) Copyright, (g) Franchise, (h) Timberland.
On January 4 of this year, Best Boutique incurs a $95,000 cost to modernize its store. Improvements include new floors, ceilings, wiring, and wall coverings. These improvements are estimated to yield benefits for 10 years. Best leases its store and has eight years remaining on the lease. Prepare
Mulan Enterprises pays $235,200 for equipment that will last five years and have a $52,500 sal¬ vage value. By using the machine in its operations for five years, the company expects to earn $85,500 annually, after deducting all expenses except depreciation. Prepare a table showing in¬ come
Busch Gallery purchases the copyright on an oil painting for $236,700 on January 1, 2005. The copy¬ right legally protects its owner for 19 more years. However, the company plans to market and sell prints of the original for only 12 years. Prepare entries to record the purchase of the copyright on
Refer to the statement of cash flows for Harley-Davidson in Appendix A for the fiscal year ended December 31, 2002, to answer the following:1. What amount of cash is used to purchase property and equipment?2. How much depreciation and amortization are recorded?3. What total amount of net cash is
Lakia Corporation reported the following current-year purchases and sales data for its only product:Lakia uses a perpetual inventory system. Ending inventory consists of 500 units, 400 from the July 28 purchase and 100 from the December 19 purchase. Determine the cost assigned to ending inventory
Use the data in Exercise 6-1 to prepare comparative income statements for Lakia Corporation (calendar year-end 2005) similar to those shown in Exhibit 6.8 for the four inventory methods. Assume expenses are $1,250. The applicable income tax rate is 30%.1. Which method yields the highest net
Henin Co. reported the following current-year purchases and sales data for its only product:Henin uses a perpetual inventory system. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO and (b) LIFO. Compute the gross margin for each method.1;1; Date Activities
Refer to the data in Exercise 6-3. Assume that ending inventory is made up of 200 units from the March 14 purchase, 20 units from the July 30 purchase, and all the units of the October 26 purchase. Using the specific identification method, calculate (a) the cost of goods sold and (b) the gross
Tanzy Company’s ending inventory includes the following items. Compute the lower of cost or mar¬ ket for ending inventory (a) as a whole and (b) applied separately to each product. Per Unit Product Units Cost Market Helmets 22 $50 $54 Bats 15 78 Shoes 36 95 91 Uniforms 40 36 23 72 36
Use the following information for Ryder Co. to compute inventory turnover for 2005 and 2004, and its days’ sales in inventory at December 31, 2005 and 2004. (Round answers to the tenths place.) Comment on Ryder’s efficiency in using its assets to increase sales from 2004 to 2005. Cost of goods
Checkers Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes.1. Compute its current ratio, inventory turnover, and days’ sales in inventory for 2005 using (a) LIFO numbers and (b)
Refer to Exercise 6-1 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO.Exercise 6-1Lakia Corporation reported the following current-year
Refer to Exercise 6-3 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO, and (b) LIFO. Compute the gross mar¬ gin for each method.Exercise 6-3Henin Co. reported the following current-year purchases and sales
Rod & Roy Co. reported the following current-year data for its only product. The company uses a periodic inventory system, and its ending inventory consists of 300 units, 100 from each of the last three purchases. Determine the cost assigned to ending inventory and to cost of goods sold using
Nyhus Gifts reported the following current-year data for its only product. The company uses a periodic inventory system, and its ending inventory consists of 300 units, 100 from each of the last three purchases. Determine the cost assigned to ending inventory and to cost of goods sold using (a)
In 2005, Wichita Company had retail sales (net) of $130,000. The following additional information is available from its records at the end of 2005. Use the retail inventory method to estimate Wichita’s 2005 ending inventory at cost. Beginning inventory. Cost of goods purchased At Cost At Retail
Parker Company uses a perpetual inventory system. It entered into the following calendar-year 2005 purchases and sales transactions:Required Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $44/unit Feb. 10 Purchase 200 units @ $40/unit Mar. 13
A physical inventory of Ireland Unlimited taken at December 31 reveals the following:Required Calculate the lower of cost or market for the inventory (a) as a whole, (b) by major category, and (c) applied separately to each item. Ele Edit View Insert Format Tods Data Accounting Window Help 100% Per
Viper Company began year 2005 with 20,000 units of product in its January 1 inventory costing $15 each. It made successive purchases of its product in year 2005 as follows:The company uses a periodic inventory system. On December 31, 2005, a physical count reveals that 35,000 units of its product
The records of Nilson Company provide the following information for the year ended December 31:Required January I beginning inventory Cost of goods purchased... Sales Sales returns At Cost At Retail $ 471,350 $ 927,150 3,276,030 6,279,350 5,495,700 44,600
Wayman Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayman's gross profit rate averages 35%. The following information for the first quarter is available from its records:Required Use the gross profit
Venus Company uses a perpetual inventory system. It entered into the following calendar-year 2005 purchases and sales transactions:Required 1. Compute cost of goods available for sale and the number of units available for sale.2. Compute the number of units in ending inventory.3. Compute the cost
A physical inventory of Office Deals taken at December 31 reveals the following:Required Calculate the lower of cost or market for the inventory (a) as a whole, (b) by major category, and (c) applied separately to each item. Ele Edit View Insert Format Tools Data Accounting Window Help 0123456789
Elfrink Co. began year 2005 with 6,300 units of product in its January 1 inventory costing $35 each. It made successive purchases of its product in year 2005 as follows:The company uses a periodic inventory system. On December 31, 2005, a physical count reveals that 16,500 units of its product
The records of Alaina Co. provide the following information for the year ended December 31:Required 1. Use the retail inventory method to estimate the company’s year-end inventory.2. A year-end physical inventory at retail prices yields a total inventory of $78,550. Prepare a cal¬ culation
Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The following information for the first quarter is available from its records:Required Use the gross
Refer to Krispy Kreme’s financial statements in Appendix A to answer the following:Required 1. What amount of inventories did Krispy Kreme hold as a current asset on February 2, 2003^ On February 3, 2002?2. Inventories represent what percent of total assets on February 2, 2003? On February 3,
Key comparative figures ($ thousands) for both Krispy Kreme and Tastykake follow:Required Krispy Kreme Tastykake Current One Year Two Years Current Prior Prior Year One Year Prior $ 16,159 $ 12,031 $ 6,777 $ 8,412 381,489 316,946 250,690 111,187 103,297 Key Figures Inventory Cost of sales Year $
Golf Away Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of in¬ ventory has continually increased in the past two years. In the first year of operations, the store as¬
You are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to re¬ sell has escalated during the later part of this period. Your client, Jariah Gish, mentions that because the
Access the 2002 annual 10-K report for Oakley, Inc. (Ticker OO), filed on March 31, 2003, from the EDGAR filings at www.SEC.gov.Required 1. What product does Oakley sell that is especially popular with college students?2. What inventory method does Oakley use? (Hint: See the notes to its financial
Each team member has the responsibility to become an expert on an inventory method.This expertise will be used to facilitate teammates’ understanding of the concepts relevant to that method.1. Each learning team member should select an area for expertise by choosing one of the following inventory
Read the article “iPod: A Seed for Growth?” from the August 27, 2002, issue of Business Week. Required 1. What percent of the U.S. market for digital music players does Apple have?2. What firms are emerging with products to compete with the Apple iPod?3. Why might the Toshiba product hold an
Key figures (pesos millions) for Grupo Bimbo (GruDoBimho.com) follow:Required 1. Use these data and those from BTN 6-2 to compute (a) inventory turnover and (b) days’ sales in inventory for the most recent two years shown for Grupo Bimbo, Krispy Kreme, and Tastykake.2. Comment on and interpret
Identify the five primary components of an accounting information system.
What is the aim of information processors in an accounting system?
How are data in the information storage component of an accounting system used?
When special journals are used, where are cash payments by check recorded?
How does a columnar journal save posting time and effort?
What is direct posting of sales invoices?
Why does a company need a general journal when using special journals for sales, purchases, cash receipts, and cash disbursements?
Identify an advantage of an integrated computer-based accounting system.
What advantages do computer systems offer over manual systems?
Identify an advantage of computer networks.
Describe ERP software and its potential advantages to businesses.
Does the income statement of Tastykake in Appendix A indicate the net income earned by its business segments? If so, list them.
Does the balance sheet of Harley-Davidson in Appendix A indicate the identifiable assets owned by its business segments? If so, list them.
Place the letter of each system principle in the blank next to its best description.A. Control principle D. Flexibility principle B. Relevance principle E. Cost-benefit principle C. Compatibility principle 1. The principle prescribes the accounting information system to change in response to
Fill in the blanks to complete the following descriptions: 1. With - processing, source documents are accumulated for a period and then processed all at the same time, such as once a day, week, or month. 2. A computer allows different computer users to share access to data and programs. 3. A is an
Identify the most likely role in an accounting system played by each of the numbered items I through 12 by assigning a letter from the list A through E on the left: A. Source documents B. Input devices C. Information processors D. Information storage E. Output devices 1. Bar code reader 2. Filing
Damron Electronics uses a sales journal, a purchases journal, a cash receipts journal, a cash dis¬ bursements journal, and a general journal as illustrated in this chapter. Damron recently completed the following transactions a through h. Identify the journal in which each transaction should be
Lue Gifts uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements jour¬ nal, and a general journal as illustrated in this chapter. Journalize its November transactions that should be recorded in the general journal. For those not recorded in the general journal,
Debray is a company with publicly traded securities and it operates in more than one industry. Which of the following items of information about each industry segment must the company report?a. Operating incomec. Inventorye. Cash flows g. Identifiable assetsb. Depreciationd. Salesf. Capital
Hutton Company uses a sales journal, a purchases journal, a cash receipts journal, a cash disburse¬ ment journal, and a general journal. The following transactions occur in the month of March: Mar. 2 Sold merchandise costing $300 to B. Fager for $450 cash, invoice no. 5703. 5 Purchased $2,300 of
Refer to Exercise 7-1 and for each of the March transactions identify the journal in which it would be recorded. Assume the company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal as illustrated in this chapter.Exercise 7-1Hutton
Prepare headings for a sales journal like the one in Exhibit 7A.1. Journalize the March transactions shown in Exercise 7-1 that should be recorded in the sales journal assuming that the periodic inven¬ tory system is used.Exercise 7-1Hutton Company uses a sales journal, a purchases journal, a cash
Moeder Co. uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. The following transactions occur in the month of November. Nov. 3 Purchased $3,100 of merchandise on credit from Hargrave Co., terms n/20. 7 Sold merchandise costing
Refer to Exercise 7-4 and for each of the November transactions identify the journal in which it would be recorded. Assume the company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal as illustrated in this chapter.Exercise 7-4Moeder
Prepare headings for a cash receipts journal like the one in Exhibit 7A.2. Journalize the November transactions shown in Exercise 7-4 that should be recorded in the cash receipts journal assuming that the periodic inventory system is used.Exercise 7-4Moeder Co. uses a sales journal, a purchases
Redmon Company uses a sales journal, a purchases journal, a cash receipts journal, a cash disburse¬ ments journal, and a general journal. The following transactions occur in the month of June.Prepare headings for a purchases journal like the one in Exhibit 7.9. Journalize the June transactions
Refer to Exercise 7-7 and for each of the June transactions identify the journal in which it would be recorded. Assume the company uses a sales journal, purchases journal, cash receipts journal, cash dis¬ bursements journal, and general journal as illustrated in this chapter.Exercise 7-7Redmon
Prepare headings for a purchases journal like the one in Exhibit 7A.3. Journalize the June transactions from Exercise 7-7 that should be recorded in the purchases journal assuming the periodic in¬ ventory system is used.Exercise 7-7edmon Company uses a sales journal, a purchases journal, a cash
Politte Supply uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. The following transactions occur in the month of April. Apr. 3 Purchased merchandise for $2,750 on credit from Scott, Inc., terms 2/10, n/30. 9 Issued check no.
Refer to Exercise 7-10 and for each of the April transactions identify the journal in which it would be recorded. Assume the company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal as illustrated in this chapter.Exercise 7-10Politte
Prepare headings for a cash disbursements journal like the one in Exhibit 7A.4. Journalize the April transactions from Exercise 7-10 that should be recorded in the cash disbursements journal assuming that the periodic inventory system is used.Exercise 7-10Politte Supply uses a sales journal, a
At the end of May, the sales journal of Clear View appears as follows:Required 1. Open an accounts receivable subsidiary ledger that has a T-account for each customer listed in the sales journal. Post to the customer accounts the entries in the sales journal and any portion of the general journal
Refer to Exhibit 7.13 and complete the segment return on assets table for Wolfe Company. Analyze your findings and identify the segment with the highest, and that with the lowest, segment return on assets.Exhibit 7.13 Segment Specialty Skiing Group Segment Operating Income (in $ mil.) 2004 2003
Assume that Wise Co. in Problem 7-1A uses the periodic inventory system.Required 1. Prepare headings for a sales journal like the one in Exhibit 7A.1. Prepare headings for a cash receipts journal like the one in Exhibit 7A.2. Journalize the April transactions shown in Problem 7-1A that should be
Complete parts 3, 4, and 5 of Problem 7-1A using the results of parts 1 and 2 of this problem.Problem 7-1Wise Company completes these transactions during April of the current year (the terms of all its credit sales are 2/10, n/30): Apr. 2 Purchased $13,300 of merchandise on credit from Negi
Refer to Problem 7-1A and assume that Wise Co. uses the periodic inventory system.Required 1. Prepare a general journal, a purchases journal like that in Exhibit 7A.3, and a cash disbursements journal like that in Exhibit 7A.4. Number all journal pages as page 3. Review the April transac¬ tions of
Refer to Krispy Kreme’s financial statements in Appendix A to answer the following: 1. Identify the note disclosing Krispy Kreme’s business segments.2. Describe the nature and activities of each of Krispy Kreme’s business segments.Roll On 3. Access Krispy Kreme’s annual report for fiscal
Key figures for Krispy Kreme follow ($ millions):Required 1. Compute the percent change in revenue (rounded to whole numbers) for each segment and for each of the most recent two years shown. Interpret and comment on your findings.2. Identify the segment experiencing the largest growth in revenue
Access the May 1, 2002, filing of the fiscal 2002 10-K report for Dell Computer (ticker DELL) at www.SEC.gov. Read the footnote that details Dell’s segment information and answer the following:1. Dell’s operations are divided among which three geographic segments?2. In fiscal year 2002, which
Each member of the team is to assume responsibility for one of the following tasks:a. Journalizing in the purchases journal.b. Journalizing in the cash disbursements journal.c. Maintaining and verifying the Accounts Payable ledger.d. Journalizing in the sales journal and the general journal.e.
Read the article, “The Battle to Streamline Business Software’’ in the December 4, 2002, edition of Business Week. (This book’s Website provides a free link.)Required 1. What functions are integrated by enteiprise resource planning, or ERP, software?2. How long does Oregon Health and
Access and refer to the 2002 annual report for Grupo Bimbo at GrupoBimbo.com.Required 1. Skim the management and discussion section until you find information relating to Grupo Bimbo’s geographic segments. Identify those segments.2. What three financial figures does it disclose for each
Why must a company hold liquid assets?
Why does a company hold cash equivalent assets in addition to cash?
Identify at least two assets that are classified as cash equivalents.
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 should count cash received from sales and promptly deposit cash receipts; or (c) Cash receipts by mail should be opened
Harley-Davidson's balance sheet in Appendix A Harley- reports that cash and equivalents decreased dur- Davidson ing the fiscal year ended December 31, 2002. Identify at least three major causes of this change in cash and equivalents.
Prepare journal entiies to record the following merchandising transactions of Wave Company, which applies the perpetual inventory system. July 3 Purchased merchandise from CAP Corp. for $15,000 under credit terms of 1/10, n/30, FOB destination, invoice dated July 3. 4 At CAP's request, Wave paid
Prepare journal entries to record the following merchandising transactions of Yang Company, which applies the perpetual inventory system. May 2 Purchased merchandise from Bots Co. for $9,000 under credit terms of 1/15, n/30, FOB shipping point, invoice dated May 2. 4 Sold merchandise to Chase Co.
Albin Company’s adjusted trial balance on March 31, 2005, its fiscal year-end, follows:Required 1. Calculate the company’s net sales for the year.2. Calculate the company’s total cost of merchandise purchased for the year.3. Prepare a multiple-step income statement that includes separate
Use the data for Albin Company in Problem 5-4B to complete the following requirements:Required 1. Prepare closing entries as of March 31, 2005 (the perpetual inventory system is used).Analysis Component 2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales

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