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fundamental accounting principles

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

Refer to the data and information in Problem 5-3B.Required Prepare and complete the entire 10-column work sheet for FAB Products Company. Follow the structure of Exhibit 5B.1 in Appendix 5B.Problem 5-3BThe following unadjusted trial balance is prepared at fiscal year-end for FAB Products
Refer to Krispy Kreme’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 2,
Key comparative figures ($ thousands) for both Krispy Kreme and Tastykake 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?3. Did the gross
Amy Martinez is a student who plans to attend approximately four professional events a year at her college. Each event necessitates a financial outlay of $100-$200 for a new suit and ac¬ cessories. After incurring a major hit to her savings for the first event, Amy developed a different ap¬
Access the SEC’s EDGAR database (www.SEC.govf and obtain the April 22, 2003, filing of its fiscal 2003 10-K report (for the year ended February 1, 2003) 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
Read the article, “The End of Fuzzy Math?” in the December 11,2000, issue ofBusiness BUSINESS WEEK Week. The book’s Website provides free access to the article.Required 1. How does the article define fulfillment costs?2. Where does Amazon.com account for fulfillment costs on its income
Dwayne Fewis and Michael Cherry have earned well beyond the $1,000 they used to launch Damani Dada (see chapter’s opening feature). Good entrepreneurs continually rethink and refine business strategies. Assume that Damani Dada’s most recent income statement follows:To increase income, Lewis and
Grupo Bimbo (GrupoBimbo.com), Krispy Kreme, and Tastykake are all competitors in the global marketplace. Key comparative figures for each company follow:Required 1. Rank the three companies (highest to lowest) based on the gross margin ratio.2. Which of the companies uses a multiple-step income
What accounting principle most guides the allocation of cost of goods available for sale between ending inventory and cost of goods sold?
If Skechers sells goods to Target with terms FOB shipping point, which company reports these goods in its inventory while they are in transit?
Describe one advantage for each of the inventory costing methods: specific identification, FIFO, LIFO, and weighted average.
When costs are rising, which method reports higher net income—LIFO or FIFO?
When costs are rising, what effect does LIFO have on a balance sheet compared to FIFO?
A company takes a physical count of inventory at the end of 2005 and finds that ending inventory is understated by $10,000. Would this error cause cost of goods sold to be overstated or understated in 2005? In year 2006? If so, by how much?
Use LCM applied separately to individual items to compute ending inventory if the data are as follows: Product Units Unit Recorded Cost Unit Market Cost A..... 20 $6 $5 B 40 9 8 C.... 10 12 15
A company reports the following beginning inventory and purchases, and it ends the period with 30 units in inventory.a. Compute ending inventory using the FIFO periodic system.b. Compute cost of goods sold using the LIFO periodic system. Beginning Inventory Purchase | Purchase 2 100 units at $10
Describe the flow of costs from inventory to cost of goods sold for the following methods: (a) FIFO and (b) LIFO.
Why are incidental costs sometimes ignored in inventory costing? Under what principle is this permitted?
If costs are declining, will the LIFO or FIFO method of inventory valuation result in the lower cost of goods sold?
Does the accounting principle of consistency preclude any changes from one accounting method to another?
Explain following statement: “Inventory errors correct themselves
What guidance does the principle of conservatism offer?
Refer to Krispy Kreme’s financial statements in Appendix A. On February 2, 2003, what per¬ cent of current assets are represented by inventory?
Refer to Tastykake’s financial statements in Appendix A. Compute its cost of goods avail¬ able for sale for the year ended December 28, 2002.
What percent of Harley-Davidson’s current assets are inventory as of December 31, 2002, and Davidson as of December 31, 2001?
Tevin Tiader starts a merchandising business on December 1 and enters into three inventory purchases:Trader sells 15 units for $25 each on December 15. Eight of the sold units are from the December 7 purchase and seven are from the December 14 purchase. Trader uses a perpetual inventory system.
A company reports the following beginning inventory and purchases for January. On January 26, 345 units were sold. What is the cost of the 140 units that remain in ending inventory, assuming costs are assigned based on (a) FIFO, (b) FIFO, and (c) weighted average? (Round unit costs to the nearest
Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs.1. The preferred method when each unit of product has unique features that markedly affect cost.2. Matches recent costs against net sales.3. Provides a tax
Duke & Son, antique dealers, purchased the contents of an estate for \($37,500.\) Terms of the purchase were FOB shipping point, and the cost of transporting the goods to Duke & Son’s warehouse was \($1,200.\) Duke & Son insured the shipment at a cost of \($150.\) Prior to putting the goods up
Talisman Trading Co. has the following products in its ending inventory. Compute lower of cost or market for inventory (a) as a whole and (b) applied separately to each product. Product Mountain bikes Quantity Cost per Unit Market per Unit Skateboards Gliders 9 $360 $330 12 210 270 25 480 420
In taking a physical inventory at the end of year 2005, Nadir Company erroneously forgot to count certain units. Explain how this error affects the following: (a) 2005 cost of goods sold, (b) 2005 gross profit, (c) 2005 net income, (d) 2006 net income, (e) the combined two-year income, and (/)
Refer to QS 6-1 and assume the periodic inventory system is used. Determine the costs assigned to the December 31 ending inventory when costs are assigned based on (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. QS 6-1Tevin Tiader starts a merchandising business on
Refer to QS 6-3 and assume the periodic inventory system is used. Determine the costs assigned to the ending inventory when costs are assigned based on (a) FIFO, (b) LIFO, and (c) weighted average. (Round unit costs to the nearest cent.)QS 6-3A company reports the following beginning inventory and
Dooling Store’s inventory is destroyed by a fire on September 5, 2005. The following data for year 2005 are available from the accounting records. Estimate the cost of the inventory destroyed. Jan. I inventory $180,000 Jan. I through Sept. 5 purchases (net)... $342,000 Jan. I through Sept. 5
Taos Company purchased merchandise for resale from Tucson Company with an invoice price of \($22,000\) and credit terms of 3/10, n/60. The merchandise had cost Tucson \($15,000.\) Taos paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.1. Prepare
Insert the letter for each term in the blank space beside the definition that it most closely matches: A. Cash discount B. Credit period E. FOB shipping point F. Gross profit H. Purchase discount I. Sales discount G. Merchandise inventory c. Discount period D. FOB destination J. Trade discount 1.
Spare Parts was organized on May 1, 2005, and made its first purchase of merchandise on May 3. The purchase was for 1,000 units at a price of \($10\) per unit. On May 5, Spare Parts sold 600 of the units for \($14\) per unit to DeSoto Co. Terms of the sale were 2/10, n/60. Prepare entries for Spare
Refer to Exercise 5-4 and prepare the appropriate journal entries for DeSoto Co. to record the May 5 purchase and each of the three separate transactions a through c. DeSoto is a retailer that uses a perpetual inventory system and purchases these units for resale.Exercise 5-4Spare Parts was
On May 11, Smythe Co. accepts delivery of \($30,000\) of merchandise it purchases for resale from Hope Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB ship¬ ping point. The cost of the goods for Hope is \($20,000.\) When the goods are delivered, Smythe
Explain why a company’s manager wants the accounting system to record customers’ returns of unsatisfactory goods in the Sales Returns and Allowances account instead of the Sales account. In addition, explain whether this information would be useful for external decision makers.
The following supplementary records summarize Titus Company’s merchandising activities for year 2005. Set up T-accounts for Merchandise Inventory and Cost of Goods Sold. Then record the summarized activities in those T-accounts and compute account balances. Cost of merchandise sold to customers
Fill in the blanks in the following separate income statements a through e. Identify any negative amount by putting it in parentheses. Sales Cost of goods sold Merchandise inventory (beginning). Total cost of merchandise purchases Merchandise inventory (ending). Cost of goods sold.. Gross profit
Refer to Exercise 5-2 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used by both the buyer and the seller. (Skip the part 3 requirement.)Exercise 5-2Refer to Exercise 5-4 and prepare the appropriate journal entries for
Refer to Exercise 5-6 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used by both the buyer and the seller,Exercise 5-6On May 11, Smythe Co. accepts delivery of \($30,000\) of merchandise it purchases for resale from Hope
Prepare journal entries to record the following merchandising transactions of Stone Company, which applies the perpetual inventory system. Aug. 1 Purchased merchandise from Abilene Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 4 At Abilene's request,
Prepare journal entries to record the following merchandising transactions of Bask Company, which applies the peipetual inventory system. July 1 Purchased merchandise from Black Company for $6,000 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. 2 Sold merchandise to Coke
BizKid Company’s adjusted trial balance on August 31, 2005, its fiscal year-end, follows:On August 31, 2004, merchandise inventory was $25,000. Supplementary records of merchandising activities for the year ended August 31, 2005, reveal the following itemized costs:Required 1. Compute the
Explain why use of the perpetual inventory system has dramatically increased.
Under what conditions are two entries necessary to record a sales return?
When a merchandiser uses a perpetual inventory system, why is it sometimes necessary to adjust the Merchandise Inventory balance with an adjusting entry?
What account is used in a perpetual inventory system but not in a periodic system?
Which of the following accounts are temporary accounts under a periodic system?(a) Merchandise Inventory: (b) Purchases; (c) Transportation-In.
How is cost of goods sold computed under a periodic inventory system?
Do reported amounts of ending inventory and net income differ if the adjusting entry method of recording the change in inventory is used instead of the closing entry method?
Refer to the income statement for Krispy Kreme Kreme in Appendix A. What term is used in- stead of cost of goods sold? Does the company present a detailed calculation of its cost of goods sold?
Refer to the balance sheet for Tastykake in TAST Appendix A. What does Tastykake call its in- ventory account? What alternate name could it use?
Refer to the income statement of Harley- Harley- Davidson in Appendix A. Does its income state- Davidson ment report a gross profit figure? If yes, what is the amount?
Prepare journal entries to record each of the following purchases transactions of a merchandising company. Show supporting calculations and assume a perpetual inventory system. Mar. 5 Purchased 500 units of product with a list price of $5 per unit. The purchaser is granted a trade discount of 20%;
Prepare journal entries to record each of the following sales transactions of a merchandising company. Show supporting calculations and assume a perpetual inventory system. Apr. 1 Sold merchandise for $2,000, granting the customer terms of 2/10, EOM; invoice dated April 1. The cost of the
Refer to QS 5-1 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used,QS 5-1Prepare journal entries to record each of the following purchases transactions of a merchandising company. Show supporting calculations and assume a
Refer to QS 5-2 and prepare journal entries to record each of the merchandising transactions assuming Recording purchases that the periodic inventory system is used,QS 5-2Prepare journal entries to record each of the following sales transactions of a merchandising company. Show supporting
Refer to Krispy Kreme’s financial statements in Appendix A to answer the following:Required 1. For the fiscal year ended February 2, 2003, what amount will be credited to Income Summary to summarize its revenues earned?2. For the fiscal year ended February 2, 2003, what amount will be debited to
Key figures ($ thousands) for the recent two years of both Krispy Kreme and Tastykake follow:Required 1. Compute the current ratio for both years and both companies.2. Which has the better ability to pay short-term obligations according to the current ratio?3. Analyze and comment on each
On January 20, 2005, Jennifer Nelson, the accountant for Travon Enterprises, is feel¬ ing pressure to complete the annual financial statements. The company president has said he needs up-to-date financial statements to share with the bank on January 21 at a dinner meeting that has been called to
Read the article “Weighing the Balance Sheet” in the April 1, 2002, issue ofBusiness Week.Required 1. This article explains how to evaluate whether a company has a financially strong balance sheet. What does the author of this article look for when evaluating the debt level carried by
Review this chapter’s opening feature involving Andy Wolf and his startup company, Premier Snowskates.Required 1. What is a conservative estimate for the units of snowskates that will be sold if annual sales are $3 million and Andy Wolf meets his targeted retail price?2. What ratios studied in
Grupo Bimbo (GrupoBimbo.com) is a leader in the baking and foods industry. Key financial information (millions of pesos) for Grupo Bimbo for its recent fiscal years follows:Required 1. Compute the current ratio for Grupo Bimbo for both the current and prior years.2. Comment on the level and the
The adjusted trial balance for Schwepker Marketing Co. follows. Complete the four right-most columns of the table by first entering information for the four closing entries (keyed 1 through 4) and second by completing the post-closing trial balance. No. Account Title Adjusted Trial Balance Closing
The following adjusted trial balance contains the accounts and balances of Showers Company as of December 31, 2005, the end of its fiscal year. (1) Prepare the December 31, 2005, closing entries for Showers Company. (2) Prepare the December 31, 2005, post-closing trial balance for Showers Company.
Use the following adjusted trial balance of Webb Trucking Company to prepare a classified balance sheet as of December 31, 2005. Account Title Debit Credit Cash $ 7,000 Accounts receivable.. 16,500 Office supplies 2,000 Trucks 170,000 Accumulated depreciation-Trucks $ 35,000 Land... 75,000 Accounts
Use the information in the adjusted trial balance reported in Exercise 4-4 to prepare Webb Trucking Company's (1) income statement, and (2) statement of owner's equity. The K. Webb, Capital account balance is $161,000 at December 31, 2004.Exercise 4-4Use the following adjusted trial balance of Webb
Use the information in the adjusted trial balance reported in Exercise 4-4 to compute the current ratio as of the balance sheet date. Interpret the current ratio for this company. (Assume that the industry norm for the current ratio is 1.5.)Exercise 4-4Use the following adjusted trial balance of
Calculate the current ratio in each of the following separate cases. Identify the company case with the strongest liquidity position. (These cases represent competing companies in the same industry.) Current Assets Current Liabilities Case I $ 78,000 $31,000 Case 2 104,000 75,000 Case 3 44,000
These 16 accounts are from the Adjusted Trial Balance columns of a company’s 10-column work sheet. In the blank space beside each account, write the letter of the appropriate financial statement column (A, B, C, or D) to which a normal account balance is extended.A. Debit column for the Income
The following two events occurred for Totten Co. on October 31, 2005, the end of its fiscal year:a. Totten rents a building from its owner for $3,200 per month. By a prearrangement, the company delayed paying October’s rent until November 5. On this date, the company paid the rent for both
Hinson Company records prepaid assets and unearned revenues in balance sheet accounts. The following information was used to prepare adjusting entries for Hinson Company as of August 31, the end of the company’s fiscal year:a. The company has earned $5,000 in unrecorded service fees.b. The
In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank. A. Current assets D. Intangible assets B. Long-term investments E. Current liabilities. C. Plant assets 1.
On April 1, 2005, Jennifer Stafford created a new travel agency, See-It-Now Travel. The following transactions occurred during the company’s first month:The company’s chart of accounts follows:Required1. Use the balance column format to set up each ledger account listed in its chart of
The adjusted trial balance of Kobe Repairs on December 31, 2005, follows:Required 1. Prepare an income statement and a statement of owner's equity for the year 2005, and a classified balance sheet at December 31, 2005. There are no owner investments in 2005. 2. Enter the adjusted trial balance in
The adjusted trial balance for Sharp Construction as of December 31, 2005, follows:J. Sharp invested \($50,000\) cash in the business during year 2005 (the December 31, 2004, credit balance of the J. Sharp, Capital account was \($32,700).\) Sharp Construction is required to make a \($6,600\)
The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2005 fiscal year. The June 30, 2004, credit balance of the owner’s capital account was \($52,660,\) and the owner invested \($25,000\) cash in the company during the 2005 fiscal year.Required I. Prepare a
The following six-column table for Bullseye Ranges includes the unadjusted trial balance as of December 31, 2005.Required 1. Complete the six-column table by entering adjustments that reflect the following information:a. As of December 31, 2005, employees had earned \($900\) of unpaid and
In the blank space beside each numbered balance sheet item. If the item should not appear on the balance A. Current assets E.B. Long-term investments F.C. Plant assets G.D. Intangible assets item, enter the letter of its balance sheet class sheet, enter a Z in the blank.Current liabilities
On July 1, 2005, Lucinda Fogle created a new self-storage business, KeepSafe Co. The following transactions occurred during the company’s first month:July 1 Fogle invested \($20,000\) cash and buildings worth \($120,000\) in the business.2 Rented equipment by paying \($1,800\) cash for the first
Heel-To-Toe-Shoes’ adjusted trial balance on December 31, 2005, follows:Required 1. Prepare an income statement and a statement of owner’s equity for the year 2005, and a classified balance sheet at December 31, 2005. There are no owner investments in 2005.2. Enter the adjusted trial balance in
The adjusted trial balance for Giovanni Co. as of December 31, 2005, follows:J. Giovanni invested \($30,000\) cash in the business during year 2005 (the December 31, 2004, credit balance of the J. Giovanni, Capital account was \($61,800).\) Giovanni Company is required to make a \($6,400\) payment
The following unadjusted trial balance is for Crush Demolition Company as of the end of its April 30, 2005, fiscal year. The April 30, 2004, credit balance of the owner’s capital account was \($36,900,\) and the owner invested \($30,000\) cash in the company during the 2005 fiscal year.Required
The following six-column table for Solutions Co. includes the unadjusted trial balance as of December 31, 2005:Required1. Complete the six-column table by entering adjustments that reflect the following information:a. As of December 31, 2005, employees had earned \($420\) of unpaid and unrecorded
Visit the Website of a major company that interests you. Use the Investor Relations link at the Website to obtain the toll-free telephone number of the Investor Relations Department. Call the company, ask to speak to Investor Relations, and request a copy of the company's most recent annual report.
Grupo Bimbo is a major producer and distributor of bakery products. Access its 2002 annual financial report at the company's Website (GrupoBimbo.com) to answer the following questions.Required1. Identify and report the revenue recognition policy applied by Grupo Bimbo? 2. What are the five types of
What are the overall benefits of a work sheet?
What accounts are listed on the post-closing trial balance?
Identify which of the following assets are classified as (I) current assets or (2) plant assets: (a) land used in operations, (b) office supplies, (c) receivables from customers due in 10 months, (d) insurance protection for the next nine months, (e) trucks used to provide services to customers,
What classes of assets and liabilities are shown on a typical classified balance sheet?10.How is unearned revenue classified on the balance sheet?
Refer to the balance sheet for Krispy Kreme «6. Refer to Harley-Davidson’s financial statements ^arley^in Appendix A. What five noncurrent asset cat- WaSaaEBaan/ in Appendix A. What journal entry was likely egories are used on its classified balance sheet? recorded as of December 31, 2002, to
Refer to Tastykake’s balance sheet in Appendix Summary account?A. Identify the accounts listed as current w liabilities.
Argosy Company began the current period with a $14,000 credit balance in the D. Argosy, Capital account. At the end of the period, the company’s adjusted account balances include the following temporary accounts with normal balances:After closing the revenue and expense accounts, what will be the
The following are common categories on a classified balance sheet:A. Current assets D. Intangible assets B. Long-term investments E. Current liabilities C. Plant assets F. Long-term liabilities For each of the following items, select the letter that identifies the balance sheet category where the
Compute Jamar Company’s current ratio using the following information: Accounts receivable Accounts payable Buildings Cash $15,000 Long-term notes payable. $20,000 10,000 Office supplies. 1,800 42,000 Prepaid insurance 2,500 6,000 Unearned services revenue 4,000
The following information is taken from the work sheet for Wayman Company as of December 31, 2005. Using this information, determine the amount for K. Wayman, Capital, that should be reported on its December 31, 2005, balance sheet. K.Wayman, Capital K.Wayman, Withdrawals Totals Income Statement

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