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fundamental accounting principles

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

List the following steps in preparing a work sheet in their proper order by writing numbers 1-5 in the blank spaces provided. a. Prepare an adjusted trial balance on the work sheet. b. Prepare an unadjusted trial balance on the work sheet. d. jjj C. e. Enter adjustments data on the work sheet.
The ledger of Avril Company includes the following accounts with normal balances: L. Avril, Capital \($6,000;\) L. Avril, Withdrawals \($400;\) Services Revenue \($10,000;\) Wages Expense \($5,200;\) and Rent Expense \($800.\) Prepare the necessary closing entries at December 31.
On December 31, 2004, Yates Co. prepared an adjusting entry for \($6,700\) of earned but unrecorded management fees. On January 16, 2005, Yates received \($15,500\) cash in management fees, which included the accrued fees earned in 2004. Assuming the company uses reversing entries, prepare the
For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.) A. To record receipt of unearned revenue. B. To record this period's earning of prior unearned revenue. C. To record payment of
Maja Co. follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts. Maja’s annual accounting period ends on December 31, 2005. The following information concerns the adjusting entries to be recorded as of that date:a. The Office Supplies account started
A six-column table for JJW Company follows. The first two columns contain the unadjusted trial balance for the company as of July 31, 2005. The last two columns contain the adjusted trial balance as of the same date.RequiredAnalysis Component1. Analyze the differences between the unadjusted and
The adjusted trial balance for Callahay Company as of December 31, 2005, follows:Required 1. Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31, 2005; (b) the statement of owner’s equity for the year ended December 31. 2005; and
Quisp Co. had the following transactions in the last two months of its year ended December 31:Required1. 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
Following is the unadjusted trial balance for Alcorn Institute as of December 31, 2005, which initially lecords prepaid expenses and unearned revenues in balance sheet accounts. The Institute pro¬ vides one-on-one training to individuals who pay tuition directly to the business and offers
A six-column table for Daxu Consulting Company follows. The first two columns contain the unad¬ justed trial balance for the company as of December 31, 2005, and the last two columns contain the adjusted trial balance as of the same date.Required Analysis Component I • Analyze the differences
The adjusted trial balance for Lightning Courier as of December 31, 2005, follows:Required 1. Use the information in the adjusted trial balance to prepare (a) the income statement for the year Check (I) Total assets, $612,000 ended December 31, 2005, (b) the statement of owner’s equity for the
Quake Co. had the following transactions in the last two months of its fiscal year ended May 31:Required1. Prepare entries for these transactions under the method that records prepaid expenses and unearned revenues in balance sheet accounts. Also prepare adjusting entries at the end of the year.2.
Refer to Krispy Kreme's financial statements in Appendix A to answer the following: 1. Identify and write down the revenue recognition principle as explained in the chapter. 2. Research Krispy Kreme's footnotes to discover how it applies the revenue recognition principle. Report what you discover.
Access the Cannondale promotional Website (Cannondale.com).1. What is the primary product that Cannondale sells?2. Review its form 10-K. You can access this from the EDGAR system (www.SEC.gov). You must scroll down the form to find the financial statements.3. What is Cannondale’s fiscal
Read the article “It’s Like When Someone Robs a Bank,” in the August 19, 2002, issue of Business Week. (Access the book’s Website for a free link.)Required 1. Describe the type of overall accounting reform that FASB Chairman Herz favors.2. What does Herz assert as being at the core of most
Melody Kulp of Mellies (see chapter’s opening feature) is aware of Robin Drucker, who operates a collection agency. For a 50% commission, Drucker collects on accounts receivables for her clients’ customers who are delinquent in their payments. For example, assume that a company turns over a
Where is a prepaid expense reported in the financial statements?
What type of asset(s) requires adjusting entries to record depreciation?
Where is unearned revenue reported in financial statements?
Refer to Harley-Davidson’s balance sheet in Harley- Appendix A. If it made an adjustment for unDav'dsori paid wages at year-end, where would the Accrued Wages Expense be reported on its balance sheet?
Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR), accrued expenses (AE), or accrued revenues (AR). a. b. To record revenue earned that was previously received as cash in advance. . To record annual depreciation expense. To record wages expense
a. On July 1, 2005, Beyonce Company paid \($1,800\) for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31, 2005. Prepare the journal entry to reflect expiration of the insurance as of December 31, 2005.b. Tyrell Company has a
a. Carlos Company purchases \($30,000\) of equipment on January 1, 2005. The equipment is expected to last five years and be worth \($5,000\) at the end of that time. Prepare the entry to record one year's depreciation expense for the equipment as of December 31, 2005.b. Chavez Company purchases
a. Eager receives \($20,000\) cash in advance for 4 months of legal services on October 1, 2005, and records it by debiting Cash and crediting Unearned Revenue both for \($20,000.\) It is now December 31, 2005, and Eager has provided legal services as planned. What adjusting entry should Eager make
Matia Mouder employs one college student every summer in her coffee shop. The student works the five weekdays and is paid on the following Monday. (For example, a student who works Monday through Friday, June 1 through June 5, is paid for that work on Monday, June 8.) Mouder adjusts her books
During the year, Lola Co. recorded prepayments of expenses in asset accounts, and cash receipts of unearned revenues in liability accounts. At the end of its annual accounting period, the company must make three adjusting entries: (1) accrue salaries expense, (2) adjust the Unearned Services
In its first year of operations. Harden Co. earned \($39,000\) in revenues and received \($33,000\) cash from these customers. The company incurred expenses of \($22,500\) but had not paid \($2,250\) of them at year- end. Harden also prepaid \($3,750\) cash for expenses that would be incurred the
Yang Company reported net income of \($37,925\) and net sales of \($390,000\) for the current year. Calculate Yang's profit margin and interpret the result. Assume that Yang's competitors' average profit margin is 15%.
Diego Consulting initially records prepaid and unearned items in income statement accounts. Given Diego Consulting's accounting practices, which of the following applies to the preparation of adjusting entries at the end of its first accounting period?a. Earned but unbilled (and unrecorded)
For each ot the following separate cases, prepare adjusting entries required for financial statements for the year ended (or date of) December 31, 2005. (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as
Prepare adjusting journal entries for the year ended tor date of) December 31, 2005, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities.a. Depreciation
The following three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses.a. On April 1, the company
On March 1, 2003, a company paid a $16,200 premium on a 36-month insurance policy for cover¬ age beginning on that date. Refer to that policy and fdl in the blanks in the following table: Balance Sheet Insurance Asset Using Insurance Expense Using Accrual Basis Cash Accrual Cash Basis Basis Basis
Following are two income statements for Kendis Co. for the year ended December 31. The left column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid
On-The-Mark Construction began operations on December 1. In setting up its accounting procedures, the company decided to debit expense accounts when it prepays its expenses and to credit revenue accounts when customers pay for services in advance. Prepare journal entries for items a through d and
Cosmo Company experienced the following events and transactions during July:a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these events using the procedure of initially crediting the Unearned Fees account when payment is received from a customer in
Lummus Management Services opens for business and completes these transactions in September:Required 1. Prepare general journal entries to record these transactions (use account titles listed in part 2).2. Open the following ledger accounts—their account numbers are in parentheses (use the bal¬
At the beginning of April, Brooke Grechus launched a custom computer programming company called Softways. The company had the following transactions during April:a. Brooke Grechus invested \($45,000\) cash, office equipment with a value of \($4,500,\) and \($28,000\) of computer equipment in the
Shaw Management Services opens for business and completes these transactions in November:Required 1. Prepare general journal entries to record these transactions (use account titles listed in part 2).2. Open the following accounts—their account numbers are in parentheses (use the balance column
The accounting records ot Schmit Co. show the following assets and liabilities as of December 31, 2004, and 2005:Late in December 2005, the business purchased a small office building and land for \($325,000.\) The business paid \($65,000\) cash toward the purchase and a \($260,000\) note payable
Miguel Gould started a Web consulting firm called Gould Solutions. He began operations and completed seven transactions in April that resulted in the following accounts, which all have normal balances:Required I. Prepare a trial balance for this business at the end of April Analysis Component 2.
Czekai Consulting completed the following transactions during June:a. Chris Czekai, the sole proprietor, invested \($80,000\) cash along with office equipment valued at \($30,000\) in the new business.b. Purchased land valued at \($30,000\) and a building valued at \($170,000.\) The purchase is
Refer to Krispy Kreme’s financial statements in Appendix A for the following questions.Required 1. What amount of total liabilities does it report for each of the fiscal years ended 2002 and 2003?2. What amount of total assets does it report for each of the fiscal years ended 2002 and 2003?3.
Key comparative figures ($ thousands) for both Krispy Kreme and Tastykake follow:1. What is the debt ratio for Krispy Kreme in the current year and the prior year?2. What is the debt ratio for Tastykake in the current year and the prior year?3. Which of the two companies has a higher degree of
Amy Renkmeyer is an aspiring entrepreneur and your friend. She is having difficulty understanding the purposes of financial statements and how they fit together across time.Required Write a one-page memorandum to Renkmeyer explaining the purposes of the four financial statements and how they are
Access EDGAR online (www.SEC.gov) and locate the 10-K report of Amazon.com (ticker AMZN) filed on January 24, 2002. Review its financial statements reported for fiscal years ended 1999, 2000, and 2001 to answer the following questions:Required 1. What are the amounts of its net losses reported for
Read the article “Leveraged for Success” in the April 18, 2002, issue of Business Week.Required 1. Explain why debt financing can be a less expensive alternative than equity financing.2. What can happen if a company takes on too much debt?3. Name five companies cited by the article that are
Liang Lu is a young entrepreneur who operates Lu Music Services, offering singing les¬ sons and instruction on musical instruments. Lu wishes to expand but needs a loan. The bank requests Lu to prepare a balance sheet and key financial ratios. Lu has not kept formal records but is able to provide
Assume that Tanya York of York Entertainment wants to grow company revenues by 10% each year for the next five years. York has determined that achieving that revenue growth will require additional financing. Accordingly, the company has sought and been offered a $5 million line of credit by a Los
Grupo Bimbo IGrupoBimbo.com1 competes with several companies, including Krispy Kreme and Tastykake. Key financial ratios for the current fiscal year follow:Required 1. Which company is most profitable according to return on assets?2. Which company is most risky according to the debt ratio?3. Which
Is cash basis accounting consistent with the matching principle? Why or why not?
What is an accrued expense? Give an example.
Describe how an unearned revenue arises. Give an example.
Music-Mart records \($1,000\) of accrued salaries on December 31. Five days later, on January 5 (the next payday), salaries of \($7,000\) are paid. What is the January 5 entry?
Jordan Air has the following information in its unadjusted and adjusted trial balances:What are the adjusting entries that Jordan Air likely recorded? Unadjusted Debit Adjusted Credit Debit Credit Prepaid insurance Salaries payable $6,200 $5,900 $ 0 $1,400
An owner invests \($15,000\) cash along with equipment having a market value of \($23,000\) in a proprietorship. Prepare the necessary journal entry.
Explain what a compound journal entry is.
Why are posting reference numbers entered in the journal when entries are posted to ledger accounts?
If a \($4,000\) debit to Equipment in a journal entry is incorrectly posted to the ledger as a \($4,000\) credit, and the ledger account has a resulting debit balance of \($20,000,\) what is the effect of this error on the Trial Balance column totals?
If a wrong amount is journalized and posted to the accounts, how should the error be corrected?
Review the Tastykake balance sheet in Appen¬ dix A. Identify two different liability accounts that include the word payable in the account title.
Locate Harley-Davidson’s income statement in Appendix A. What is the title of its revenue Davidson account?
Identify the items from the following list that are likely to serve as source documents:a. Bank statementb. Sales ticketc. Income statementd. Trial balancee. Telephone billf. Invoice from supplierg. Company revenue accounth. Balance sheeti. Prepaid insurance
Identify the financial statement(s) where each of the following items appears. Use I for income statement, E for statement of owner’s equity, and B for balance sheet:a. Service fees earnedb. Owner cash withdrawalc. Office equipmentd. Accounts payablee. Cashf. Utilities expensesg. Office
Indicate whether a debit or credit decreases the normal balance of each of the following accounts:a. Office Suppliesb. Repair Services Revenuec. Interest Payabled. Accounts Receivable e. Salaries Expensef. Owner Capitalg. Prepaid Insuranceh. Buildingsi. Interest Revenuej. Owner Withdrawalsk.
Identify whether a debit or credit yields the indicated change for each of the following accounts:a. To increase Store Equipmentb. To increase Owner Withdrawalsc. To decrease Cashd. To increase Utilities Expensee. To increase Fees Earnedf. To decrease Unearned Revenue g. To decrease Prepaid
Identify whether the normal balances (in parentheses) assigned to the following accounts are correct or incorrect.a. Office supplies (Debit)b. Owner Withdrawals (Credit)c. Fees Earned (Debit)d. Wages Expense (Credit)e. Cash (Debit)(Credit)f. Prepaid Insurance (Credit)g. Wages Payableh. Building
Prepare journal entries for each of the following selected transactions:a. On January 13, Chico Chavez opens a landscaping business called Showcase Yards by investing Preparing journal entries\($70,000\) cash along with equipment having a \($30,000\) value. pjb. On January 21, Showcase Yards
Indicate the financial statement on which each of the following items appears. Use I for income statement, E for statement of owner’s equity, and B for balance sheet: a. Office Supplies b. Services Revenue c. Interest Payable d. Accounts Receivable e. Salaries Expense f. Equipment g. Prepaid
For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, (2) enter debit (Dr.) or credit (Cr.) to identify the kind of entry that would increase the account balance, and (3) identify the normal balance of the account. a. Unearned Revenue b.
Tavon Co recently notified a client that it must pay a \($48,000\) fee for services provided. Tavon agreed to accept the following three items in full payment:(1) \($7,500\) cash,(2) computer equipment worth \($75\) 000 and(3) assume responsibility for a \($34,500\) note payable related to the
Use the information in each of the following separate cases to calculate the unknown amount:a. During October, Shandra Company had \($97,500\) of cash receipts and \($101,250\) of cash disbursements. The October 31 Cash balance was \($16,800.\) Determine how much cash the company had at the close
Use the information in Exercise 2-4 to prepare an August 31 trial balance for Pose-for-Pics. Open these T-accounts: Cash; Office Supplies; Prepaid Insurance; Photography Equipment; H. Paris, Capital; Photography Fees Earned; and Utilities Expense. Post the general journal entries to these
Record the transactions below for Dejonge Company by recording the debit and credit entries di¬ rectly in the following T-accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Dejonge, Capital; Dejonge, Withdrawals; Fees Earned; and Rent Expense. Use the letters
Examine the following transactions and identify those that create revenues for Jade Services, a company owned by Mia Jade. Prepare general journal entries to record those transactions and explain why the other transactions did not create revenues.a. Mia Jade invests \($38,250\) cash in the
Examine the following transactions and identify those that create expenses for Jade Services. Prepare general journal entries to record those transactions and explain why the other transactions did not create expenses.a. Paid $14,100 cash for office supplies that were purchased more than 1 year
On October 1, Ming Lue organized a new consulting firm called Tech Today. On October 31, the company’s records show the following items and amounts. Use this information to prepare an October income statement for the business. Cash Accounts receivable. $ 8,360 M. Lue, Withdrawals... $ 3,000
A sole proprietorship had the following assets and liabilities at the beginning and end of a recent year:Determine the net income earned or net loss incurred by the business during the year for each of the following separate cases:a. Owner made no investments in the business and withdrew no assets
Use information from the T-accounts in Exercise 2-15 to prepare general journal entries for each of the seven transaction a through g.Exercise 2-15Assume the following T-accounts reflect Joy Co.’s general ledger and that seven transactions a through g are posted to them. Provide a short
You are told the column totals in a trial balance are not equal. After careful analysis, you discover only one error. Specifically, a correctly journalized credit purchase of a computer for \($16,950\) is posted from the journal to the ledger with a \($16,950\) debit to Office Equipment and another
Roberto Ricci opens a computer consulting business called Viva Consultants and completes the following transactions in its first month of operations:April 1 Ricci invests \($100,000\) cash along with office equipment valued at \($24,000\) in the business.2 Prepaid \($7,200\) cash for twelve
Shelton Engineering completed the following transactions in the month of June.a. Shania Shelton, the owner, invested \($105,000\) cash, office equipment with a value of \($6,000,\) and \($45,000\) of drafting equipment to launch the business.b. Purchased land worth \($54,000\) for an office by
Santo Birch opens a Web consulting business called Show-Me-the-Money Consultants and completes the following transactions in March:Required;1. Prepare general journal entries to record these transactions (use the account titles listed in part 2).2. Open the following accounts—their account
The accounting records of Crist Crate Services show the following assets and liabilities as of December 31, 2004, and 2005:Late in December 2005, the business purchased a small office building and land for \($225,000.\) The business paid \($120,000\) cash toward the purchase and a \($105,000\) note
Carlos Beltran started an engineering firm called Beltran Engineering. He began operations and com¬ pleted seven transactions in May, which included his initial investment of $17,000 cash. After these transactions, the ledger included the following accounts with normal balances;Required 1. Prepare
Business transactions completed by Eric Piburn during the month of September are as follows:a. Piburn invested \($23,000\) cash along with office equipment valued at \($12,000\) in a new sole pro¬ prietorship named EP Consulting.b. Purchased land valued at \($8,000\) and a building valued at
The following financial statement information is from five separate companies:Required 1. Answer the following questions about Company A:a. What is the equity amount on December 31, 2004?b. What is the equity amount on December 31, 2005?c. What is the amount of liabilities on December 31, 2005?2.
The following is selected financial information for Valdez Energy Company for the year ended December 31, 2005: revenues, \($65,000;\) expenses, \($50,000;\) net income, \($15,000\).Required; Prepare the 2005 calendar-year income statement for Valdez Energy Company.
The following is selected financial information for Amico as of December 31, 2005: liabilities, \($34,000;\) equity, \($56,000;\) assets, \($90,000\).Required; Prepare the balance sheet for Amico as of December 31, 2005.
The following is selected financial information of Trimark for the year ended December 31, 2005:Required Prepare the 2005 calendar-year statement of cash flows for Trimark. Cash used by investing activities..... Net increase in cash .. Cash used by financing activities Cash from operating
The following is selected financial information for Boardwalk for the year ended December 31, 2005:Required Prepare the 2005 calendar-year statement of owner’s equity for Boardwalk. B. Walk, Capital, Dec. 31, 2005 $15,000 B. Walk, Withdrawals.. Net income... 9,000 B. Walk, Capital, Dec. 31, 2004
Curtis Hamilton started a new business and completed these transactions during December:Dec. 1 Curtis Hamilton transferred \($56,000\) cash from a personal savings account to a checking account in the name of Hamilton Electric as its initial capital.2 Rented office space and paid \($800\) cash for
Miranda Right started Right Consulting, a new business, and completed the following transactions during its first year of operations:a. M. Right invests \($60,000\) cash and office equipment valued at \($30,000\) in the business.b. Purchased a \($300,000\) building to use as an office. Right paid
Zia manufactures, markets, and sells cellular telephones. The average total assets for Zia is \($250,000.\) In its most recent year, Zia reported net income of \($55,000\) on revenues of \($455,000\).Required 1. What is Zia’s return on assets?2. Does return on assets seem satisfactory for Zia
The following financial statement information is from five separate companies:Required 1. Answer the following questions about Company V:a. What is the amount of equity on December 31, 2004?b. What is the amount of equity on December 31, 2005?c. What is net income for year 2005?2. Answer the
Selected financial information for Online Co. for the year ended December 31. 2005, follows:Required Use the information provided to prepare the 2005 calendar-year income statement for Online Co. Revenues $58,000 Expenses $30,000 Net income $28,000
The following is selected financial information for RWB Company as of December 31, 2005:Required Use the information provided to prepare the balance sheet for RWB as of December 31, 2005. Liabilities E $74,000 Equity $40,000 Assets $114.000
Selected financial information of BuyRight Co. for the year ended December 31, 2005, follows:Required Use this information to prepare the 2005 calendar-year statement of cash flows for BuyRight. Cash from investing activities $2,600 Net increase in cash.. 1,400 Cash from financing activities 2,800
The following is selected financial information of ComEx for the year ended December 31, 2005:Required Prepare the 2005 calendar-year statement of owner’s equity for ComEx. C. Tex, Capital, Dec. 31, 2005 Net income $47,000 C. Tex, Withdrawals 6,000 C. Tex, Capital, Dec. 31, 2004 $ 8,000 49,000
Ken Stone launched a new business, Ken’s Maintenance Co., that began operations on June 1. The following transactions were completed by the company during that first month:June 1 K. Stone invested $120,000 cash in the business.2 Rented a furnished office and paid $4,500 cash for June’s rent.4

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