Questions and Answers of Fundamental Financial Accounting Concepts 11th Edition

North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31.Other data not yet recorded at December 31:a. Rent expired during the year,
Dyer, Inc., completed its first year of operations on December 31, 2015. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income
On December 31, 2015, Alan and Company prepared an income statement and balance sheet but failed to take into account four adjusting journal entries. The income statement, prepared on this incorrect
The adjusted trial balance for Rowdy Profits Corporation reports that its equipment had cost $250,000. For the current year, the company has recorded $30,000 of depreciation, which brings the total
Refer to E4-6.Required:Prepare adjusting journal entries at December 31, 2015, for (a) insurance and (b) supplies.Data From Exercise 4-6:Fes Company is making adjusting journal entries for the year
Refer to E4-8.Required:For each of the transactions in E4-8, indicate the amount and direction of effects of the adjusting journal entry on the elements of the accounting equation. Using the
Jaworski’s Ski Store is completing the accounting process for its first year ended December 31, 2015. The transactions during 2015 have been journalized and posted. The following data are available
Refer to E4-6.Required:Prepare adjusting journal entries at December 31, 2015, for (a) insurance and (b) supplies.Data From Exercise 4-6:Fes Company is making adjusting journal entries for the year
Fes Company is making adjusting journal entries for the year ended December 31, 2015. In developing information for the adjusting journal entries, you learned the following:a. A two-year insurance
Gibson Company’s adjusted balances at December 31, 2015 (listed alphabetically) were:Gibson prepared, but did not yet post, additional adjusting journal entries (AJEs) for $3,000 of depreciation
When a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is recorded?a. Accrued Liabilityb. Accounts Receivablec.
Which of the following accounts would not appear in a closing journal entry?a. Interest Revenueb. Accumulated Depreciationc. Retained Earningsd. Salaries and Wages Expense
What is the purpose of closing journal entries?
What is a contra-asset? Give an example of one.
When should companies that sell gift cards to customers report revenue?a. When the gift card is issued and cash is received.b. When the gift card is used by the customer.c. At the end of the year in
Which of the following accounts normally has a debit balance?a. Unearned Revenueb. Rent Expensec. Retained Earningsd. Sales Revenue
Define accrual basis accounting and contrast it with cash basis accounting.
Show the income statement equation and define each element.
Heavey and Lovas Furniture Repair Service, a company with two stockholders, began operations on June 1. The following T-accounts indicate the activities for the month of June.Required:For each of the
If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to report too small a value for which of the
Which of the following is not an asset account?a. Cashb. Landc. Equipmentd. Common Stock
What is a T-account? What is its purpose?
You are one of three stockholders who own and operate Mary’s Maid Service. The company has been operating for seven years. One of the other stockholders has always prepared the company’s annual
As a team, select an industry to analyze. Reuters provides lists of industries in the online stock screener at www.reuters.com/finance/personal-finance . Another source is csimarket.com . Each group
Home Realty, Incorporated, has been operating for three years and is owned by three investors. J. Doe owns 60 percent of the total outstanding stock of 9,000 shares and is the managing executive in
Which of the following is true regarding the income statement?a. The income statement is sometimes called the statement of operations.b. The income statement reports revenues, expenses, and
Selected financial information for Purdy Company for Year 4 follows.RequiredAssuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turn
Listed here are the stockholders’ equity sections of three public companies for 2017 and 2018.Requireda. Divide the class in three sections and divide each section into groups of three to five
The following financial statements and information are available for Blythe Industries Inc.Additional Information1. Sold land that cost $40,000 for $44,000.2. Sold equipment that cost $30,000 and had
Tesla, Inc. began operations in 2003 but did not begin selling its stock to the public until June 28, 2010. It has lost money every year it has been in existence, and by December 31, 2019, it had
There were over 38,000 McDonald’s Company restaurants in 120 countries as of December 31, 2019. Shake Shack, Inc., a much newer fast-food restaurant company, began operations as a hot dog cart in
General Motors Company (GM) is one of the world’s largest automobile manufacturing companies. The following data were taken from the company’s 2019 annual report.Requireda. Compute GM’s
Listed here are data for five companies. These data are for the companies’ 2019 fiscal years. The market price per share is the closing price of the companies’ stock the day after they announced
Use the following information to prepare a multistep income statement and a balance sheet for Sherman Equipment Co. for Year 2. Salaries Expense Common Stock Notes Receivable (short term) Allowance
What is the purpose of the W-2 form? What is the purpose of the W-4 form?
What is a classified balance sheet?
How does issuing an $8,000 discount note with an 8 percent discount rate and a one-year term to maturity affect the accounting equation?
What type of account is Discount on Notes Payable?
American Airlines, Inc. “. . . our airline operates an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries through hubs and gateways in Charlotte, Chicago,
FedEx Corporation provides a broad range of transportation, e-commerce and business services. The following data were taken from the company’s 2019 annual report. All dollar amounts are in
The following data are for the 2018 fiscal year of Alphabet, Inc., which is the parent company of Google, Inc., and Facebook, Inc. All dollar amounts are in thousands.Requireda. Calculate the EBIT
The following information is available for three companies.Requireda. Determine the annual before-tax interest cost for each company in dollars.b. Determine the annual after-tax interest cost for
Are contingent liabilities recorded on a company’s books? Explain.
Advanced Micro Devices, Inc. (AMD) is “a global semiconductor company with facilities around the world.” AMD began operations in 1969. Texas Instruments, Inc. is the company that invented the
Stanley Black & Decker, Inc. (SBD) was founded in 1843. Its 2018 annual report states that “the Company is a diversified global provider of hand tools, power tools and related accessories,
In the liabilities section of its 2018 balance sheet, Bank of America reported “noninterest-bearing deposits” in U.S. offices of over $412 billion. Bank of America is a very large banking
What is salvage value?
Metals Exploration Corporation engages in the exploration and development of many types of natural resources. In the last two years, the company has engaged in the following activities:Requireda.
Define amortization. Which kinds of assets are amortized?
Why do you think natural resources are called wasting assets?
Companies in the tire manufacturing business use a lot of property, plant, and equipment. Cooper Tire & Rubber Company “. . . is a leading manufacturer and marketer of replacement tires. It is
Electronic Arts, Inc. better known to consumers as EA Sports, is in the digital interactive entertainment business. Its products include Madden NFL and The Sims. Union Pacific Corporation is one of
The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook, others have not, but their names explain how the ratio was computed.
Three different companies each purchased a machine on January 1, Year 1, for $64,000. Each machine was expected to last five years or 43,800 hours. Salvage value was estimated to be $6,000. All three
How is the accounts receivable turnover ratio computed? What information does the ratio provide?
What is accrued interest?
Define the following terms:a. Makerb. Payeec. Principald. Intereste. Maturity datef. Collateral
What is a promissory note?
The following post-closing trial balance was drawn from the accounts of Little Grocery Supplier (LGS) as of December 31, Year 1.Requireda. What is the accounts receivable turnover for each of the
What is “aging of accounts receivable”?
AutoZone, Inc. claims to be the nation’s leading auto parts retailer. It sells replacement auto parts directly to the consumer. BorgWarner, Inc. has over 30,000 employees and produces automobile
The following data were taken from The Hershey Company’s 2018 annual report. All dollar amounts are in millions.Requireda. Compute Hershey’s accounts receivable turnover ratios for 2018 and
Presented here are the average days to collect accounts receivable for four companies in different industries. The data are for 2018.RequiredWrite a brief memorandum that provides possible answers to
What is the net realizable value of receivables?
What is a deposit in transit?
The following excerpt was taken from Alphabet, Inc.’s 10-K report for its 2019 fiscal year. Alphabet, Inc. is the parent company of Google, Inc.CONTROLS AND PROCEDURESEvaluation of Disclosure
The following information related to accounting for inventory was taken from the 2019 annual report of Costco Wholesale Corporation.Merchandise inventories consist of the following at the end of 2019
The Kroger Co. was founded in 1883 and is one of the largest retailers in the world, based on annual sales. Publix Super Markets, Inc. operates 1,167 grocery stores throughout the southeastern and
The trial balance of Pacilio Security Services, Inc. as of January 1, Year 2, was as follows.During Year 2, Pacilio Security Services experienced the following transactions:1. Acquired an additional
Verizon Communications, Inc. is one of the world’s largest providers of communication services. The following information, taken from the company’s annual reports, is available for the years
The following data are based on information in the 2019 annual reports of Abercrombie & Fitch, Co. and American Eagle Outfitters, Inc. Dollar amounts are in millions.Abercrombie & Fitch is a
The following data are based on information in the 2019 annual reports of H&R Block, Inc. and Intuit, Inc. Dollar amounts are in millions.H&R Block, Inc. has subsidiaries that provide tax,
Domino’s Pizza, Inc. had 5,486 franchised restaurants in the United States and 85 in international markets as of December 30, 2018. Signet Jewelers Limited claims to be the world’s largest
Costco Wholesale Corporation operated 787 stores as of September 1, 2019. The following data were taken from the company’s annual report. All dollar amounts are in millions.Requireda. Compute
The following data were extracted from the 2018 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States, Canada, and Western
What are some advantages and disadvantages of using the FIFO method of inventory valuation?
What are some advantages and disadvantages of the specific identification method of accounting for inventory?
Bloomin’ Brands, Inc. is the corporation behind five restaurant chains: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, and Roy’s. The
Presented here is selected information from the 2018 fiscal-year 10-K reports of four companies. The four companies, in alphabetical order, are: Advance Micro Devices, a global semiconductor company;
Mano Company was started in Year 1 when it acquired $40,000 from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all
The following information is available for the Maine Company and the Iowa Company.Requireda. For each company, compute the debt-to-assets ratio and the return-on-equity ratio.b. Determine what
a. Describe some ways that U.S. GAAP and IFRS are different.b. How are U.S. GAAP and IFRS alike for reporting purposes?
The following data were taken from the 2018 annual reports of Biogen, Inc. and Amgen Inc. Both companies are leaders in biotechnology. All dollar amounts are in millions.Requireda. For each company,
The following data were taken from Netflix, Inc.’s 2018 annual report. All dollar amounts are in millions.Requireda. For each year, compute Netflix’s debt-to-assets ratio, return-on-assets ratio,
In Year 1, Lee Inc. billed its customers $72,000 for services performed. The company collected $55,000 of the amount billed. Lee incurred $42,000 of other operating expenses on account. Lee paid
The following data are based on information in the 2018 annual report of YUM! Brands, Inc. YUM! Brands is the parent company of KFC, Pizza Hut, and Taco Bell. As of December 31, 2018, the parent
The following data are based on information in the 2019 annual report of Cracker Barrel Old Country Store. As of August 2, 2019, Cracker Barrel operated 660 restaurants and gift shops in 45 states.
Corrugated Boxes Inc. is a U.S.-based company that develops its financial statements under GAAP.The total amount of the company’s assets shown on its balance sheet for the current year was
What is the going concern doctrine?
Explain the matching concept.
Why are temporary accounts closed at the end of the accounting period?
What causes a net loss?
What is a business liquidation?
Pet Partners experienced the following events during its first year of operations, Year 1:1. Acquired cash by issuing common stock.2. Borrowed cash from a bank.3. Signed a contract to provide
The Candle Shop experienced the following events during its first year of operations, Year 1:1. Acquired cash by issuing common stock.2. Paid a cash dividend to the stockholders.3. Paid cash for
Blix Corp. started the Year 2 accounting period with total assets of $50,000 cash, $20,000 of liabilities, and $20,000 of retained earnings. During the Year 2 accounting period, the Retained Earnings
As of January 1, Year 2, Room Designs Inc. had a balance of $9,900 in Cash, $3,500 in Common Stock, and $6,400 in Retained Earnings. These were the only accounts with balances in the ledger on
The December 31, Year 1, balance sheet for James Company showed total stockholders’ equity of $200,000. Total stockholders’ equity increased by $80,000 between December 31, Year 1, and December
The following cash transactions occurred in five real-world companies.1. During the third quarter of 2019 (July 1 through September 30), Snap, Inc. the company that produces Snapchat, borrowed $1.3
At the beginning of Year 2, Master Corp.’s accounting records had the following general ledger accounts and balances:Master Corp. completed the following transactions during Year 2:1. Purchased

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