Questions and Answers of Fundamentals Financial Accounting

Lakeshore Cottages was incorporated as a private company on January 1, 2017. The company’s accounts included the following at January 31, 2017: During the month of February, the company had
Fruity Farms was incorporated as a private company on January 1, 2017. The company’s accounts included the following at January 31, 2017: During the month of February, the company had
Blockhead and Sons is a motor vehicle repair centre specializing in engine repair. At the end of the most recent year, 2016, the accounting records reported total assets of $746,000 and total
Athletic Professional Training Company (APTC) was incorporated as a private company on June 1, 2017. The company’s accounts included the following at July 1, 2017: During the month of July,
The four friends who organized Healthcare Services (HS) on January 1, 2017, each invested $10,000 in the company and were issued 8,000 common shares. To date, they are the only shareholders. During
Match each term with its related definition by entering the appropriate letter in the space provided. There should be only one definition per term (but there are more definitions than terms).
What is the main goal for accounting rules in Canada and around the world? What characteristics must financial information possess to reach that goal?
Stone Culture Corporation was organized on January 1, 2016. For its first two years of operations, it reported the following: On the basis of the data given, prepare a statement of retained
Three individuals organized Pest B-Gone Professionals on January 1 to provide insect extermination services. The company paid dividends of $10,000 during the year. At the end of the first year of
Explain why the income statement, statement of retained earnings, and statement of cash flows would be dated “For the Year Ended December 31, 2017,” whereas the balance sheet would be dated
Electronic Arts is the world’s leading developer and publisher of interactive entertainment software for personal computers and advanced entertainment systems made by Sony, Nintendo, and
Home Realty, Incorporated, has been operating for three years and is owned by three investors. J. Doe owns 60 percent of the 9,000 total outstanding shares and is the managing executive in charge. On
Cineplex Entertainment operates movie theatres and food concession counters throughout Canada. Assume its income statement for the quarter ended September 30, 2017, reported the following (listed
Assume that the Cheesecake Factory reported the following information for the fiscal year ended August 31, 2017. Amounts are in thousands of dollars. Required: Prepare the four basic
Refer to PB1-3. Data From PB1-3.Assume that you are the president of Rock Point Adventures Inc. At the end of the second year of operations (June 30, 2017), the following financial data for the
Refer to PA1-3. Data From PA1-3.Assume that you are the owner/operator of the College Park Veterinary Clinic. At the end of the second year of operations (June 30, 2017), the following financial
Assume that Fitness and Fun, Inc. reported the following information for the nine-month period ended September 30, 2017. Items are listed alphabetically and are in thousands of
Assume that you are the president of Rock Point Adventures Inc. At the end of the second year of operations (June 30, 2017), the following financial data for the company are
Assume that you are the owner/operator of College Park Veterinary Clinic. At the end of the second year of operations (June 30, 2017), the following financial data for the company are
Assume that Fitness and Fun, Inc. reported the following information for the nine-month period ended September 30, 2017. Items are listed alphabetically and are in thousands of
Designer Footwear Inc. is a designer shoe warehouse that sells luxurious and fashionable shoes at prices that people can actually afford. Its balance sheet, at November 1, 2017, contained the
Refer to PA1-1.Data From PA1-1You are the president of High Power Corporation. At the end of the first year of operations (December 31, 2017), the following financial data for the company are
Assume that you are the president of Aerospace Explorations. At the end of the first year of operations (December 31, 2017), the following financial data for the company are
You are the president of High Power Corporation. At the end of the first year of operations (December 31, 2017), the following financial data for the company are available: Required: 1.
Identifying Definitions with Abbreviations. Abbreviation Full Designation 1. CPA Chartered Professional Accountant 2. GAAP 3. IASB 4. CSA 5. IFRS 6. ASPE
Complete this case, available online in the Connect eBook, which involves identifying flaws in a company’s balance sheet.
Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1,
Match each definition with its related term by entering the appropriate letter in the space provided. Term Definitlon 1. Relevance A. The financial reports of a business are assumed to include the
DSW, Inc., is a designer shoe warehouse, selling luxurious and fashionable shoes. Its balance sheet, at July 30, 2016 (the last Saturday of the month), contained the following (listed
Fitbit, Inc., reported the following information for the nine-month period ended October 1, 2016. Items are listed alphabetically and are in thousands of dollars.Required:Prepare the four basic
Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $49,000 cash to start the business and received 4,000 shares of stock. The store completed its first year of
Refer to CP1-3.Data from CP1-3:Required:1. Did Fitbit rely more on creditors or stockholders for its financing at October 1, 2016? What is your information source?2. Was the stockholders’ equity at
Cinemark Holdings, Inc., operates movies and food concession counters throughout the United States. Its income statement for the quarter ended September 30, 2016, reported the following (accounts are
Explain why the income statement, statement of retained earnings, and statement of cash flows would be dated “For the Year Ended December 31, 2018,” whereas the balance sheet would be dated
Briefly explain the difference between net income and net loss.
Stone Culture Corporation was organized on January 1, 2017. For its first two years of operations, it reported the following:On the basis of the data given, prepare a statement of retained earnings
Items from the income statement, statement of retained earnings, and balance sheet are listed below in alphabetical order. For the companies shown in each column, solve for the missing
Items from the 2015 income statement, statement of retained earnings, and balance sheet of Activision Blizzard, Inc., are listed below in alphabetical order. Solve for the missing amounts, and
The following information was reported in the December 31, 2017, financial statements of National Airways, Inc. (listed alphabetically, amounts in millions).1. Prepare an income statement for the
Explain the effect of adjusting journal entries on cash.
What is a contra-asset? Give an example of one.
What is the equation for each of the following statements: (a) Income statement, (b) Balance sheet, and (c) Statement of retained earnings?
Refer to E4-16.Required:Using the adjusted balances in E4-16, prepare an income statement, statement of retained earnings, and classified balance sheet for the year ended December 31.Data from
Refer to E4-16.Required:Using the adjusted balances in E4-16, give the closing journal entry for the year ended December 31.Data from E4-16:On December 31, 2018, Alan and Company prepared an income
Bill’s Boards (BB) is an outdoor advertising company founded by William Longfall. William knows very little accounting so he hired a friend to “keep the books.” Unfortunately, William did not
What is a sales discount? Use 2/30, n/45 in your explanation.
Why are different depreciation methods allowed?
After recording depreciation for the current year, Media Mania Incorporated decided to discontinue using its printing equipment. The equipment had cost $750,000, accumulated depreciation was
What is an asset impairment? How is it accounted for?
Distinguish between depreciation and amortization.
Define goodwill. When is it appropriate to record goodwill as an intangible asset? When is its value decreased?
Johnson & Johnson, the maker of Tylenol, uses GAAP. Bayer, the maker of aspirin, uses IFRS. Explain what complications might arise when comparing the long-lived assets of these two companies.
Cedar Fair operates amusement parks in the United States and Canada. During a recent year, it reported the following (in millions):Equipment costing $120 was purchased during the year.Required:For
Refer back to the information given for E12-10, plus the following summarized income statement for Pizza International, Inc. (in thousands):Required:1. Based on this information, compute cash flow
The Walt Disney Company reported the following in its 2016 annual report (in millions):Required:1. Note that in all three years, net cash provided by operating activities is greater than net income.
Gibraltar Industries, Inc., is a manufacturer of steel products for customers such as Home Depot, Lowe’s, Chrysler, Ford, and General Motors. In the year ended December 31, 2016, it reported the
Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015–2017 but started noticing its cash dwindle early in 2018. In January
Colgate-Palmolive was founded in 1806. Its statement of cash flows reported the following information (in millions) for the nine months ended September 30, 2016:Required:Based on the information
Using the information in E6-10, prepare journal entries to record the transactions, assuming Solitare records discounts using the net method in a perpetual inventory system. Forfeited discounts are
Using the information in E6-10, prepare journal entries to record the transactions, assuming Solitare records discounts using the gross method in a perpetual inventory system.Data from E6-10:During
In response to the weak economy, your company’s sales force is urging you, the sales manager, to change sales terms from 1/10, n/30 to 2/30, n/60. Explain what these terms mean and how this switch
Why is revenue from selling a product/service bundle allocated between the product and service?
The following data were provided by Mystery Incorporated for the year ended December 31:Required:1. Based on these data, prepare a multistep income statement for external reporting purposes (showing
Using the information in E6-7, prepare journal entries to record the transactions, assuming Axe records discounts using the gross method in a perpetual inventory system.Data from E6-7:During the
Using the information in E6-7, prepare journal entries to record the transactions, assuming Axe records discounts using the net method in a perpetual inventory system. Forfeited discounts are charged
Using the information in E6-8, prepare journal entries to record the transactions, assuming Ace records discounts using the gross method in a perpetual inventory system.Data from E6-8:During the
Using the information in E6-8, prepare journal entries to record the transactions, assuming Ace records discounts using the net method in a perpetual inventory system. Forfeited discounts are charged
Using the information in E6-11, prepare journal entries to record the transactions, assuming Evergreen Company records discounts using the gross method in a perpetual inventory system.Data from
Using the information in E6-11, prepare journal entries to record the transactions, assuming Evergreen Company records discounts using the net method in a perpetual inventory system. Forfeited
Using the information in E6-12, prepare journal entries to record the transactions, assuming Bear’s Retail Store records discounts using the gross method in a perpetual inventory system.Data from
Using the information in E6-12, prepare journal entries to record the transactions, assuming Bear’s Retail Store records discounts using the net method in a perpetual inventory system. Forfeited
In March 2015, Target Corporation decided to discontinue its Target credit card operations. What factors would this company have considered prior to making this decision?
J. M. Smucker is well known for its fruit jams and Seneca Foods Corporation is the company behind Green Giant canned vegetables. To evaluate their ability to collect on credit sales, consider the
As of May 1, 2016, Krispy Kreme Doughnuts had $1,170,000 of Notes Receivable due within one year, $29,039,000 of Accounts Receivable, and $346,000 in its Allowance for Doubtful Accounts (assume all
Under the cost principle, what amounts should be recorded as a cost of a long-lived asset?
Lumber Liquidators, Inc., competes with Lowe’s in product lines such as hardwood flooring, moldings, and noise-reducing underlay. The two companies reported the following financial results in
Compute the following three ratios for The Home Depot’s year ended January 29, 2017: (i) fixed asset turnover, (ii) days to sell, and (iii) debt-to-assets. To calculate the ratios, use the Fiscal
Mattel and Hasbro are the two biggest makers of games and toys in the world. Mattel sells over $5.6 billion of products each year while annual sales of Hasbro products exceed $5 billion. Compare the
Coke and Pepsi are well-known international brands. Coca-Cola Co. sells more than $42 billion each year while annual sales of PepsiCo products exceed $62 billion. Compare the two companies as a
Kohl’s Corporation is a national retail department store. The company’s total revenues for the twelve months ended October 31, 2016, were $19 billion. Macy’s is a larger department store
A condensed income statement for Electronic Arts and a partially completed vertical analysis follow.Required:1. Complete the vertical analysis by computing each line item (a)–(d) as a percentage of
Procter & Gamble (P&G) manufactures and markets many products you use every day. In 2016, sales for the company were $65,300 (all amounts in millions). The annual report did not report the
Cintas Corporation is the largest uniform supplier in North America. Selected information from its annual report follows. For the 2016 fiscal year, the company reported sales revenue of $4.9 billion
Use the information in E13-3 to complete the following requirement.Required:Compute the times interest earned ratios for 2016 and 2015. In your opinion, does Computer Tycoon generate sufficient net
Use the information for Chevron Corporation in E13-1 to complete the following requirements.Required:1. Compute the gross profit percentage for each year (rounded to one decimal place). Assuming that
The average price of a gallon of gas in 2015 dropped $0.94 (28 percent) from $3.34 in 2014 (to $2.40 in 2015). Let’s see whether these changes are reflected in the income statement of Chevron
Last year, Big W Company reported earnings per share of $2.50 when its stock was selling for $50.00. If its earnings this year increase by 10 percent and the P/E ratio remains constant, what will be
Explain where and how discontinued operations are reported on the income statement.
What are the two essential characteristics of useful financial information? What other characteristics enhance the usefulness of financial information?
From last year to this year, Colossal Company’s current ratio increased and its inventory turnover decreased. Does this imply a higher, or lower, risk of obsolete inventory?
1. Which of the two basic reporting approaches for the cash flows from operating activities did Lowe’s use? Is this the same as what The Home Depot used?2. What amount of cash did Lowe’s receive
1. Which of the two basic reporting approaches for the cash flows from operating activities did The Home Depot use?a. Directb. Indirect2. What amount of income tax payments did The Home Depot make
Refer to the information in PB12-2.Required:Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.Data from PB12-2: Selected Balance Sheet
For each of the following transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (−). Use (NE)
Refer to PA1-3.Data from PA1-3:Required:1. Did Nice Bite rely more on creditors or stockholders for its financing at December 31, 2016? What is your information source?2. Did the retained earnings at
The following information for the year ended December 31, 2016, was reported by Nice Bite, Inc.RequiredPrepare the four basic financial statements for 2016. $ 45,000 $ 17,200 Accounts Payable
A company separately sells home security equipment and 12 months of system monitoring service for $120 and $240, respectively. The company sells an equipment/monitoring bundle on January 1 for a
Cycle Wholesaling sold merchandise on account, with terms n/60, to Sarah’s Cycles on February 1 for $800 (cost of goods sold of $500). On February 9, Sarah’s Cycles returned to Cycle Wholesaling
The following transactions were selected from among those completed by Bear’s Retail Store:Nov. 20 Sold two items of merchandise to Cheryl Jahn, who paid the $400 sales price in cash.
The following transactions were selected from the records of Evergreen Company: July 12 Sold merchandise to Wally Butler, who paid the $1,000 purchase with cash. The goods cost Evergreen

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