Questions and Answers of Fundamentals Financial Accounting

During the months of January and February, Solitare Corporation sold goods to two customers. The sequence of events was as follows:Jan. 6 Sold goods for $100 to Wizard Inc. with terms
During the months of January and February, Axe Corporation purchased goods from three suppliers. The sequence of events was as follows:Jan. 6 Purchased goods for $1,200 from Green with terms
In fiscal 2015, Macy’s reported cost of goods sold (before shrinkage) of $16.5 billion, ending inventory for 2015 of $5.5 billion, and ending inventory for the previous year (2014) of $5.4 billion.
Inventory that cost $500 is sold for $700, with terms of 2/30, n/60. Give the journal entries to record (a) The sale of merchandise and (b) Collection of the accounts receivable. Assume the
Inventory that cost $500 is sold for $700, with terms of 2/30, n/60. Give the journal entries to record (a) The sale of merchandise and (b) Collection of the accounts receivable. Assume the
Using the information in M6-9, prepare the journal entries needed at (a) time of sale and (b) collection of payment from the customer, assuming the company uses a perpetual inventory system with the
Using the information in M6-9, prepare the journal entries needed at (a) time of sale and (b) collection of payment from the customer, assuming the company uses a perpetual inventory system with the
Using the information in M6-19, prepare the journal entries needed on October 5 and 20, assuming the company uses a perpetual system and records purchase discounts using the net method.Data from
On October 5, your company buys and receives inventory costing $5,000, on terms 2/30, n/60. On October 20, your company pays the amount owed relating to the October 5 purchase. Prepare the journal
Fortune Brands Home & Security, Inc., sells Master Lock padlocks. It reported an increase in net sales from $4.0 billion in 2014 to $4.6 billion in 2015, and an increase in gross profit from $1.4
Luxottica Group, the Italian company that sells Ray Ban and Oakley sunglasses, reported net sales of €8.8 billion in 2015 and €7.6 billion in 2014. Gross profit increased from €5.1 billion in
Ziehart Pharmaceuticals reported Net Sales of $178,000 and Cost of Goods Sold of $58,000. Candy Electronics Corp. reported Net Sales of $36,000 and Cost of Goods Sold of $26,200. Calculate the gross
A company that usually sells satellite TV equipment for $50 and two years of satellite TV service for $450 has a special, time-limited offer in which it sells the equipment for $300 and gives the two
Merchandise costing $2,000 is sold for $3,000 on terms 2/30, n/60. If the customer pays within the discount period, what amount will be reported on the income statement as net sales and as gross
During its first year of operations, Drone Zone Corporation (DZC) bought goods from a manufacturer on account at a cost of $50,000. DZC returned $8,000 of this merchandise to the manufacturer for
During its first year of operations, Tron Auto Dealership (TAD) bought vehicles from a manufacturer on account at a cost of $608,000. TAD returned $152,000 of these vehicles to the manufacturer for
Assume Anderson’s General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $23,000. If Anderson’s paid National Trucking $650 cash for transportation,
Dillard’s, Inc., operates department stores located primarily in the Southwest, Southeast, and Midwest. In its 2016 third-quarter report, the company reported Cost of Goods Sold of $880 million,
XO Group sells merchandise to companies (and individuals) for significant milestones in life, such as getting married, moving in together, and having a baby. Indicate (yes/no) whether the following
Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds:Date of bonds: January 1, 2018Maturity amount and date: $200,000 due in 10 years (December 31,
The following data were included in a recent Apple Inc. annual report (in millions):Required:1. Compute Apple’s fixed asset turnover ratio for 2014, 2015, and 2016. Round your answer to one
Iconix Brand Group owns and markets various brands and trademarks, including Joe Boxer, London Fog, Ocean Pacific, Ecko Unltd., Umbro, Ed Hardy, Lee Cooper, Buffalo, and Peanuts. The company’s
Refer to the data in E9-10. Assume each company spent $319,800 at the beginning of the current year for additional Developed Technology. Because of its proprietary nature, the technology is estimated
Amazon, Alphabet, and TripAdvisor rely on various intangible assets to operate their businesses. These companies amortize the cost of these assets using the straight-line method over the following
The following is a list of account titles and amounts (in millions) reported at December 27, 2015, by Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for
1. The number of issued shares is shown in the first column of the statement of stockholders’ equity. Had Lowe’s issued more or fewer shares of common stock than The Home Depot at the end of
1. As of January 29, 2017, how many shares of common stock were authorized? How many shares were issued? How many shares were held in treasury?a. 10 billion; 1.772 billion; 1.252 billionb. 10
American Laser, Inc., reported the following account balances on January 1.The company entered into the following transactions during the year.Jan. 15 Issued 5,000 shares of $1 par common stock for
Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2018:Common Stock (par $1; outstanding, 490,000 shares)........................$490,000Preferred Stock, 8%
Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2018:Common stock (par $1; outstanding, 500,000 shares)......................$500,000Preferred stock, 8% (par
Delta Air Lines, Inc., and Southwest Airlines Co. are two publicly traded airline companies. They reported the following in their financial statements (in millions of dollars, except per-share
Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2018:Common Stock (par $8; outstanding, 30,000 shares).......................$240,000Preferred Stock, 8% (par
The records of Hoffman Company reflected the following balances in the stockholders’ equity accounts at December 31, 2018:Common stock, par $12 per share, 40,000 shares outstanding.Preferred stock,
The 2016 annual report for General Mills disclosed that 1 billion shares of common stock have been authorized. At the end of 2015, 755 million shares had been issued and the number of shares in
Netpass Company has 300,000 shares of common stock authorized, 270,000 shares issued, and 100,000 shares of treasury stock. The company’s board of directors declares a dividend of $1 per share of
Identify and explain four important dates with respect to dividends.
Nicole thinks that her business, Nicole’s Getaway Spa (NGS), is doing really well and she is planning a large expansion. With such a large expansion, Nicole will need to finance some of it using
1. Calculate and express as a percentage the companies’ debt-to-assets ratios using amounts reported in the financial statements for fiscal 2016, which ends in early 2017. What do the differences
1. Calculate and express as a percentage the company’s debt-to-assets ratio using amounts reported in its financial statements for the years ended January 29, 2017, and January 31, 2016,
Fit for Life (FFL) operates a fitness center and snack lounge. The following is a partial list of FFL transactions during its year ended December 31. FFL adjusts its records only at
Zarina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $15,000 in its bank account. The note has a two-year term, compounds 4 percent interest annually, and
Assume the same facts as PB10-6, but now assume that Methodical uses the simplified effectiveinterest bond amortization method, as shown in Chapter Supplement 10C.Required:1. Prepare a bond
Refer to PB10-6. Assume Methodical uses the effective-interest bond amortization method.Required:1. Prepare a bond amortization schedule.2. Give the journal entry to record the bond issue.3. Give the
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31,
Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2018. The bonds pay interest each December 31 and mature 10 years from January 1, 2018.Required:For each of the three
Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $50,000 in its bank account. The note has a three-year term, compounds 5 percent interest annually, and
Assume the same facts as PA10-7, except that Surreal uses the simplified effective-interest bond amortization method, as shown in Chapter Supplement 10C.Required:1. Prepare a bond amortization
On January 1, 2018, Surreal Manufacturing issued 600 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31,
On January 1, 2018, Loop Raceway issued 600 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2020. On
Macromedia, Inc., is the original maker of shockwave and flash technologies. One of its annual reports indicated a lawsuit had been filed against the company and five of its former officers for
Complete the requirements of CP10-6, assuming Southwest Corporation uses simplified effectiveinterest amortization shown in Chapter Supplement 10C.Data from CP10-6:Southwest Corporation issued bonds
Complete the requirements of CP10-6, assuming Southwest Corporation uses effective-interest amortization.Data from CP10-6:Southwest Corporation issued bonds with the following details:Face value:
Southwest Corporation issued bonds with the following details:Face value: $600,000 Interest: 9 percent per year payable each December 31Terms: Bonds dated January 1, 2018, due five years from
Brunswick Corporation is a multinational company that manufactures and sells marine and recreational products. A prior annual report contained the following information:A jury awarded $44.4 million
Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:Required:1. For each listed transaction and related adjusting entry, indicate the accounts, amounts,
EZ Curb Company completed the following transactions. The annual accounting period ends December 31.Jan. 8 Purchased merchandise on account at a cost of $14,000. (Assume a perpetual inventory
The following amortization schedule indicates the interest and principal to be repaid on an installment note established January 1, 2018, for a company with a March 31 year-end.Required:1. Assuming
At May 31, 2016, FedEx Corporation reported the following amounts (in millions) in its financial statements:Required:1. Compute the debt-to-assets ratio and times interest earned ratio (to two
The Tennis Times (TTT) is a publisher of magazines. Its accounting policy for subscriptions follows:Revenues from our magazine subscription services are deferred initially and later recognized as
Bryant Company sells a wide range of inventories, which are initially purchased on account. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions
Assume an employee of Rocco Rock Company earns $1,000 of gross wages during the current pay period and is required to remit to the government $100 for income tax and $50 for FICA. Consider the
McLoyd Company completed the salaries and wages payroll for March. The payroll provided the following details:Required:1. Considering both employee and employer payroll taxes, use the preceding
Use the information in E10-1 to complete the following requirements.Required:1. Give the journal entry to record the note on November 1, 2018.2. Give any adjusting entry required on December 31,
Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. For example, Mattel builds up its inventory to meet the needs of retailers
Refer to M10-20. Welton Corp. established the note on the first day of its fiscal year and will fully repay the note by the end of year 3 on its December 31 fiscal year-end. Prepare Welton Corp.’s
Access an online loan calculator with annual payments, such as the one at mycalculators.com, to produce an amortization schedule for Welton Corp.’s installment note that has original principal of
Refer to M10-18. Prepare CCC’s required journal entries on (a) January 1, 2018; (b) December 31, 2018; (c) December 31, 2019; (d) December 31, 2020; and (e) December 31, 2021.Data from M10-18:
The following amortization schedule indicates the interest and principal that Chip’s Cookie Corporation (CCC) must repay on an installment note established January 1, 2018. CCC has a December 31
On January 1, 2018, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was
Clem Company issued $800,000, 10-year, 5 percent bonds on January 1, 2018. The bonds sold for $741,000. Interest is payable annually on December 31. Using effective-interest amortization, prepare
Simko Company issued $600,000, 10-year, 5 percent bonds on January 1, 2018. The bonds were issued for $580,000. Interest is payable annually on December 31. Using straight-line amortization, prepare
Buzz Coffee Shops is famous for its large servings of hot coffee. After a famous case involving McDonald’s, the lawyer for Buzz warned management (during 2014) that it could be sued if someone were
E-Tech Initiatives Limited plans to issue $500,000, 10-year, 4 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would
On February 6, 2017, the NYSE bond directory quoted a bond price of 130.03 for Ford Motor Company’s 7.45 percent bonds maturing on July 16, 2031. Were the bonds listed at a discount or premium?
Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2018, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $200,000, plus accrued
Greener Pastures Corporation borrowed $1,000,000 on November 1, 2018. The note carried a 9 percent interest rate with the principal and interest payable on June 1, 2019. Show the accounting equation
On December 1, 2018, your company borrowed $15,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2019, $2,000;
A local theater company sells 1,500 season ticket packages at a price of $250 per package. The first show in the 10-show season starts this week. Show the accounting equation effects and prepare the
Over the period to maturity, why does yearly interest expense decrease on an installment note?
What is the carrying value of a bond payable?
What is the difference between the stated interest rate and the market interest rate on a bond?
Why is Deferred Revenue considered a liability?
1. Calculate the depreciation that would be reported this year under each of the three methods shown in this chapter. Which of the methods would meet the owner’s objective?2. Evaluate whether it is
1. What method of depreciation does Lowe’s use?2. What is Lowe’s fixed asset turnover ratio for the year ended February 3, 2017? Compare this ratio to that of The Home Depot for the comparable
1. What is the amount of Accumulated Depreciation and Amortization at January 29, 2017? What percentage is this of the total cost of property and equipment?a. $18,512; 45.8%b. $21,914; 54.2%c.
The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles,
1. Where does the company disclose the amount of its Allowance for Doubtful Accounts? a. On the income statement.b. On the statement of cash flows.c. On both the income statement and balance
One Trick Pony (OTP) incorporated and began operations near the end of the year, resulting in the following post-closing balances at December 31:The following information is relevant to the first
Polaris Industries Inc. is the biggest snowmobile manufacturer in the world. It reported the following amounts in its financial statements (in millions):Required:1. Calculate to one decimal place
TrackR, Inc., (TI) has developed a coin-sized tracking tag that attaches to key rings, wallets, and other items and can be prompted to emit a signal using a smartphone app. TI sells these tags, as
Repeat M7-23, except assume the 2018 ending inventory was overstated by $10,000.Data from M7-23:Assume the 2018 ending inventory of Shea’s Shrimp Shack was understated by $10,000. Explain how this
Assume the 2018 ending inventory of Shea’s Shrimp Shack was understated by $10,000. Explain how this error would affect the amounts reported for cost of goods sold and gross profit for 2018 and
Solve for the missing information designated by “?” in the following table. Round the Inventory Turnover Ratio and Days to Sell to one decimal. EI Days to Sell Inventory Turnover Ratio Case BI
Indicate whether a company interested in minimizing its income taxes should choose the FIFO or LIFO inventory costing method under each of the following circumstances.a. Declining costsb. Rising costs
Indicate whether the following items should be included in the inventory of XO Group, a company that arranges and supplies wedding services for couples and other wedding consultants. a. Goods
Abercrombie & Fitch Co. reported the following in its financial statement notes.Ending inventory balances . . . include inventory in transit. Inventory in transit is considered to be all
Explain why an error in ending inventory in one period affects the following period.
Explain briefly the application of the LCM/NRV rule to ending inventory. Describe its effect on the balance sheet and income statement when inventory value is lower than cost.
Use the information in CP6-1 to complete the following requirements. Required: 1. For each of the events (a) through (c), indicate the amount and direction of the effect (+ for increase,
The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions. Amalgamated is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume

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