Questions and Answers of Glencoe Accounting First Year Course

Karina Ludmiko is turning her photography hobby into a business called The Photo Studio. She asked you to set up the company’s asset records. INSTRUCTIONS 1. Assume that The Photo
Listed here are the assets of New England Sports Equipment Inc. Instructions In your working papers, indicate whether each asset listed is a current asset or a plant asset by placing a check
After working for a year as payroll clerk for a small publishing company, you believe you have evidence of embezzlement—and suspect the department manager or senior accountant. Whom can you tell?
As accountant for Playtime Preschool, you want to convince the owner to purchase computers for the children to use. Explain that the company can depreciate the $10,000 investment and deduct the
a. Depreciation is an application of what accounting principle?b. What distinguishes a plant asset from a current asset?
A method that allocates an equal portion of the total depreciation for a plant asset (cost minus salvage) to each accounting period in its service life isa. Accelerated depreciation.b.
Explain how current assets and plant assets differ.
As Westside Wholesale’s newly hired manager, you plan for and control its plant assets. One standard you will be measured by is your budget and the controls you use to stay within that budget.
a. What four factors affect the depreciation calculation?b. How is the annual depreciation expense for a plant asset calculated under the straight-line method?
The Crimson Cartage Company purchased a new truck at a cost of $42,000 on July 1. The truck is estimated to have a useful life of 6 years and a salvage value of $6,000. Using the straight-line
A company purchased plant assets for $100,000. It expects to sell them in 4 years for 20 percent of the cost. What is the depreciation expense?
Global companies may use the revaluation model allowed by International Accounting Standard 16 to record plant assets. After initially recording an asset at cost, this model revalues an asset at its
Use the following information to complete the blank asset record found in your working papers. The company uses the straight-line method for depreciating all plant assets. Item Purchased: Xerox
In your working papers:1. Record the purchase in the general journal, page 4.2. Record the partial depreciation expense for the first year in the general journal, page 7.a. Disposal value—$200b.
a. Explain how depreciation for part of a year is calculated.b. What is meant by “allocating the cost” of a plant asset?
The adjusting entry for the depreciation of a plant asset such as equipment involves a credit to a. Equipment expense.b. Accumulated equipment.c. Depreciation expense.d. Accumulated depreciation.
Classify these assets: land, building, cash, accounts receivable, computer equipment, merchandise inventory, supplies, and prepaid insurance into (a) plant assets or (b) current assets. Identify the
Quade Corporation bought a copy machine on January 7 of the current year for $2,360. It has an estimated useful life of five years and an estimated disposal value of $100.Instructions In your
A vehicle is a valuable asset. The vehicle declines in value each year, but if you keep it properly maintained, it will have a higher resale value when you sell it.PERSONAL FINANCE
a. What is accumulated depreciation?b. How is book value calculated?
The entry to record depreciation for the fax machine at the end of the fiscal perioda. Debit Accumulated Depreciation—Maintenance Equipment, credit Depreciation Expense—Maintenance Equipmentb.
Set up the formulas for calculating the amount to be depreciated, the annual depreciation expense, the accumulated depreciation, and book value.
Vertical analysis makes it easy to compare financial statements with industry standards, which are average percentages for companies in the same industry. Assume these partial vertical analyses of an
On July 10 Sunset Surfwear purchased a scanner from Taunton Equipment for $1,500. Taunton Equipment charged Sunset Surfwear $200 to install the scanner. The scanner has an estimated useful life of
The following adjustments for depreciation were entered on the work sheet for InBeat CD Shop for the year ended December 31. Instructions Record the adjusting entries on general journal page 11.
a. What is the classification of the Accumulated Depreciation account?b. Which two accounts are affected by an adjusting entry for depreciation?
Justify crediting the Accumulated Depreciation account rather than the Plant Asset account when recording depreciation expense.
a. What is the purpose of a depreciation schedule?b. When is the depreciation of a plant asset recorded?
The trial balance of Shutterbug Cameras appears on the work sheet included in your working papers. All adjustments, except those for depreciation, are already recorded on the work
Cycle Tech Bicycles purchased manufactur ing equipment on August 1 for $410,000. The equipment has an estimated useful life of 25 years and an estimated disposal value of $20,000. Cycle Tech uses the
The December 31 trial balance of Rivers Edge Canoe & Kayak is included in your working papers. Instructions 1. Calculate and record end-of-period adjustments on the work sheeta. Ending
On May 2 Buzz Newsstand purchased a new machine for $2,700. It has an estimated disposal value of $100 and an estimated useful life of eight years. Buzz uses the straight-line method.On December 31
The Black Tie rents formal attire. It accepts cash, debit cards, credit cards, and personal checks. To reserve an outfit requires a down payment. The balance, due 10 days after the return, is
Suppose you are an accounts receivable clerk for an advertising agency. Your friend, Hector, owns a deli and has hired your agency to create an ad for a local magazine. Hector’s business is having
At The Music Connection, you handle accounts receivable and uncollectible accounts. Six months ago a new dance club bought an expensive, state-of-the-art music system on account. It is still unpaid.
The Parker Supply Company uses the direct write-off method of accounting for uncollectible accounts. InstructionsIn your working papers:1. Record the following transactions on page 21 of the
a. Explain the difference between the direct write-off method and the allowance method.b. Which method is likely to be used by a business with many charge customers? Which is likely to be used by a
The ________ of accounting for uncollectible accounts matches potential bad debts expense with the sales from the same period.a. Direct write-off methodb. Matching principlec. Aging of accounts
Before a business extends credit, it should determine whether potential credit customers are likely to pay their bills. Explain why this is important.
The Clothes Horse, a well-known retailer of men’s apparel, is closing. Before it does it wants to collect all its accounts receivable.INSTRUCTIONS Write a collection letter to send to all customers
Taylor Furniture Company Inc. uses the allowance method to account for uncollectible accounts.Instructions In your working papers:1. Record the following transactions in the general journal on page
a. How does the direct write-off method identify the uncollectible accounts expense amount?b. What factors does the allowance method consider in determining bad debt expense?
Under the allowance method, the entry to record the estimated bad debts expensea. Has no effect on net income.b. Increases net income.c. Has no effect on total assets. d. Reduces total assets.
Contrast the direct write-off method and the allowance method.
Prepare the journal entry to write off an uncollectible account using(a) The direct write-off method (b) The allowance method.
International companies strive to collect accounts receivable as quickly as possible. A firm that expects to receive payment in a foreign currency faces a transaction risk that currency values will
Following are the end-of-period account balances for several stationery and office supply companies. Each company uses the percentage of net sales method to estimate its uncollectible accounts
a. Which accounting principle does the direct write-off method violate?b. In the direct write-off method of recording an uncollectible account receivable, which accounts are debited and credited?
Cameron Corporation ages accounts receivable to estimate uncollectibles. The aging schedule estimates $2,340 of uncollectible accounts. Prior to adjustment, allowance for uncollectible accounts has a
Compare the journal entries to reinstate a customer account that had been written off using (a) the direct write-off method and (b) the allowance method.
To obtain credit, you must complete a credit application. The business will check your income, banking record, current debt amount, debt payment record, age, employment history, current employer,
Sunset Surfwear uses the direct write-off method of accounting for uncollectible accounts.Instructions1. In your working papers, record the following transactions on page 14 in the general journal.2.
a. What is another term for bad debts expense?b. What can businesses do to prevent bad debts?
To determine the amount of the adjustment for uncollectible accounts expense, develop (a) A formula for the percentage of net sales method (b) A step-by-step procedure for the aging of
InBeat CD Shop uses the percentage of net sales method of accounting for uncollectible accounts. At the end of the period, the following account balances appeared on InBeat’s trial
a. What accounts are debited and credited in the adjusting entry to record uncollectible accounts using the allowance method?b. What is the account classification of Allowance for Uncollectible
SPH, Inc. uses the direct write-off method for uncollectible accounts. The entry to record the $64 invoice that Dave Case did not pay isa. Debit Accounts Receivable/Dave Case, credit Uncollectible
Evaluate (a) the direct write-off method and (b) the allowance method.
Shutterbug Cameras uses the allow ance method of accounting for uncollectible accounts.Instructions1. In your working papers, record the following transactions on page 9 in the general journal.2.
a. When does the allowance method recognize the bad debt expense for a year’s sales?b. When a specific account receivable is written off using the allowance method, which accounts are debited and
Cycle Tech Bicycles uses the allowance method of accounting for uncollectible accounts. The company estimates the uncollectible amount by aging its accounts receivable accounts. Instructions1.
The work sheet for River’s Edge Canoe & Kayak is included in your working papers. The trial balance is complete, and all of the adjustments except the one required for uncollectible accounts
Buzz Newsstand uses the allowance method for uncollectible accounts.InstructionsIn your working papers, journalize the following transactions on page 13 in the general journal. Post the transactions
a. Describe the percentage of net sales method.b. Describe the aging of accounts receivable method.
In your working papers, complete the manual inventory sheet for Carole’s Gift Shop. Use today’s date and your name as the clerk. Stock
Grandma’s Toy Attic is changing from a manual to an automated inventory control system. As the owner, you plan to hire an inventory supervisor who understands accounting principles, inventory
a. Why does a company need a control system for its merchandise inventory?b. What information does tracking inventory provide to a business?
The inventory system in which a constant, up-to-date record of merchandise on hand is maintained is called thea. First-in, first-out system. b. Last-in, first-out system.c. Perpetual inventory
Name and describe the two systems used to determine the quantity of merchandise on hand.
Remodeling a kitchen? Adding a deck to your home? Home Helper is a building supply store that sells everything from lightbulbs to lumber, cabinet fixtures to appliances. Because it stocks many sizes
Imagine that you work in the cosmetics department of a large department store like Macy’s. You have access to free samples—shampoo, moisturizer, lipstick, and nail polish—offered by
Natural Wonder offers products organically grown or made from organic materials. Its products include clothing, jewelry, gardening materials, and hair and body care products. The store is interested
The following items were purchased by Kudos Leather Goods during the month of April:April 2 34 wallets @ $12.95 eachApril 8
a. What is the difference between a periodic and a perpetual inventory system?b. What is the advantage to using a perpetual inventory system? Why is it difficult for some businesses to use it?
Johnson, Inc. had the following inventory data: Inventory item T25 had 1,600 units at a unit price of $14 in inventory on January 1. The first purchase during the year was for 1,000 units at $15. The
Explain what is meant by an inventory system that is online.
Your manager, Richard Smythe, is considering switching from a manual inventory system to an automated perpetual system. Write a proposal to Mr. Smythe that emphasizes the benefits of a perpetual
Read the following memorandum and complete the assigned task. Instructions1. What is the new value of the ending inventory?2. Assume that all 36 dolls were sold for $21.95. What is the gross
a. When is the best time for a business to take a physical inventory?b. Which tracking system requires a physical inventory count for financial reporting purposes?
Johnson, Inc. had the following inventory data: Inventory item T25 had 1,600 units at a unit price of $14 in inventory on January 1. The first purchase during the year was for 1,000 units at $15. The
Compute the cost of merchandise sold if the cost of the ending inventory is $35,280 and the cost of the merchandise available for sale is $97,200.
Johnson, Inc. had the following inventory data: Inventory item T25 had 1,600 units at a unit price of $14 in inventory on January 1. The first purchase during the year was for 1,000 units at $15. The
a. How does the consistency principle help the owners, creditors, and the general public?b. What approach to presenting income does the conservatism principle require?
a. In this rule, what is meant by the term cost? By the term market?b. State the lower-of-cost-or-market rule using your definitions of cost and market.
Many countries use International Accounting Standards (IAS) as their national GAAP. IAS No. 2 allows inventory valuation using the specific identification, FIFO, and weighted average methods. It does
Sunset Surfwear sells wet suits. On January 2 there were 21 wet suits at a total cost of $4,809 in inventory.At the end of the year, there were 17 wet suits in ending inventory. Of these, 1 was
a. What is meant by the phrase “with the FIFO method, the inventory cost is based on the most recent costs”?b. Why does the inventory costing method used affect gross profit on sales and net
Explain why the specific identification costing method is the most accurate in determining inventory cost.
When shopping for a vehicle, you probably want a wide selection from which to choose. For this reason dealers try to have a large inventory, yet not so large it becomes impossible to track and
InBeat CD Shop assigns a cost to its inventory using the lower-of-cost-ormarket rule. In your working papers, there is a partial inventory record. As an example, the first line of the inventory
a. Assumes that old goods are sold first and that goods which are on hand are valued at current prices.b. Assumes that new goods are sold first and inventory is valued at old prices.c. Assumes that
Explain why an ice cream stand would not use the LIFO method of inventory costing.
Knowing how much inventory is on hand helps managers make decisions about how much merchandise to purchase. Too much inventory means the business has not sold what it purchased and its money is tied
Using the four inventory costing methods, Shutterbug Cameras summarized the cost of its ending inventory as follows: Instructions Using the preceding information, determine the cost of mer chan
Defend the practice of most businesses to estimate the cost of their inventory using a method other than specific identification, which is the most accurate.
Cycle Tech Bicycles operates on a fiscal year beginning January 1. At the beginning of the year, the shop had in stock six Model #8274, 10-speed bicycles, valued at $2,364 (6 bicycles @ $394 each).
Buzz Newsstand started the month of May with the following inventory of disposable cameras: Buzz Newsstand uses the FIFO method to calculate the cost of its merchandise inventory. The May 31
a. List the steps to record transactions in the sales journal.b. What are the source documents for transactions recorded in the cash receipts journal?
Check marks are placed in parentheses below both General amount column totals in a journal to show that the column totalsa. Are not posted.b. Have been posted.c. Balance.d. None of the above
How is the sales journal different from the cash receipts journal?

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