Questions and Answers of Intermediate Accounting Volume 1

New West Company recently hired a new accountant whose first task was to prepare the financial statements for the year ended December 31, 2024. The following is what he produced:The owner of the
The following information (dollars in millions) is for Canadian Tire Corporation, Limited.Instructionsa. Calculate the gross profit margin, profit margin, and current ratio for each year.b. Comment
Assume the same information as in BE8.9. Tokarik Inc.’s financial difficulties are over. On June 4, 2024, Perry Co. receives a payment in full of $5,500 from Tokarik Inc. Record this transaction.
Magna International Inc. is a leading global supplier of technologically advanced automotive components, systems, and modules. Selected financial information (in US$ millions) follows:Instructionsa.
The unadjusted trial balance of World Enterprises for the year ended December 31, 2024, follows:Additional information:1. There is $750 of supplies on hand on December 31, 2024.2. The one-year
Reynold’s Company had net sales of $2,500,000, cost of goods sold of $1,150,000, and profit of $500,000 in 2024. The company had a January 1, 2024, inventory balance of $132,000 and a December 31,
Explain the difference between a purchase return and a purchase allowance. In a perpetual inventory system, what accounts would be affected by a purchase return and a purchase allowance?
The unadjusted trial balance of Global Enterprises for the year ended December 31, 2024, follows:Additional information:1. There was $700 of supplies on hand on December 31, 2024.2. Depreciation
Western Lighting Warehouse has a July 31 fiscal year end and uses a perpetual inventory system with the earnings approach. An alphabetical list of its account balances at July 31, 2024, follows. All
Wolcott Warehouse Store has an August 31 fiscal year end and uses a perpetual inventory system and the earnings approach. An alphabetical list of its account balances at August 31, 2024, follows. All
Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European juicing machines. The owner of
At the beginning of June 2024, Willingham Distributing Company’s ledger showed Cash $18,000, Merchandise Inventory $5,900, and D. Willingham, Capital $23,900. During the month of June, the company
You are given the following information for Swan Valley Company for the month ended June 30, 2024:Swan Valley Company uses a perpetual inventory system. All sales and purchases are on
In December, Carrie’s Car Emporium purchased the following items:On December 22, the 2022 Honda and 2021 Jeep were sold for $16,500 each.Instructionsa. Should Carrie’s Car Emporium use specific
The management of Birchwood Inc. is evaluating the appropriateness of using its present inventory cost determination method, which is FIFO. The company requests your help in comparing the results of
The management of Gresa Inc. is evaluating the appropriateness of using its present inventory cost determination method, which is weighted average. The company requests your help in comparing the
You are the controller of Small Toys Inc. Mutahir Kazmi, the president, recently mentioned to you that he found an error in the 2023 financial statements that he believes has now corrected itself. In
The records of James Company show the following data:After its July 31, 2024, year end, James Company discovered two errors:1. In August 2022, James recorded a $30,000 inventory purchase on account
Harrison Company has a July 31 fiscal year end and uses a perpetual inventory system. The records of Harrison Company show the following data:After its July 31, 2024, year end, Harrison discovered
Top Light Company uses a perpetual inventory system. The company began 2024 with 1,000 lamps in inventory at a cost of $12 per unit. During 2024, Top Light had the following purchases and sales of
The following financial information (in US$ millions) is for two major corporations for the three fiscal years ended December 31 as follows:Instructionsa. Calculate the inventory turnover, days sales
Glacier Fishing Gear reported the following amounts for its cost of goods sold and ending inventory:Glacier made two errors: (1) 2023 ending inventory was overstated by $5,500, and (2) 2024 ending
The following financial information (in US$ millions) is for two major corporations for the three years ended December 31:Instructionsa. Calculate the inventory turnover, days sales in inventory, and
Westor Company lost all of its inventory in a fire on December 28, 2024. The accounting records showed the following gross profit data for November and December:Westor is fully insured for fire
Smart Watch Company reported the following income statement data for a two-year period.Smart Watch uses a perpetual inventory system. The inventory amounts on January 1, 2023, and December 31, 2024,
Aldor Corporation opened a new store on January 1, 2024. During 2024, the first year of operations, the following purchases and sales of inventory were made:Instructionsa. Calculate the cost of goods
Merrett Company lost 80% of its inventory in a fire on March 23, 2024. The accounting records showed the following gross profit data for February and March:Merrett is fully insured for fire losses
Which inventory cost formula—FIFO or weighted average—provides a better match between sales and cost of goods sold? The better inventory valuation? Explain.
Mila Company discovers in 2024 that its ending inventory at December 31, 2023, was overstated by $5,000. What effect will this error have on (a) 2023 profit, (b) 2024 profit, (c) The
Smart Information Technology Company has the following cost and net realizable value data at December 31, 2024:a. Calculate the lower of cost and net realizable value valuation assuming Smart
Hakim’s Department Store uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at August 31, 2024:On August
Brandon Shoe Store uses the retail inventory method to estimate its monthly ending inventories. The following information is available at November 30, 2024:At November 30, Brandon Shoe Store takes a
Collie Company incorrectly included $23,000 of goods held on consignment for Retriever Company in its beginning inventory for the year ended December 31, 2023. The ending inventory for 2023 and 2024
FirstIn Company reported profit of $90,000 in 2023. When counting its inventory on December 31, 2023, the company forgot to include items stored in a separate room in the warehouse. As a result,
Dartmouth Games reported the following information for a three-year period:Instructionsa. Calculate the inventory turnover, days sales in inventory, and gross profit margin for 2024 and 2023.b. Based
Refer to the data in BE6.14 for Smart Information Technology Company. Prior to making the adjustment in BE6.14 part (b), cost of goods sold for 2024 was $418,500. What is the correct ending inventory
Shereen Company reported the following information for November and December 2024:Shereen’s ending inventory at December 31 was destroyed in a fire.Instructionsa. Calculate the gross profit margin
Gupta Company maintains a petty cash fund for small expenditures. The following transactions occurred over a two-month period:Instructionsa. Journalize the petty cash transactions.b. What internal
New Look Vision Group Inc. manufactures and retails eye care products. The company operates company stores under different banners including New Look Eyewear, Vogue Optical, Iris, and Greiche &
Aritzia Inc.’s financial statements are presented in Appendix A of this book.Instructionsa. Based on the information contained in these financial statements, determine each of the following:1. Cash
Refer to the data in BE6.16 for Reynold’s Company. Assume for 2023 the company had an inventory turnover ratio of 9.1 and 40.1 days sales in inventory. Has the company’s inventory management
Barinder’s Barbourshop Co. owns the following items:Cash in bank savings account $ 5,000Cash on hand 1,050Cash refund due from the Canada Revenue Agency 1,000Chequing account balance
Presented below are two independent situations.1. On March 15, 50 customers used debit cards to purchase merchandise for a total of $8,740 from SoccerMax. SoccerMax pays a $1.25 debit card fee for
The internal control procedures in Valentine Company result in the following provisions. Identify the control activity that is being followed in each case.1. Employees who have physical custody of
The following is an alphabetical list of Bud’s Bakery’s adjusted account balances at the end of the company’s fiscal year on November 30, 2024:Additional facts:1. Bud’s Bakery uses a periodic
Nelson Company provides the following information for the month ended October 31, 2024: sales on credit $280,000, cash sales $95,000, sales discounts $5,000, and sales returns and allowances $11,000.
The following is an alphabetical list of Tse’s Tater Tots’ adjusted account balances at the end of the company’s fiscal year on December 31, 2024:Additional information:1. Tse’s Tater Tots
Chocolate Treats has the following account balances:Assuming Chocolate Treats uses a multiple-step income statement, calculate the following:(a) Net sales,(b) Gross profit,(c) Operating expenses,(d)
Raymond is the accountant at an electronics retail store. He is friends with one of the salespeople, Geoff. The electronics retail store follows ASPE. Geoff tells Raymond to simply debit Sales
Presented below are selected transactions for Patterson Warehouse during April and May of the current year. Patterson uses a perpetual inventory system and the contract-based approach for revenue
The following is Crystal Company’s adjusted trial balance at December 31, 2024:Instructionsa. Prepare a single-step income statement for the year ended December 31, 2024.b. Prepare closing entries
GS Retail reported the following for the past two fiscal years:(a) Calculate the gross profit margin and profit margin for both years.(b) Comment on any changes in profitability. Net sales Cost of
Presented below is selected information for Kaila Company for the month of March, 2024.Instructionsa. Prepare a multiple-step income statement.b. Calculate the gross profit margin. Cost of goods
An alphabetical list of Rikards Company adjusted accounts at its fiscal year end, August 31, 2024, follows. All accounts have normal balances.Additional information:1. Of the notes payable, $6,000
lululemon athletica inc. reported the following information (in US$ thousands) for the three fiscal years ended:Instructionsa. Calculate the gross profit margin and profit margin for lululemon for
Sagina Stores uses a periodic inventory system and reports the following information for 2024:Prepare the cost of goods sold section of the multiple-step income statement for Sagina Stores. Beginning
On January 1, 2024, Casselberry Retailers had inventory of $50,000. On December 31, 2024, total inventory on hand was $66,000. Casselberry reported the following account balances on December
Venti Construction Supplies uses a perpetual inventory system and the contract-based approach for revenue recognition. Management estimates that 15% of sales will be returned by customers within the
The following selected information is for Okanagan Company for the year ended January 31, 2024:Instructionsa. Prepare a multiple-step income statement.b. Prepare closing entries. Delivery
The following are some of the terms discussed in the chapter:1. Performance obligation 4. Contract-based approach2. Right of return 5. Refund liability3. Variable consideration 6. Estimated inventory
At the beginning of the current soccer season, on May 1, 2024, Fullback Sports has 100 soccer balls in inventory at $10 each. The company uses a perpetual inventory system and the contract-based
The following merchandise transactions occurred in January. Pippen Company uses a perpetual inventory system and the contract-based approach to revenue recognition. Pippen Company has a stated policy
Data visualization can be used to compare inventory management. Inventory turnover shows the number of times during the period a firm sells the entire dollar amount of its inventory. It is
When a buyer returns goods to a seller, the seller will also adjust Cost of Goods Sold, Estimated Inventory Returns, and Inventory if the seller is using the contract-based approach to revenue
Carberry Company is trying to determine the value of its ending inventory as at February 29, 2024, the company’s year end. The accountant counted everything that was in the warehouse as at February
Refer to the consolidated financial statements for Aritzia Inc. reproduced in Appendix A.Instructionsa. How does Aritzia value its inventory?b. Which inventory cost formula does Aritzia use?c. Would
Morden Company is trying to determine the value of its ending inventory as at February 29, 2024, the company’s year end. The accountant counted everything that was in the warehouse as at February
The merchandise inventory in Claire’s Clothing Store was counted after the close of business on December 31, 2024, the company’s year end. It was determined that the total cost of this inventory
Kari Downs, an auditor with Wheeler & Co., CPAs, is performing a review of Depue Company’s inventory account. Depue did not have a good year, and top management is under pressure to boost
Headquartered in Toronto, Indigo Books & Music Inc. is Canada’s largest book retailer. The following selected information is from the consolidated financial statements for Indigo Books &
You are given the following information for Churchill Company for the month ended November 30, 2024:Churchill Company uses a perpetual inventory system. All sales and purchases are on
Inventory data for Moath Company are reported as follows:Assume a sale of 440 units occurred on June 15 for a selling price of $8 and a sale of 360 units on June 27 for $9. On June 30, 100 units
Duval Retailers uses a perpetual inventory system. Data for athletic t-shirts include the following purchases:On July 9, Duval sold 18 t-shirts, and on September 7, 30 more units. Prepare the
On May 31, 2024, Forester Theatre’s Cash account per its general ledger showed the following balance:A comparison of the details on the bank statement with the details in the Cash account revealed
On June 30, 2024, EZ Fertilizer’s Cash account per its general ledger showed the following balance:A comparison of the details on the bank statement with the details in the Cash account revealed
The bank portion of the bank reconciliation for Katsaris Company at August 31, 2024, was as follows:The unadjusted cash balance per books on September 30, 2024, was $10,228. The September bank
You are given the following information for River Adventures Company:Additional information from the bank statement:1. The deposit of $1,650 on May 13 is an electronic transfer from a customer in
On July 31, 2024, Daisy Company had a cash balance per books of $7,250. The statement from Canada Bank on that date showed a balance of $7,690.80. A comparison of the bank statement with the Cash
The March bank statement showed the following for Yap Co.:Additional information:1. The bank statement contained three debit memoranda:• An NSF cheque of $595 that Yap had deposited was returned
On April 16, Temptalia Company made sales of $15,000 to customers using credit cards for payment. The credit card company charges Temptalia a service fee of 2.5% for credit card transactions. Prepare
The Agricultural Genetics Company’s Cash account in its general ledger reported a balance of $6,782 on May 31, 2024. The company’s bank statement from Western Bank reported a balance of $6,405 on
The following information is for Tindall Company in September:1. Cash balance per bank, September 30, $7,100.2. Cash balance per books, September 30, $5,470.3. Outstanding cheques, $3,120.4. Bank
The bank portion of the bank reconciliation for Maloney Company at October 31, 2024, was as follows:The adjusted cash balance per bank agreed with the cash balance per books at October 31. The
On December 31, 2024, Lally Company had a cash balance per books of $8,981. The bank statement on that date showed a balance of $10,155. A comparison of the statement with the Cash account revealed
In the November 30, 2024, bank reconciliation at Kiran’s Kayaks, there were two outstanding cheques: #165 for $812 and #169 for $529. There was a $1,128 deposit in transit as at November 30, 2024.
The following information is for Robin’s Logistics Company:1. Cash balance per bank, July 31, $7,263.2. July bank service charge not recorded by the depositor, $28.3. Cash balance per books, July
Walker Company has recorded the following items in its financial records:The highly liquid investments had maturities of three months or less when they were purchased. The stock investments will be
The following reconciling items are applicable to the bank reconciliation for Ellington Company. Indicate which items will require a journal entry. Explain if any items do not require an entry.a.
South Hampton Pool Supplies’ May 31, 2024, bank balance was $7,350. The company’s cash balance at May 31 was $8,210. Other information follows:1. Outstanding cheques were #321 for $653, #371 for
Salut Company owns the following assets at the balance sheet date:What amount should be reported as cash and cash equivalents in the balance sheet? Cash in bank-savings account Cash on hand Cash
Sunil’s Supplies has hired a new junior accountant and has given her the task of identifying what should be reported as cash as at February 29, the company’s balance sheet date. The following
Shaw Communications Inc. is a diversified Canadian communications company whose core operating business is providing broadband cable television services, internet, telecommunications services,
At July 31, Rai Company has the following bank information: cash balance per bank $9,375, outstanding cheques $875, deposits in transit $2,260, and a bank service charge $20. Determine the adjusted
On August 31, 2024, Claresview Company had a cash balance per its books of $26,030. The bank statement on that date showed a balance of $17,100. A comparison of the bank statement with the Cash
At August 31, Wong Company has a cash balance per books of $9,500 and the following additional data from the bank statement: charge for printing Wong Company cheques $55, interest earned on chequing
A new accountant at Magenta Company is trying to identify which of the following amounts should be reported as the current asset Cash and Cash Equivalents in the year-end balance sheet, as at June
The following errors were found when the controller at Harrison Hotel was doing the October 31 bank reconciliation.1. On October 3, Harrison recorded a payment of an account payable as $590. The
The receivables turnover and collection period for BCE Inc. were calculated in this chapter, based on the company’s financial statements for the 2020 fiscal year. Portions of these financial
On September 12, five customers use debit cards to purchase merchandise totalling $600 from Temptalia Company. The bank charges Temptalia Company $1.25 per debit card transaction. Prepare the entry
On October 31, 2024, Charlie Company had a cash balance per books of $12,300. The statement from Canada Bank on that date showed a balance of $13,134. A comparison of the bank statement with the Cash

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