Questions and Answers of Introduction To Accounting

Herpich Products presently has an accounts receivable turnover of 11 and an inventory turnover of 7. For each of the following transactions, specify the effect of the transaction on these two ratios.
Refer to P20.4 and prepare a complete ratio analysis and comment on anything unusual you find.Data from P20.4Refer to Ford Motor Company, Inc. (www.ford.com), and find the most recent annual
What is a financial ratio?
Herron Products presently has a current ratio of 2.0 to 1 and a quick ratio of 1.8 to 1. For each of the following transactions, specify the effect of the transaction on these two ratios. Use I for
Refer to Walt Disney Company (www.disney.com), and find the most recent annual report.Required:A. Prepare a vertical analysis.B. Prepare a horizontal analysis.C. Comment on any trends you see.
Refer to P20.6 and prepare a complete ratio analysis and comment on anything unusual you find.Data from P20.6Refer to Walt Disney Company (www.disney.com), and find the most recent annual
Donnelly Industries has a return on sales ratio of 5 percent and a return on assets ratio of 20 percent. For each of these transactions or changes, determine the effect of the transaction on the
Refer to PepsiCo Corporation (www.pepsico.com), and find the most recent annual report.Required:A. Prepare a vertical analysis.B. Prepare a horizontal analysis.C. Comment on any trends you see.
These summarized data are from the records of Klocke Enterprises at the end of the fiscal year:Calculate the following:A. Activity ratiosB. Liquidity ratios, assuming the weighted average shares
Veeman Inc., had $1,600,000 in net income for 2018 after deducting interest expense of $320,000 and income taxes of $500,000. Theprice of the stock at the fiscal year-end was $35. The company’s
Refer to P20.8 and prepare a complete ratio analysis and comment on anything unusual you find.Data from P20.8Refer to PepsiCo Corporation (www.pepsico.com), and find the most recent annual
McGowen Industries has a debt-to-equity ratio of 0.75 to 1 and a times-interest-earned ratio of 10. For each transaction or change listed here, determine the effect on the debt-to-equity and
What do activity ratios measure?
What is the difference between return on assets and asset turnover?
Hickert Company has total liabilities of $350,000 and total owners’ equity of $500,000. The company had net income of $66,000 after deducting interest expense of $8,000. This is a proprietorship
What is meant by earnings per share?
Grinch Imports has total shareholders’ equity of $1,298,000 on September 30, 2018. The company issues only no-par common stock and had 300,000 shares outstanding on that date. During the fiscal
How is earnings per share different from diluted earnings per share?
What is meant by the price-earnings ratio?
Explain why an analyst would want to use more than one ratio that measures the same characteristic of a company, such as liquidity or profitability.
What are the three audit opinions rendered by a CPA firm upon completing an audit?
What role do CPAs play in the capital markets?
Calculate the proposed distribution of dividends in E13.15 assuming that the preferred stock is noncumulative.Data from E13.15The board of directors of Petrisin Manufacturing, Inc., may declare a
A. Calculate the ratios for the financial and internal perspectives of the balanced scorecard for 2019 and 2018.B. Comment on any trend you see from your ratio analysis.C. Develop scorecard
Franzen Company uses a perpetual inventory system. During the month of February of the current year, the company experienced the following transfers and sales on one item in the stock of goods. The
The Rust Corporation has gathered the following information for activities during 2019:Required:A. Calculate net sales during 2019.B. Calculate estimated cash receipts from customers during 2019.
The Patterson Company sells two products, Tog and Uni. Tog sells for $850 per unit, and Uni has a price of $1,300. Patterson uses the perpetual inventory system and uses the gross price method of
Matthews, Inc., is in its first year of operating as a wholesale company. During the accounting period just completed, it experienced consistently rising prices on the products it buys and sells. The
In each of the following situations, determine the month in which the business should recognize the revenue:A. On June 5, Jacquie Monahan, an editor, received an advance from a publisher. She
Define a cash equivalent value.
What two contra accounts are related to sales and what is the purpose of each?
What is the difference between a sales return and a sales allowance?
The accountant at Zetec, Inc., gathered the following information:If net sales for the year ended December 31, 2020, were $783,200, determine the amount of cash received from customers during the
What is meant by the phrase “cost flow assumption” as it relates to inventories?
Journalize the following transactions using the perpetual inventory system on the books of Drietz Company:A. June 5, sold $10,200 of merchandise to Bailey Company on account, terms 2/10, n/30. The
Assume a company has two items for sale. Item 1 was produced on January 15 at a cost of $50,000 and Item 2 was produced on January 31 at a cost of $60,000. If the company sells Item 2 on February 5
Assume a company has two items for sale. Item 1 was produced on January 15 at a cost of $50,000 and Item 2 was produced on January 31 at a cost of $60,000. If the company sells Item 2 on February 5
Can a company use LIFO for tax reporting and FIFO for external reporting? Why?
What are the external reporting objectives in accounting for uncollectible accounts?
The statement of cash flows for Steinhoff Corporation for the year ended June 30, 2018, reported cash received from customers of $5,680,000. Steinhoff’s comparative balance sheets for June 30,
A. Calculate the ratios for the financial and internal perspectives of the balanced scorecard for 2019 and 2018.B. Comment on any trend you see from your ratio analysis.C. Develop scorecard
What is meant by the term net realizable value as it pertains to accounts receivable?
What is the impact on the financial statements of writing off a specific customer’s account receivable?
The Rodgers Company reported $284,700 of cash received from customers on its statement of cash flows for the year ended September 30, 2020. However, the income statement for the same time period
If a company’s Accounts Receivable account increases during the period, were cash collections from customers greater than or less than net sales?
What does the sales price variance indicate?
What does the sales quantity variance indicate?
Rasmussen, CPAs, completed 1,800 tax returns for clients during 2018. The average price paid per return was $165. The firm’s master budget indicated expected tax return revenues of
If the actual quantity sold is less than the budgeted sales quantity, is the sales quantity variance favorable or unfavorable?
The financial statements for Faulkender Company are as follows:Required:Calculate the appropriate ratios for the financial and internal perspectives of the balanced scorecard. Be sure to include the
As of January 2, 2019, you have just completed a discounted cash flow analysis on a $250,000 investment. You calculated after-tax cash flows (including the tax savings from the tax shield) for each
The engineering costs and the number of machine setups for each month during the first half of the year at Decklever Company follow. Using the high/low cost estimation method, determine the cost
Hills Dog Food generated revenues of $5,000,000 during 2019 by selling 1,000,000 bags of dog food. The master budget of Hills shows expected sales of 1,200,000 bags of dog food generating $5,760,000
Scott, LLC, has gathered the following information regarding the number of tax schedules prepared and the revenue generated.Required: A. Determine the revenue formula using the high/low method.B.
If the actual selling price is greater than the planned selling price, is the sales price variance favorable or unfavorable?
Describe the balanced scorecard approach.
Describe some measurements used in the customer perspective.
What is a bank reconciliation?
Select a company whose stock you would like to buy. Examine this company’s statement of cash flows. Did the company undertake any long-term investments during the period? If so, what additional
Walmart Stores has run into opposition when it has tried to open stores in certain towns in the United States. Walmart’s capital budgeting process has determined that these locations would be
Your supervisor has just completed a discounted cash flow analysis on a 15-year, $3,000,000 project. She is upset that the net present value was negative and is getting ready to report her findings
Why is activity analysis important?
Explain the importance of the relevant range concept.
Huey, Louie, and Dewey are forming a dental partnership and are concerned about how to allocate the partnership’s income. Once the partnership is formed, Huey will have $200,000 of capital, while
What is an activity driver?
What are the advantages and disadvantages of the high/low method?
Is an R square of 0.9 good? Why or why not?
Bolin Corporation has planned to have $5,000,000 in assets and $1,000,000 in liabilities at the end of the year. What is its planned debt-to equity ratio?
Letterman, Leno, and Carson all are partners in the WB Company and have the following amounts of capital: Letterman, $120,000; Leno; $80,000; and Carson, $100,000. The partners currently share all
Property dividends, although rare, are occasionally distributed by corporations. As you know from the chapter, a property dividend is a distribution of the corporation’s assets other than cash.
Describe the two sources of financing available to a company.
Bert and Ernie formed a partnership in 2019 to produce and sell puppets. At the time the partnership was formed, it was agreed all income and losses would be allocated based on the following: Bert
Jeon Company expects to earn income before interest and taxes of $700,000 during 2019. Its estimated interest expense is $40,000 and its estimated tax expense is $92,000. What is its planned times
Assume the partners in P13.1 want to consider the following methods of allocating WB Company’s profits and losses:Data from P13.1Letterman, Leno, and Carson all are partners in the WB Company and
Rickhaus Company is authorized to issue 10 million shares of $1 par value common stock and 800,000 shares of $10 par value 7 percent cumulative, convertible, preferred stock. For simplicity, assume
The “Of Interest” box in this chapter discussed several “hybrid” types of business organizational forms. Assume that you have started a business but are now looking for additional sources of
Tayson Company currently has $1,000,000 owners’ equity and no long term debt. Its expected income for 2019 is $120,000 and it is subject to a 20 percent tax rate. What is Tayson’s planned return
Refer to E13.3. If Tayson issues $200,000 in debt, it anticipates that the interest expense will be $14,000. However, it expects to use this money and increase sales such that the income before
Surber Company has 700,000 shares of $1 par value common stock outstanding and 12,000 shares of $100 par value preferred stock outstanding. Earlier in the year, Surber’s common stock had been
How is equity financing used?
In their partnership agreement, Bogie and McCall agreed that Bogie should receive a salary allowance of $40,000 per year and that McCall should receive a salary allowance of $60,000. Any remainder is
Harry Potter Corporation had the following stocks issued and outstanding when the board of directors proposed a $150,000 dividend: Preferred stock: 100,000 shares authorized, 45,000 shares
Larry, Mo, and Curly have agreed to allocate profits and losses as follows: 10 percent interest on beginning capital and the remainder allocated equally. The beginning capital amounts are Larry,
What is mutual agency and why is it risky?
Zhu Corporation is authorized to issue 1,500,000 shares of its $1 par value common stock and 400,000 shares of $50 par value preferred stock. Zhu plans to sell 20,000 shares of common stock at $35
What is unlimited liability and why is it considered a disadvantage for a partnership?
Rogers Corporation plans to issue 7,500 shares of its $1 par value common stock for $52 per share and 800 shares of its $30 par value preferred stock for $63 per share. What would Roger’s legal
Ashley Golden is a sole proprietor offering cooking classes for clients throughout the region. She is considering starting a syndicated television cooking show for one year. She estimates that she
Why is a salary allowance used in the allocation of income in a partnership?
Dillon Corporation has 5,000 shares of $100 par value 8 percent cumulative preferred stock included in its total owners’ equity of $2,000,000. Its budgeted income for the period is $300,000. If the
Why is an interest allowance used in the allocation of income in a partnership?
Why is it possible for a partner’s equity to increase when the partnership generates a loss?
The board of directors of Petrisin Manufacturing, Inc., may declare a dividend this year but has not declared a dividend for the past two years. The corporation has 800,000 shares of $1 par value
Compare and contrast callable versus redeemable preferred stock.
Ady, Inc., is authorized to issue 1,000,000 shares of common stock and has 250,000 shares of $1 stated value common stock issued and outstanding. The stock has a market value of $32 per share on
Distinguish among authorized shares, issued shares, and outstanding shares of stock.
What is the distinction between the par value and market value of a stock?
How does a cash dividend differ from a stock dividend or a property dividend?
Discuss the ethical implications of using derivatives to shift risk from one entity to another.
On November 30, 2019, Harris Company plans to purchase a $350,000 piece of equipment by making a 20 percent down payment and signing a 15-year installment loan contract with a 7 percent interest rate

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