Questions and Answers of Introductory Financial Accounting

Tringle Inc. recorded the following transactions over the life of a piece of equipment purchased inYear 1:Jan. 1, Year 1 Purchased the equipment for $38,000 cash. The equipment is estimated to have a
The following transactions pertain to Accounting Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year.Year 11. Acquired
Todd Service Company purchased a copier on January 1, Year 1, for $25,000 and paid an additional $500 for delivery charges. The copier was estimated to have a life of four years or 1,000,000 copies.
Friendly Corporation purchased a delivery van for $28,500 in Year 1. The firm’s financial condition immediately prior to the purchase is shown in the following horizontal statements model:The van
Scott Company began operations when it acquired $40,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $40,000 that had a
Three different companies each purchased a machine on January 1, Year 1, for $64,000. Each machine was expected to last five years or 200,000 hours. Salvage value was estimated to be $6,000. All
Floyd Company made several purchases of long-term assets in Year 1. The details of each purchase are presented here.New Office Equipment1. List price: $50,000; terms: 1/10 n/30; paid within the
Assume the following. Madrid Company purchased a parcel of land on January 1, Year 1, for $600,000. It constructed a building on the land at a cost of $3,000,000. The building was occupied on January
The Transnational Business Inc. (TBI) purchased an asset that cost $60,000 on January 1, Year 1. The asset had a four-year useful life and a $10,000 salvage value.Requireda. Determine the amount of
Tri-Cities Equipment Rentals, LLC rents equipment such as cranes and bulldozers to construction companies, while Sam’s Tax Services, LLC provides income tax and accounting services to individuals
On January 1, Year 1, Mid state Power Company overhauled four turbine engines that generate power for customers. The overhaul resulted in a slight increase in the capacity of the engines to produce
On January 1, Year 1, Mead Machining Co. purchased a compressor and related installation equipment for $72,500. The equipment had a three-year estimated life with a $12,500 salvage value.
Ripley Lumber Company purchased $240,000 of equipment on September 1, Year 1.Requireda. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that
On January 1, Year 1, Heflin Enterprises purchased a parcel of land for $20,000 cash. At the time of purchase, the company planned to use the land for future expansion. In Year 2, Heflin Enterprises
Pete’s Pizza purchased a delivery van on January 1, Year 1, for $35,000. In addition, Pete’s paid sales tax and title fees of $1,500 for the van. The van is expected to have a four-year life and
Design Service Co. purchased a new color copier at the beginning of Year 1 for $47,000. The copier is expected to have a five-year useful life and a $7,000 salvage value. The expected copy production
At the beginning of Year 1, Hill Manufacturing purchased a new computerized drill press for $75,000. It is expected to have a five-year life and a $15,000 salvage value.Requireda. Compute the
Hinds Company started operations by acquiring $120,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $110,000 cash. The equipment had an
The following events apply to The Soda Shop for the Year 1 fiscal year:1. The company started when it acquired $20,000 cash from the issue of common stock.2. Purchased a new ice cream machine that
Give some examples of long-term operational assets that each of the following companies is likely to own: (a) Sears, (b) Princess Cruise Lines, (c) Southwest Airlines, and (d) Harley-Davidson Co.
Rossie Equipment Manufacturing Co. acquired the assets of Alba Inc., a competitor, in Year 1. It recorded goodwill of $70,000 at acquisition. Because of defective machinery Alba had produced prior to
Flannery Company engages in the exploration and development of many types of natural resources. In the last two years, the company has engaged in the following activities:Jan. 1, Year 1
Tower Company owned a service truck that was purchased at the beginning of Year 1 for $31,000. It had an estimated life of three years and an estimated salvage value of $4,000. Tower Company uses
Morris Inc. recorded the following transactions over the life of a piece of equipment purchased in Year 1:Jan. 1, Year 1 Purchased equipment for $90,000 cash. The
The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year.Year 11. Acquired
Banko Inc. manufactures sporting goods. The following information applies to a machine purchased onJanuary 1, Year 1:Purchase price .............................$ 70,000Delivery cost
Sabel Co. purchased assembly equipment for $500,000 on January 1, Year 1. Sabel’s financial condition immediately prior to the purchase is shown in the following horizontal statements model:The
Bensen Company started business by acquiring $60,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $50,000 that had a
Becker Office Service purchased a new computer system in Year 1 for $40,000. It is expected to have a five-year useful life and a $5,000 salvage value. The company expects to use the system more
Three different companies each purchased trucks on January 1, Year 1, for $50,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $5,000. All three
Trinkle Co., Inc. made several purchases of long-term assets in Year 1. The details of each purchase are presented here. New Office Equipment1. List price: $60,000; terms: 2/10 n/30; paid within
Assume the following. Queensland Company purchased a parcel of land on January 1, Year 1, for $400,000. It constructed a building on the land at a cost of $2,000,000. The building was occupied on
The Paris Corp. incurred $3,600,000 of research cost and $800,000 of development cost during the current year.Requireda. Determine the amount of expense recognized on its income statement assuming
Executive Jets, LLC operates a charter flight-service company in the northwestern United States. Classic Steps, LLC is a company that provides dance lessons to students of all ages. Classic Steps has
On January 1, Year 1, Webb Construction Company overhauled four cranes, resulting in a slight increase in the life of the cranes. Such overhauls occur regularly at two-year intervals and have been
On January 1, Year 1, Poultry Processing Company purchased a freezer and related installation equipment for $42,000. The equipment had a three-year estimated life with a $3,000 salvage value.
Crossroads Eye Care Company purchased $60,000 of equipment on March 1, Year 1.Requireda. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that
On January 1, Year 1, Prairie Enterprises purchased a parcel of land for $28,000 cash. At the time of purchase, the company planned to use the land for a warehouse site. In Year 3, Prairie
City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $36,000. In addition, City paid sales tax and title fees of $1,200 for the vehicle. The taxi is expected to have a
Exact Photo Service purchased a new color printer at the beginning of Year 1 for $38,000. The printer is expected to have a four-year useful life and a $3,500 salvage value. The expected print
At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $52,000. It is expected to have a five-year life and a $7,000 salvage value.Requireda. Compute the depreciation for
Golden Manufacturing Company started operations by acquiring $150,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $120,000 cash, had an
The following events apply to Gulf Seafood for the Year 1 fiscal year:1. The company started when it acquired $60,000 cash by issuing common stock.2. Purchased a new cooktop that cost $40,000 cash.3.
Carver Inc. purchased a building and the land on which the building is situated for a total cost of $700,000 cash. The land was appraised at $320,000 and the building at $480,000.Requireda. What is
Which of the following items should be classified as long-term operational assets?a. Prepaid insuranceb. Coal minec. Office equipmentd. Accounts receivablee. Suppliesf. Copyrightg. Delivery vanh.
AutoZone, Inc. claims to be the nation’s leading auto parts retailer. It sells replacement auto parts directly to the consumer. BorgWarner, Inc. has over 30,000 employees and produces automobile
Presented here are the average days to collect accounts receivable for four companies in different industries. The data are for 2016.RequiredWrite a brief memorandum that provides possible answers to
The following selected financial information is available for three companies:Requireda. Divide the class into three sections and divide each section into groups of three to five students. Assign one
Obtain the Target Corporation’s annual report at http://investors.target.com using the instructions in Appendix B. Anyone who has shopped at Target knows that many of its customers use a credit
The following trial balance was prepared for Village Cycle Sales and Service on December 31, Year 1:Account TitleCash
Diamond Supply Company had the following transactions in Year 1:1. Acquired $50,000 cash from the issue of common stock.2. Purchased $120,000 of merchandise for cash in Year 1.3. Sold merchandise
The following transactions apply to Cheng Co. for Year 1, its first year of operations:1. Issued $60,000 of common stock for cash.2. Provided $94,000 of services on account.3. Collected $84,500 cash
Use the following information to prepare a multistep income statement and a balance sheet for Trias Company for Year 2.Operating Expenses ........................................................$
Thorne Inc. experienced the following transactions for Year 1, its first year of operations:1. Issued common stock for $60,000 cash.2. Purchased $210,000 of merchandise on account.3. Sold
The following information pertains to Kee Cabinet Company’s sales on account and accounts receivable:Accounts Receivable Balance, January 1, Year 2 ......................................$
During the first year of operation, Year 1, Home Renovation recognized $261,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $46,300. Even though this is
The following transactions apply to Sports Consulting for Year 1, the first year of operation:1. Issued $5,000 of common stock for cash.2. Recognized $70,000 of service revenue earned on account.3.
The following information is available for Bradford Inc. and Windsor Inc. at December 31:Requireda. What is the accounts receivable turnover for each of the companies?b. What is the average days to
The following trial balance was drawn from the accounts of Southern Timber Co. as of December 31,Year 1:Cash ........................................................$16,000Accounts receivable
Jung Company accepted credit cards in payment for $8,650 of services performed during March, Year 1. The credit card company charged Jung a 4 percent service fee. The credit card company paid Jung as
Advanced Carpet Cleaning provided $76,000 of services during Year 1, its first year of operations. All customers paid for the services with major credit cards. Advanced Carpet submitted the credit
On March 1, Year 1, Taylor’s Deli loaned $18,000 to Style Studio for one year at 5 percent interest.RequiredAnswer the following questions:a. What is Taylor’s interest income for Year 1?b. What
Cachet Enterprises loaned $30,000 to Craft Co. on September 1, Year 1, for one year at 6 percent interest.RequiredShow the effects of the following transactions in a horizontal statements model like
Classic Auto Parts sells new and used auto parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During Year 1, its first year of operations, Classic
Applied Business Systems has a small number of sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During Year 1,
Pollard Service Co. experienced the following transactions for Year 1, its first year of operations:1. Provided $86,000 of services on account.2. Collected $72,000 cash from accounts receivable.3.
Juno Inc. experienced the following events for the first two years of its operations:Year 1:1. Issued $5,000 of common stock for cash.2. Provided $80,000 of services on account.3. Provided $22,000
Edd’s Shoe Repair had the following balances at December 31, Year 1: Cash of $22,000, Accounts Receivable of $76,000, Allowance for Doubtful Accounts of $3,200, and Retained Earnings of $94,800.
Tull Bros. uses the allowance method to account for uncollectible accounts expense. Tull experienced the following four events in Year 1:1. Recognized $68,000 of revenue on account.2. Collected
Reliable Auto Service was started on January 1, Year 1. The company experienced the following events during its first two years of operation:Events Affecting Year 11. Provided $52,000 of repair
Sandy’s Accounting Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations: Events Affecting Year 1:1. Provided $96,000 of
Hardin Services Co. experienced the following events in Year 1:1. Provided services on account.2. Collected cash for accounts receivable.3. Attempted to collect an account and, when unsuccessful,
The following trial balance was prepared for Tile, Etc., Inc. on December 31, Year 2, after all account adjustments had been made:Account TitleCash ...............................
Northwest Sales had the following transactions in Year 1:1. The business was started when it acquired $200,000 cash from the issue of common stock.2. Northwest purchased $900,000 of merchandise for
The following transactions apply to Hooper Co. for Year 1, its first year of operations:1. Issued $60,000 of common stock for cash.2. Provided $90,000 of services on account.3. Collected $78,000
Use the following information to prepare a multistep income statement and a balance sheet for Sherman Equipment Co. for Year 2.Salaries Expense ..............................................$
Sage Inc. experienced the following transactions for Year 1, its first year of operations:1. Issued common stock for $50,000 cash.2. Purchased $140,000 of merchandise on account.3. Sold merchandise
The following information is available for Quality Book Sales’ sales on account and accounts receivable:Accounts receivable balance, January 1, Year 2 ...............................
During the first year of operation, Year 1, Direct Service Co. recognized $290,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $46,000. For this first
The following transactions apply to Jova Company for Year 1, the first year of operation:1. Issued $10,000 of common stock for cash.2. Recognized $210,000 of service revenue earned on account.3.
The following information is available for Market, Inc. and Supply, Inc. at December 31:Requireda. What is the accounts receivable turnover for each of the companies?b. What is the average days to
The following trial balance was drawn from the accounts of Little Grocery Supplier (LGS) as of December 31, Year 2:Cash ...............................
Ultra Day Spa provided $120,000 of services during Year 1. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The
On May 1, Year 1, Benz’s Sandwich Shop loaned $10,000 to Mark Henry for one year at 6 percent interest.RequiredAnswer the following questions:a. What is Benz’s interest income for Year 1?b. What
Rainey Enterprises loaned $20,000 to Small Co. on June 1, Year 1, for one year at 6 percent interest.RequiredShow the effects of the following transactions in a horizontal statements model like the
Joey’s Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During Year 1, its first year of operations,
Patel Service Co. does make a few sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During Year 1, Patel Service
Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations:1. Provided $91,000 of services on account.2. Collected $72,000 cash from accounts receivable.3.
Leach Inc. experienced the following events for the first two years of its operations: Year 1:1. Issued $10,000 of common stock for cash.2. Provided $78,000 of services on account.3. Provided
Renue Spa had the following balances at December 31, Year 1: Cash of $15,000, Accounts Receivable of $61,000, Allowance for Doubtful Accounts of $3,750, and Retained Earnings of $72,250. During Year
Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the following four accounting events in Year 1:1. Recognized $92,000 of revenue on
Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its first two years of operation: Events Affecting Year 11. Provided $45,000 of cleaning services
Holmes Cleaning Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations:Events Affecting Year 1:1. Provided $84,000 of cleaning
Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events:1. Recognition of uncollectible accounts expense through a
Assume that on July 1, Year 1, Big Corp. loaned Little Corp. $12,000 for a period of one year at 6 percent interest. What amount of interest revenue will Big report for Year 1? What amount of cash
The accounting firm of Eckert & Bell, CPAs, recently completed the audits of three separate companies. During these audits, the following events were discovered, and Eckert & Bell is trying
The following excerpt was taken from Alphabet, Inc.’s 10-K report for its 2016 fiscal year. Alphabet, Inc. is the parent company of Google, Inc.CONTROLS AND PROCEDURESEvaluation of Disclosure
The following cash and bank information is available for three companies at June 30, Year 1:Requireda. Organize the class into three sections and divide each section into groups of three to five
Obtain the Target Corporation’s annual report at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions:a. Who are the independent auditors
The following is a bank reconciliation for BBQ Express for May 31, Year 1:Because of limited funds, BBQ Express employed only one accountant who was responsible for receiving cash, recording receipts

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