Questions and Answers of Introductory Financial Accounting

Indicate whether each of the following costs is a product cost or a period cost:a. Cleaning supplies for the office.b. Freight on goods purchased for resale.c. Salary of the marketing director.d.
For each of the following events, determine the amount of freight paid by Cycle Parts House. Also indicate whether the freight is classified as a product or period cost.a. Purchased merchandise with
Far East Retailers uses the periodic inventory system to account for its inventory transactions. The following account titles and balances were drawn from Far East’s records for Year 2:
Rick Dove is the owner of RD Cleaning. At the beginning of the year, RD Cleaning had $4,800 in inventory. During the year, RD Cleaning purchased inventory that cost $26,000. At the end of the year,
Custom Auto Parts (CAP) started the Year 2 accounting period with the balances given in the horizontal financial statements model shown below. During Year 2, CAP experienced the following business
McDowell Company began the Year 3 accounting period with $50,000 cash, $72,000 inventory, $55,000 common stock, and $67,000 retained earnings. During Year 3, McDowell experienced the following
The following information was drawn from the Year 1 accounting records of Cozart Merchandisers.1. Inventory with a list price of $40,000 was purchased under terms 2/10, net/30.2. Cozart returned
The following information was taken from the accounts of Adams’s Eatery, a delicatessen, at December 31, Year 1. The accounts are listed in alphabetical order, and each has a normal
In Year 1, Image Incorporated sold land for $82,000 cash. The land had originally cost $50,000. Also, Image sold inventory that had cost $176,000 for $265,000 cash. Operating expenses amounted to
The beginning account balances for Franchoni’s Body Shop as of January 1, Year 2, follow:Account Titles Beginning ................................. ................................. BalancesCash
Alpine Ski Co. experienced the following events during Year 1, its first year of operation:1. Started the business when it acquired $145,000 cash from the issue of common stock.2. Paid $85,000 cash
Wild Rose Co. experienced the following events for the Year 1 accounting period:1. Acquired $20,000 cash from the issue of common stock.2. Purchased $36,000 of inventory on account.3. Received goods
TRS Company experienced the following events:1. Purchased merchandise inventory for cash.2. Sold merchandise inventory on account. Label the revenue recognition 2a and the expense recognition 2b.3.
Which of the following would be added to the Inventory account for a merchandising business using the perpetual inventory system?Requireda. Transportation-in.b. Allowance received for damaged
Musgrove Basket Company had an $8,500 beginning balance in its Merchandise Inventory account. The following information regarding Musgrove’s purchases and sales of inventory during its Year 1
Determine which party (buyer or seller) is responsible for freight charges in each of the following situations:a. Purchased merchandise, freight terms, FOB destination.b. Purchased merchandise,
On March 6, Year 1, Salon Express purchased merchandise from Hair Fashions with a list price of $19,000, terms 2/10, n/45. On March 10, Salon returned merchandise to Hair Fashions. The list price of
Farm Tractor Supply experienced the following events during Year 1, its first year of operation:1. Acquired $85,000 cash from the issue of common stock.2. Purchased inventory for $42,000 cash.3. Sold
During Year 1, Rondor Merchandising Company purchased $40,000 of inventory on account. The company sold inventory on account that cost $30,000 for $50,000. Cash payments on accounts payable were
Sara Bayer started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Bayer uses the perpetual inventory system.1.
The following information is available for two different types of businesses for the Year 1 accounting year. Diamond Consulting is a service business that provides consulting services to small
The following trial balance pertains to Benji’s Grocery as of January 1, Year 2:Account
The following account titles and balances were taken from the adjusted trial balance of King Co. for Year 2. The company uses the periodic inventory system.Account Title
The following information was drawn from the records of Toner Sales Company:Requireda. Prepare a multistep income statement for each year.b. Prepare a common size income statement for each year.c. At
At the beginning of Year 2, the Redd Company had the following balances in its accounts:Cash ..................................................................$16,900Inventory
Blooming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock. The following data summarize the company’s first three years’ operating activities.
For each of the following events, determine the amount of freight paid by The Box Company. Also indicate whether the freight cost would be classified as a product or period (selling and
Tippah Antiques uses the periodic inventory system to account for its inventory transactions. The following account titles and balances were drawn from Tippah’s records for Year 2: beginning
The following information is available for the Memphis and Billings companies:Requireda. Prepare a common size income statement for each company.b. Compute the return on assets and return on equity
The following income statements were drawn from the annual reports of the Atlanta Company and the Boston Company:Requireda. One of the companies is a high-end retailer that operates in exclusive
Junker’s Stash started the Year 2 accounting period with the balances given in the horizontal financial statements model shown below. During Year 2, Junker’s Stash experienced the following
Powell Company began the Year 3 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During Year 3, Powell experienced the following events:1.
The following information was drawn from the Year 1 accounting records of Ozark Merchandisers:1. Inventory that had cost $21,200 was sold for $39,900 under terms 2/20, net/30.2. Customers returned
The following information was taken from the accounts of Green Market, a small grocery store, at December 31, Year 1. The accounts are listed in alphabetical order, and all have normal balances.
In Year 1, Kim Company sold land for $80,000 cash. The land had originally cost $60,000. Also, Kim sold inventory that had cost $110,000 for $198,000 cash. Operating expenses amounted to
The beginning account balances for Terry’s Auto Shop as of January 1, Year 2, follow:Account Titles Beginning
Ho Designs experienced the following events during Year 1, its first year of operation:1. Started the business when it acquired $70,000 cash from the issue of common stock.2. Paid $41,000 cash to
The Pet Store experienced the following events for the Year 1 accounting period:1. Acquired $60,000 cash from the issue of common stock.2. Purchased $65,000 of inventory on account.3. Received goods
Bali Sales Company experienced the following events:1. Purchased merchandise inventory for cash.2. Purchased merchandise inventory on account.3. Returned merchandise purchased on account.4. Sold
On April 6, Year 1, Home Furnishings purchased $25,200 of merchandise from Una Imports, terms 2/10 n/45. On April 8, Home returned $2,400 of the merchandise to Una Imports. Home paid cash for the
Milo Clothing experienced the following events during Year 1, its first year of operation:1. Acquired $30,000 cash from the issue of common stock.2. Purchased inventory for $15,000 cash.3. Sold
During Year 1, Hardy Merchandising Company purchased $40,000 of inventory on account. Hardy sold inventory on account that cost $24,500 for $38,000. Cash payments on accounts payable were $22,000.
Dan Watson started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory
The following information is available for two different types of businesses for the Year 1 accounting year. Hopkins CPAs is a service business that provides accounting services to small businesses.
Ball Co. purchased inventory with a list price of $4,000 with the terms 2/10, n/30. What amount will be added to the Merchandise Inventory account?
What is the purpose of giving credit terms to customers?
Saul Sellers is the Chief Accountant for Bright Day Cafe (BDC) and is close to retirement. Traditionally, BDC provides a retirement plan that pays a bonus equal to 10 percent of the net income the
The following scenarios are independent of each other.1. During Year 1, a company pays $3,000 cash to purchase supplies. There are $1,000 of supplies on hand at the end of Year 1.2. On April 1, Year
The following data were taken from the 2016 annual reports of Biogen Idec, Inc. and Amgen, Inc. Both companies are leaders in biotechnology. All dollar amounts are in millions.Requireda. For each
The following data were taken from Netflix, Inc.’s 2016 annual report. All dollar amounts are in millions.Requireda. For each year, compute Netflix’s debt-to-assets ratio, return-on-assets ratio,
On January 1, Year 1, three companies purchased the same make and model copy machine. However, each company made different assumptions regarding the useful life and salvage value of its particular
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. What was Target’s debt-to-assets
On June 1, Year 1, Ark Corporation paid $8,400 to purchase a 24-month insurance policy. Assume that Ark records the purchase as an asset and that the books are closed on December 31.Requireda. Show
The following information was drawn from the Year 5 balance sheets of two companies:During Year 5, Steelman’s net income was $45,800, while Bingum’s net income was $22,300.Requireda. Compute the
Oaks Company had the following balances in its accounting records as of December 31, Year 1:The following accounting events apply to Oaks’s Year 2 fiscal year:Jan. 1 Acquired an additional $70,000
On January 1, Year 4, Franklin Company paid $200,000 cash to purchase a new theme ride. The ride has a $5,000 salvage value and a six-year useful life. Assume that Franklin earns $70,000 of cash
Iowa Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period1. Acquired cash of $60,000 from the issue of common stock.2. Purchased $1,200 of supplies on
The following accounts and balances were drawn from the records of Shearer Company at December 31, Year 2:Cash
The following events pertain to Weaver Cleaning Company:1. Acquired $15,000 cash from the issue of common stock.2. Provided services for $6,000 cash.3. Provided $18,000 of services on account.4.
Gossett Company had the following beginning balances in its accounting records as of January 1, Year 1:The following accounting events apply to Gossett for Year 1:Jan. 1 Acquired an additional
The following information was drawn from the Year 3 balance sheets of two companies:During Year 3, Williamson’s net income was $35,800, while Hendrix’s net income was $22,900.Requireda. Compute
The following information was drawn from the balance sheets of two companies:Requireda. Compute the debt-to-assets ratio to measure the level of financial risk of both companies.b. Compare the two
On January 1, Year 1, Yallow Cab Inc. paid $29,000 cash to purchase a taxi cab. The taxi had a threeyear useful life and a $5,000 salvage value.Requireda. Determine the amount of depreciation expense
The following events apply to Highland Grill for the Year 1 fiscal year:1. Started the company when it acquired $40,000 cash by issuing common stock.2. Purchased a new stove that cost $24,000 cash.3.
Identify whether each of the following transactions is an asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also, show the effects of the events on the financial
On January 1, Year 2, KimCom Boat Rentals purchased a boat that is to be used to produce rental income. The boat cost $120,000. It has an expected useful life of 10 years and a $20,000 salvage value.
Indicate whether each of the following statements is true or false.a. Prepaid rent appears on the balance sheet.b. The book value of a long-term asset appears on the statement of changes in
The following is a partial list of transactions FRC Company experienced during its Year 4 accounting period:1. Collected cash for services to be performed in the future.2. Paid cash to purchase
a. Describe a year-end adjustment that results in a decrease in liabilities.b. Describe a year-end adjustment that reduces the book value of a long-term asset.c. Describe a year-end adjustment that
The following transactions pertain to the operations of Blair Company for Year 1:1. Acquired $30,000 cash from the issue of common stock.2. Performed services for $12,000 cash.3. Paid a $7,200 cash
Patal Inc. experienced the following accounting events during its Year 1 accounting period:1. Paid cash to settle an account payable.2. Collected a cash advance for services that will be provided
Identify each of the following events as an accrual, deferral, or neither:a. Incurred other operating expenses on account.b. Recorded expense for salaries owed to employees at the end of the
On October 1, Year 1, Stokes Company paid Eastport Rentals $4,800 for a 12-month lease on warehouse space.Requireda. Record the deferral and the related December 31, Year 1, adjustment for Stokes
Warren, Attorney at Law, experienced the following transactions in Year 1, the first year of operations:1. Purchased $1,500 of office supplies on account.2. Accepted $36,000 on February 1, Year 1, as
Brandon Baily started a personal financial planning business when he accepted $120,000 cash as advance payment for managing the financial assets of a large estate. Baily agreed to manage the estate
Interior Design Consultants (IDC) experienced the following events in Year 1, its first year of operation:1. On October 1, Year 1, IDC collected $24,000 for consulting services it agreed to provide
Jake Lewis received $800 in advance for tutoring fees when he agreed to help Laura Dalton with her introductory accounting course. Upon receiving the cash, Jake mentioned that he would have to record
Forestry Services Inc. experienced the following events in Year 1, its first year of operation:1. Performed counseling services for $18,000 cash.2. On February 1, Year 1, paid $12,000 cash to rent
On March 1, Year 1, Windy Mill Co. paid $48,000 for 12 months rent on its factory. In addition, on September 1, Year 1, the company paid $18,000 for a one-year insurance policy on the
Janitorial Professionals Inc. experienced the following events in Year 1, its first year of operation: 1. Performed services for $20,000 cash. 2. Purchased $4,000 of supplies on account. 3. A
Handy Andy Inc. began the Year 1 accounting period with $9,000 cash, $5,000 of common stock, and $4,000 of retained earnings. Handy Andy was affected by the following accounting events during Year
The following information was drawn from the Year 8 balance sheets of two companies:Company Assets = Liabilities + Common Stock + Retained EarningsMorris 500,000 = 125,000
Porser Company had the following balances in its accounting records as of December 31, Year 1:Assets
On January 1, Year 2, Shapiro Company paid $70,000 cash to purchase a truck. The truck has a $10,000 salvage value and a five-year useful life. Assume that Shapiro earns $18,000 of cash revenue per
Alcorn Service Company was formed on January 1, Year 1.Events Affecting the Year 1 Accounting Period1. Acquired $20,000 cash from the issue of common stock.2. Purchased $800 of supplies on account.3.
The following accounts and balances were drawn from the records of Barker Company at December 31, Year 2:Supplies ..................... .........................................$ 1,000 Beginning
The following events pertain to Super Cleaning Company:1. Acquired $10,000 cash from the issue of common stock.2. Provided $15,000 of services on account.3. Provided services for $5,000 cash.4.
Simpson Company had the following balances in its accounting records as of December 31, Year 1:Assets Liabilities and EquityCash ....................................................$
The following information was drawn from the Year 5 balance sheets of two companies:During Year 5, Butler’s net income was $25,200, while Lynch’s net income was $43,200.Requireda. Compute the
The following information was drawn from the balance sheets of two companies:Requireda. Compute the debt-to-assets ratio to measure the level of financial risk of both companies.b. Compare the two
On January 1, Year 1, Your Ride Inc. paid $36,000 cash to purchase a taxi cab. The taxi had a four-year useful life and a $4,000 salvage value.Required:a. Determine the amount of depreciation expense
The following events apply to Tracey’s Restaurant for the Year 1 fiscal year:1. Started the company when it acquired $21,000 cash from the issue of common stock.2. Purchased a new cooktop that cost
On January 1, Year 2, LCJ Rental Cars purchased a car that is to be used to produce rental income. The car cost $35,000. It has an expected useful life of five years and a $5,000 salvage value. The
Indicate whether each of the following statements is true or false:a. The unearned revenue account appears on the income statement.b. Supplies expense appears on the statement of cash flows.c.
The following is a partial list of transactions Bok Company experienced during its Year 3 accounting period:1. Paid cash to purchase supplies.2. Paid cash to purchase insurance coverage for the
Identify whether each of the following items would appear on the income statement (IS), statement of changes in stockholders’ equity (SE), balance sheet (BS), or statement of cash flows (CF). Some
a. Describe a year-end adjustment that results in an increase in liabilities.b. Describe a year-end adjustment that results in a decrease in assets.c. Describe a year-end adjustment that results in a
The following transactions pertain to the operations of Ewing Company for Year 2:1. Acquired $30,000 cash from the issue of common stock.2. Provided $65,000 of services on account.3. Paid $22,000
Norell Inc. experienced the following accounting events during its Year 1 accounting period:1. Recognized revenue on account.2. Issued common stock.3. Paid cash to purchase supplies.4. Collected a
On October 1, Year 1, Josh Smith, attorney, accepted a $10,800 cash advance from his client, James Company, for services to be performed over the next six months.Requireda. Record the deferral and

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