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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions

PB11-2 Recording Notes Payable, Warranties, and Evaluating Impact on Current Ratio On January 31, 2009, Dry Ice Inc. (DII) had $486,000 in current assets and $405,000 in current liabilities. On February 1, 2009, DII received $100,000 from an issue of promissory notes that will mature in 2011. The
PB11-1 Journalizing Transactions, Evaluating Current Ratio Effects, and Reporting Liabilities Tiger Company completed the following transactions during 2009. The annual accounting period ends December 31, 2009. Jan. 3 Purchased merchandise on account at a cost of $24,000. (Assume a perpetual
PA11-5 Journalizing Transactions, Evaluating Current Ratio Effects, and Reporting Liabilities (Comprehensive Problem) Jinx Hair Salon in Iowa City completed the following transactions. (a) Provided hair styling services and received $9,450, which included $450 in sales taxes. (b) Received $200 for
PA11-4 Determining Financial Statement Reporting of Contingent Liabilities Macromedia, Inc., is the original maker of shockwave and flash technologies. Its 2002 annual report indicated that a lawsuit had been filed in 2000 against the company and five of its former officers for securities fraud in
PA11-3 Recording and Reporting Unearned Revenue and Payroll On December 1, 2009, Lakeview Company collected rent of $3,600 for office space rented to another business. The rent collected was for two months from December 1, 2009, to January 31, 2010. Lakeview also reported the following information
PA11-2 Recording Notes Payable, Warranties, and Evaluating Impact on Current Ratio On June 30, 2009, Sideways Movers had $243,000 in current assets and $211,000 in current liabilities. On August 1, 2009, Sideways received $50,000 from an issue of promissory notes that will mature in 2012. The notes
arising from these transactions are reported on the classified balance sheet at December 31, 2009.
PA11-1 Journalizing Transactions, Evaluating Current Ratio Effects, and Reporting Liabilities Jack Hammer Company completed the following transactions during 2009. The annual accounting period ends December 31, 2009. Apr. 30 Received $550,000 from Commerce Bank after signing a 2-year, 6 percent
E11-14 (Supplement) Employee Benefits Heara Whisper Electronics (HWE) is a maker of assistive hearing devices. To attract employees, the company offers three-week paid vacations, which can be used up each year or accumulated over successive years and then paid out in cash. The company also has a
E11-13 Recording Payroll Costs with and without Withholdings Assume an employee of Rocco Rock Company earns $1,000 of gross wages during the current pay period and is required to remit to the government $100 for income tax and $50 for FICA. Consider the following two procedures for paying the
E11-12 Calculating and Recording Payroll Taxes The payroll register for Great Southern Hospitality Corp. is shown below. No employees have earned more than $7,000 to date.Required: 1. Calculate state unemployment taxes, assuming a 5.4 percent rate. If necessary, round to the nearest cent. 2.
E11-11 Recording Net Pay and Payroll Taxes The payroll register for the two weeks ended October 31, 2008, indicates the following: Gross salaries $140,000 United Way contributions $3,000 Federal income tax deductions 10,093 State unemployment taxes 7,560 FICA tax deductions 11,120 Federal
E11-10 Calculating and Recording Net Pay Assume that Nora Jones worked 46 hours this week. Her regular wage rate is $13 per hour, and the overtime rate is 1½ times the regular pay rate. She is single, paid weekly, claims three allowances, pays federal but no state, county, or city income tax, and
E11-9 Recording Payroll Costs with Discussion McLoyd Company completed the salary and wage payroll for March 2009. The payroll provided the following details: Salaries and wages earned $230,000 Withholdings for United Way $ 6,000 Federal income taxes withheld 50,200 Federal unemployment tax 1,840
E11-8 Journalizing Transactions Involving Warranties Paloma Group sells tankless water heaters that come with a 10-year warranty against defects. Assume that during the years ended December 31, 2008 and 2009, the company sold 50,000 and 60,000 units. At the time of sale, the company’s engineers
E11-7 Journalizing Transactions Involving Warranties During 2008, Bull Manufacturing Inc. (BMI) sold 30,000 lawnmowers with a two-year warranty. The company’s production manager estimated that 5 percent of the lawnmowers would require warranty repairs at an average cost of $100 per unit. BMI
E11-6 Determining and Recording the Financial Statement Effects of Unearned Subscription Revenue Reader’s Digest Association is a publisher of magazines, books, and music collections. The following note is from its June 30 annual report:Assume that Reader’s Digest collected $394 million in 2008
E11-5 Journalizing and Reporting Transactions Involving Sales Taxes The Ferrer School (TFS) provides services to customers and collects a 5 percent state sales tax. The business entered into the following transactions.a. During January 2009, TFS sold $12,000 worth of services to customers and
E11-4 Journalizing Transactions Involving Notes Payable Assume that on November 1, 2009, Tops Bakery negotiated an agreement to borrow $200,000 cash on a one-year note. The note specified that Tops would pay 6 percent interest one year later, on October 31, 2010. The principal was also to be repaid
E11-3 Journalizing Transactions Involving Notes Payable Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of America’s largest general merchandise retailers. Each Christmas, Target builds up its
E11-2 Determining the Impact of Current Liability Transactions Including Analysis of the Current Ratio Bryant Company sells a wide range of inventories that are initially purchased on accounts payable. Occasionally, a short-term note payable is used to obtain cash for current use. The following
E11-1 Calculating and Interpreting the Current Ratio According to its Web site, Kraft Foods Inc. sells enough Kool-Aid mix to make 1,000 gallons of the drink every minute during the summer and over 560 million gallons each year. At December 31, 2006, the company reported the following amounts (in
M11-15 Recording Net Pay Refer to M11-14. Prepare the journal entry or entries that Lightning Electronics would use to record the payroll. Include both employee and employer taxes.
M11-14 Calculating Net Pay Lightning Electronics is a mid-size manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $100,000 but that federal income taxes totaling $14,000 and FICA taxes totaling $5,250 were
week?
M11-13 Calculating Gross Earnings Dan Carotene earns a regular pay rate of $20 per hour for the first 40 hours per week and time and a half for anything over 40 hours. If Dan works 50 hours during the first week of the year, what is his gross earnings for the
M11-12 Reporting a Contingent Liability Buzz Coffee Shops is famous for its large servings of hot coffee. After a famous case involving McDonald’s, the lawyer for Buzz warned management (during 2007) that it could be sued if someone were to spill hot coffee and be burned. “With the temperature
M11-11 Accounting for Warranty Liabilities Hugo Watch Company, based in Livingston, Montana, sold $10,000 of watches in January under a sixmonth warranty. The cost of warranty repairs is estimated to be 5 percent of the sales price. In February and March, customers returned watches for repair
M11-10 Recording Unearned Revenues A local theater company sells 1,500 season ticket packages at a price of $250 per package. The first show in the five-show season starts this week. Prepare the journal entries and show the related accounting equation effects arising from (a) the sale of the season
M11-9 Recording Sales, State Sales Tax, and Cost of Goods Sold Assume Ahlers Clock sold a grandfather clock for $5,000 cash plus 4 percent sales tax. Prepare the journal entry and show the accounting equation effects related to this transaction. As part of this transaction, include the cost of
M11-8 Recording Sales and State Sales Tax on Services Ahlers Clocks sells and repairs wall clocks, mantles, and grandfather clocks and is located in the Empire Mall in Sioux Falls, South Dakota. Assume that a grandfather clock was repaired for $50 cash plus 4 percent sales tax. Prepare the journal
M11-7 Reporting Interest and Long-Term Debt, Including Current Portion Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2009, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $200,000, plus accrued interest, on June 30 of every year
M11-6 Recording a Note Payable Greener Pastures Corporation borrowed $1,000,000 on November 1, 2008. The note carried a 6 percent interest rate with the principal and interest payable on June 1, 2009. Prepare the journal entries and show the accounting equation effects for (a) the note issued on
M11-5 Reporting Current and Noncurrent Portions of Long-Term Debt Assume that on December 1, 2008, your company borrowed $14,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2009, $2,000; 2010, $3,000; 2011,
M11-3 Computing and Interpreting the Current Ratio The balance sheet for Shaver Corporation reported the following: total assets, $250,000; noncurrent assets, $150,000; current liabilities, $40,000; total owners’ equity, $90,000; net income, $3,320; interest expense, $4,400; and income before
M11-2 Computing and Interpreting the Current Ratio Refer to M11-1. Compute the Electronic Games current ratio to two decimal places assuming current assets totaled $487,500 at March 31, 2009. Knowing the current ratio was 1.15 on March 31, 2008, would you say the company’s liquidity improved or
M11-1 Reporting Liabilities in a Classified Balance Sheet Prepare the liabilities sections of a classified balance sheet for Electronic Games Inc. using the following balances reported at March 31, 2009: Unearned Revenue of $23,000; Accrued Salaries and Employee benefits of $35,670; Accounts
10. The payroll records for Coolo Ice Cream Company showed gross employee earnings of $10,000 as well as payroll deductions of $1,200 for income tax, $800 for FICA taxes, and $500 for voluntary deductions. If the company owes $80 in federal unemployment taxes and $540 for state unemployment taxes,
9. Lucinda Perez worked 50 hours this week. She earns $10 for the first 40 hours and $15 for any overtime work. She had $75 in payroll deductions. What is her gross earnings?a. $550.c. $475.b. $665.d. $590.
8. Big Hitter Corp. is facing a class-action lawsuit in the upcoming year. It is possible, but not probable, that the company will have to pay a settlement of approximately $2,000,000. How would this fact be reported, if at all, in the financial statements to be issued at the end of the current
7. Which of the following accounts is debited when a company pays cash to have its products repaired under warranty?a. Warranty Expense.b. Cash.c. Warranty Liability.d. Repairs and Maintenance Expense.
6. Which of the following is true when a retailer sells a computer for $1,000 cash and collects a 5 percent sales tax?a. Sales Revenue is $1,000.b. Sales Taxes Payable is $50.c. Cash collected totals $1,050.d. All of the above are true.
5. As of February 28, 2007, American Greetings Corporation had 9,400 full-time and 19,500 part-time employees. Assume that in the last pay period of the year, the company paid $8,000,000 to employees after deducting $2,000,000 for employee income taxes, $612,000 for FICA taxes, and $700,000 of
4. Assume Speedo International received $400,000 for promissory notes that it issued on November 1. The notes pay interest on April 30 and October 31 at the annual rate of 6 percent. Which of the following journal entries must Speedo make at December 31?a. Interest Expense 4,000 Interest Payable
3. Assume that Warnaco Group Inc., the makers of Calvin Klein underwear, borrowed $100,000 from the bank to be repaid over the next five years with principal payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today (the date
2. Which of the following statements about the current ratio is true?a. The current ratio is always more than or equal to 1.0.b. The current ratio decreases when a company fulfills its obligation for unearned revenues.c. The higher the current ratio, the greater the risk the business will not be
1. Which of the following does not create a current liability?a. Cash is received from customers but not yet earned.b. Sales taxes are collected but not remitted.c. Amounts are withheld from employee wages but not yet remitted.d. None of the above—all create current liabilities.
16. (Supplement 11A) Why should employees participate in a 401 (k) plan? Is this a defined contribution or defined benefit plan?
15. (Supplement 11A) If a company records and pays salaries each month, why is it necessary to estimate and record paid vacations too?
14. If a company maintains employee earnings records for each employee, is there additional value in maintaining a payroll register?
13. Why do you think the federal government requires employers to deduct income taxes from employees’ pay? How does this benefit the government? How might it benefit employees?
12. Why are payroll deductions considered current liabilities?
11. What is a contingent liability? How is a contingent liability reported?
10. How is the liability for warranties similar to and different from liabilities for sales taxes and accounts payable?
9. Why are warranty repair costs estimated and recorded in the period of sale rather than simply recorded when they are provided for customers?
8. Why is unearned revenue considered a liability?
7. Why are sales taxes considered liabilities?
6. If a company has a long-term loan that has only two years remaining until it matures, how is it reported on the balance sheet (a) this year and (b) next year?
5. Why is the “time” factor included in the formula to compute interest?
4. What is a line of credit? Does a line of credit affect the amount of cash that a company needs to have available to pay current liabilities?
3. What is the current ratio? How is it related to the classification of liabilities?
2. What three factors influence the dollar amount reported for liabilities?
1. Define liability. What is the difference between a current liability and a long-term liability?
CP10-7 Preparing Depreciation Schedules for Straight-Line and Double-Declining-Balance Methods To make some extra money, you have started preparing templates of business forms and schedules for others to download from the Internet (for a small fee). After relevant information is entered into each
CP10-6 Thinking Critically: Analyzing the Effects of Depreciation Policies on Income As an aspiring financial analyst, you have applied to a major Wall Street firm for a summer job. To screen potential applicants, the firm provides them a short case study and asks them to evaluate the financial
CP10-5 Making Ethical Decisions: A Mini Case Assume you are one of three members of the accounting staff working for a small, private company. At the beginning of this year, the company expanded into a new industry by acquiring equipment that will be used to make several new lines of products. The
CP10-4 Making Ethical Decisions : A Real-Life Example Assume you work as a staff member in a large accounting department for a multinational public company. Your job requires you to review documents relating to the company’s equipment purchases. Upon verifying that purchases are properly
CP10-3 Examining an Annual Report: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. (See CP1-3 in
CP10-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s Companies in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/ LLPW1e . Required: 1. What method of
CP10-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases and Projects section of the text’s Web site at www.mhhe.com/ LLPW1e . Required: 1. What method of depreciation does the
PB10-5 (Supplement 10C) Analyzing and Recording Entries Related to an Exchange of Assets The following transactions and adjusting entries were completed by a glass-cutting company. The company uses straight-line depreciation. June 30, 2009 Paid $10,000 cash to purchase waterjet cutting equipment.
PB10-4 Determining Financial Statement Effects of Activities Related to Intangible Assets Pandey Company entered into the following transactions that potentially affect intangible assets: (a) Soon after Pandey Company started business, in January 2008, it purchased the assets of another business
PB10-3 Recording and Interpreting the Disposal of Long-Lived Assets Sold and Discarded During 2009, Rayon Corporation disposed of two different assets. On January 1, 2009, prior to their disposal, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated
PB10-2 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods At the beginning of the year, Oakmont Company bought three used machines from American Manufacturing, Inc. The machines immediately were overhauled, installed, and started operating. Because the machines
PB10-1 Recording Transactions and Adjustments for Tangible and Intangible Assets The following transactions and adjusting entries were completed by a local delivery company called Super Swift. The company uses straight-line depreciation for delivery vehicles, double-decliningbalance depreciation
PA10-5 (Supplement 10B) Analyzing and Recording Entries Related to a Change in Estimated Life and Residual Value Reader’s Digest is a global publisher of magazines, books, and music and video collections, and is one of the world’s leading direct-mail marketers. Many direct-mail marketers use
PA10-4 Determining Financial Statement Effects of Activities Related to Intangible Assets Norton Pharmaceuticals entered into the following transactions that potentially affect intangible assets: (a) On January 1, 2009, the company spent $18,600 cash to buy a patent that expires in 15 years. (b)
PA10-3 Recording and Interpreting the Disposal of Long-Lived Assets Sold and Discarded During 2009, Ly Company disposed of two different assets. On January 1, 2009, prior to their disposal, the accounts reflected the following:The machines were disposed of in the following ways:a. Machine A: Sold
PA10-2 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods At the beginning of the year, Chemical Control Corporation bought three used machines from Radial Compression Incorporated. The machines immediately were overhauled, installed, and started operating.
PA10-1 Recording Transactions and Adjustments for Tangible and Intangible Assets The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International. The company uses straight-line depreciation for trucks and other vehicles,
E10-22 (Supplement 10C) Comparing Exchange of Assets under Two Depreciation Methods Scrimshaw Industries acquired a new dump truck worth $120,000 on December 31, 2010, by paying $70,000 cash and trading in its used dump truck, which had been purchased three years ago at a cost of $100,000. The old
E10-21 (Supplement 10B) Recording a Change in Estimate Refer to E10-4. Required: Give the adjusting entry that should be made at the end of 2010 for depreciation of the manufacturing equipment, assuming no change in the original estimated total life or residual value. Show computations.
E10-20 (Supplement 10A) Calculating and Reporting Depletion Louisiana Oil Company (LOC) paid $3,000,000 for an oil reserve estimated to hold 50,000 barrels of oil. Oil production is expected to be 10,000 barrels in year 1, 30,000 barrels in year 2, and 10,000 barrels in year 3. LOC expects to begin
E10-19 Accounting for Operating Activities (Including Depreciation) and Preparing Financial Statements (Comprehensive Exercise) Grid Iron Prep Inc. (GIPI) is a sole proprietorship created in January 2009 to provide personal training for athletes aspiring to play college football. The following
E10-18 Computing Depreciation and Book Value for Two Years Using Alternative Depreciation Methods and Interpreting the Impact on the Fixed Asset Turnover Ratio Torge Company bought a machine for $65,000 cash. The estimated useful life was five years, and the estimated residual value was $5,000.
E10-17 Computing and Interpreting the Fixed Asset Turnover Ratio from a Financial Analyst’s Perspective The following data were included in a recent Apple Inc. annual report (in millions):Required: 1. Compute Apple’s fixed asset turnover ratio for 2002, 2004, and 2006 (the even years). Round
E10-16 Recording the Purchase, Amortization, and Impairment of a Patent Nutek, Inc., holds a patent for the Full Service handi-plate, which the company described in its annual report as “a patented plastic buffet plate that allows the user to hold both a plate and cup in one hand” and that
E10-15 Computing and Reporting the Acquisition and Amortization of Three Different Intangible Assets Kreiser Company had three intangible assets at the end of 2009 (end of the accounting year):a. A patent purchased from J. Miller on January 1, 2009, for a cash cost of $5,640. Miller had registered
E10-14 Demonstrating the Effect of Book Value on Recording an Asset Disposal through Sale Refer to E10–13. Required: 1. Calculate the amount of gain or loss on disposal, assuming thata. The accumulated depreciation was $12,000.b. The accumulated depreciation was $10,000.c. The accumulated
E10-13 Demonstrating the Effect of Book Value on Reporting an Asset Disposal through Sale FedEx is the world’s leading express-distribution company. In addition to the world’s largest fleet of allcargo aircraft, the company has more than 46,400 ground vehicles that pick up and deliver
E10-12 Exploring Financial Statement Effects of Asset Impairment Refer to E10-11. Required: If TTC’s management estimated that the equipment had future cash flows and a fair value of only $6,800 at December 31, 2009, how would this affect TTC’s balance sheet and income statement? Explain.
E10-11 Inferring Asset Age from Straight-Line Depreciation On January 1, 2009, the records of Tuff Turf Corporation (TTC) showed the following regarding production equipment: Equipment (estimated residual value, $4,000) $14,000 Accumulated depreciation (straight line, one year) 2,000 Required:
E10-8 Computing Partial-Year Depreciation under Alternative Methods A vehicle was purchased on July 1, 2009, at a cost of $50,000. The vehicle had an estimated useful life of five years and a residual value of $5,000. The company’s fiscal year ends on December 31. The vehicle was expected to be
E10-7 Computing Depreciation under Alternative Methods Sonic Corp. purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, Texas, at a cost of $27,000. The equipment has an estimated residual value of $1,500. The equipment is expected to process 255,000
E10-6 Computing Depreciation under Alternative Methods PlasticWorks Corporation bought a machine at the beginning of the year at a cost of $12,000. The estimated useful life was five years, and the residual value was $2,000. Assume that the estimated productive life of the machine is 10,000 units.
E10-5 Determining Financial Statement Effects of Straight-Line Depreciation and Repairs Refer to E10-4. Required: Indicate the effects (accounts, amounts, and + or –) of the following items on the accounting equation, using the headings shown below. 1. The adjustment for depreciation made at the
E10-4 Recording Straight-Line Depreciation and Repairs Wiater Company operates a small manufacturing facility. At the beginning of 2010, an asset account for the company showed the following balances: Manufacturing equipment $160,000 Accumulated depreciation through 2009 110,000 During 2010, the
E10-3 Recording Asset Acquisition Costs and Straight-Line Depreciation Conover Company ordered equipment on January 1, 2009, at a purchase price of $30,000. On date of delivery, January 2, 2009, the company paid $8,000 for the equipment and signed a note payable for the balance. On January 3, 2009,
E10-2 Computing and Recording a Basket Purchase and Straight-Line Depreciation Bridge City Consulting bought a building and the land on which it is located for $182,000 cash. The land is estimated to represent 70 percent of the purchase price. The company also paid renovation costs on the building
E10-1 Preparing a Classified Balance Sheet The following is a list of account titles and amounts (in millions) reported at December 31, 2006, by Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for children and families: Buildings and Improvements $186

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