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

9. What two approaches can managers take to speed up sluggish collections of receivables? List one advantage and one disadvantage for each approach.
8. Does an increase in the receivables turnover ratio generally indicate faster or slower collection of receivables? Explain.
7. Are interest revenues most appropriately recognized in the period in which (a) a note receivable has remained unpaid or (b) the company receives a cash payment for the interest?
6. What are the three components of the interest formula? Explain how this formula adjusts for interest periods that are less than a full year.
5. What is the primary difference between accounts receivable and notes receivable?
4. What is the effect of the write-off of uncollectible accounts (using the allowance method) on (a) net income and (b) net accounts receivable?
3. Using the allowance method, is bad debt expense recognized in the period in which (a) sales related to the uncollectible account were made or (b) the seller learns that the customer is unable to pay?
2. Which basic accounting principles does the allowance method of accounting for bad debts satisfy?
1. What determines whether receivables are current or noncurrent assets?
CP8-6 Analyzing Internal Control Weaknesses: Critical Thinking Snake Creek Company has one trusted employee who, as the owner said, “handles all of the bookkeeping and paperwork for the company.” This employee is responsible for counting, verifying, and recording cash receipts and payments,
CP8-5 Making Ethical Decisions: A Mini Case You are an assistant in the accounting department of Hasher Electronics, a small electronics retailer. Hasher has a loan that requires the company to maintain a minimum cash balance of $125,000, as reported on its year-end balance sheet. Although Hasher
CP8-4 Making Ethical Decisions: A Real-Life Example When some people think about inventory theft, they imagine a shoplifter running out of a store with goods stuffed inside a jacket or bag. But that’s not what the managers at the Famous Footwear store on Chicago’s Madison Street thought. No,
CP8-3 Examining an Annual Report: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should access 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
CP8-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s 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. Does Lowe’s report more or less cash
CP8-1 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. How much cash (including cash equivalents) does the
PB8-4 Preparing a Bank Reconciliation and Journal Entries and Reporting Cash The bookkeeper at Tony Company has asked you to prepare a bank reconciliation as of February 29, 2010. The February 29, 2010, bank statement and the February T-account for Cash showed the following (summarized):Tony
PB8-3 Preparing a Bank Reconciliation and Journal Entries and Reporting Cash The April 30, 2010, bank statement for KMaxx Company and the April ledger account for Cash are summarized here:No outstanding checks and no deposits in transit were noted in March. However, there are deposits in transit
PB8-2 Controlling and Accounting for Petty Cash Disbursements Harristown Hockey Club (HHC) maintains a petty cash fund for minor club expenditures. The petty cash custodian, Wayne Crosby, describes the events that occurred during the last two months:a. I established the fund by cashing a check from
PB8-1 Evaluating Internal Control Strengths and Weaknesses in Cash Receipts and Disbursements The following procedures are used by The Taco Shop.a. Customers pay cash for all food orders. Cash is placed in a cash register and a receipt is issued upon request by the customer.b. At the end of each
PA8-5 Preparing a Bank Reconciliation and Journal Entries Including Petty Cash Transactions The August 2009 bank statement for Martha Company and the Cash T-account for August 2009 follow:No deposits were in transit and no checks were outstanding at the end of July. Required: 1. Identify and list
PA8-4 Identifying Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal Entries The December 2009 bank statement and Cash T-account for Stewart Company follow:There were no deposits in transit or outstanding checks at November 30. Required: 1. Identify and list
PA8-3 Preparing a Bank Reconciliation and Journal Entries and Reporting Cash Martin Company’s bank reconciliation at the end of April 2009 showed a reconciled cash balance of $18,800. No deposits were in transit at the end of April, but a deposit was in transit at the end of May. The bookkeeper
PA8-2 Controlling and Accounting for Petty Cash Disbursements Superior Cabinets maintains a petty cash fund for minor business expenditures. The petty cash custodian, Mo Smith, describes the events that occurred during the last two months:a. I established the fund by cashing a Superior Cabinets’
PA8-1 Evaluating Internal Control Strengths and Weaknesses in Cash Receipts and Disbursements The following procedures are used by Richardson Light Works.a. When customers pay cash for lighting products, it is placed in a cash register and a receipt is issued to the customer.b. At the end of each
E8-8 Preparing a Bank Reconciliation and Journal Entries and Reporting Cash The September 30, 2009, bank statement for Cadieux Company and the September ledger account for cash are summarized here:No outstanding checks and no deposits in transit were noted in August. However, there were deposits in
E8-7 Preparing a Bank Reconciliation and Journal Entries and Reporting Cash Hills Company’s June 30, 2009, bank statement and the June ledger account for cash are summarized here:Required: 1. Prepare a bank reconciliation. A comparison of the checks written with the checks that have cleared the
E8-6 Recording Petty Cash Transactions Sunshine Health established a $100 petty cash fund on January 1. From January 2 through 10, payments were made from the fund, as listed below. On January 12, the fund had only $10 remaining; a check was written to replenish the fund.a. January 2—Paid cash to
E8-5 Recording Petty Cash Transactions Mountain Air Company established a $200 petty cash fund on January 1. From January 2 through 15, payments were made from the fund, as listed below. On January 17, the fund was replenished with a check for $172.a. January 3—Paid cash to courier for deliveries
E8-4 Identifying Internal Control Principles in Cash Payment Processes Home Repair Corp. (HRC) operates a building maintenance and repair business. The business has three office employees—a sales manager, a materials/crew manager, and an accountant. HRC’s cash payments system is described
E8-3 Identifying Internal Control Principles in Cash Receipt Processes Locker Rentals Corp. (LRC) operates locker rental services at several locations throughout the city including the airport, bus depot, shopping malls, and athletics facilities. Unlike some of the old mechanical lockers that
E8-2 Identifying Internal Control Principles Your student club recently volunteered to go door-to-door collecting cash donations on behalf of a local charity. The charity’s accountant went berserk when you said you wrote receipts only for donors who asked for one. Required: Identify the control
E8-1 Identifying Internal Control Principles At most movie theaters, one employee sells tickets and another employee collects them. One night when you are at the movies, your friend comments that this is a waste of the theater’s money. Required: 1. Identify the control principle to which this
M8-15 Reporting Cash and Cash Equivalents Indicate (Yes or No) whether each of the following would be properly included as Cash and Cash Equivalents. ____ 1. $10,000 of government Treasury bills purchased 10 days prior to their maturity. ____ 2. $5,000 of stock in Zoogle—a private company that
M8-14 Preparing Journal Entries after a Bank Reconciliation Refer to M8-13. Prepare any journal entries needed to adjust the company’s books.
M8-13 Preparing a Bank Reconciliation Prepare a bank reconciliation for Trigger Company, using the following information at June 30, 2009. Balance per bank $10,000 Balance per company 9,030 Bank service charges 80 Bank interest earned 50 Deposit in transit 3,000 Outstanding checks 4,000
M8-12 Preparing Journal Entries after a Bank Reconciliation Using the information in M8-11, prepare any journal entries needed to adjust the company’s books.
M8-11 Organizing Items on the Bank Reconciliation Indicate whether the following items would be added ( +) to or subtracted (–) from the company’s books or the bank statement side of a bank reconciliation. Reconciling Item Bank Statement Company’s Books 1. Outstanding checks of $12,000 2.
M8-10 Accounting for Petty Cash Transactions On September 30, Hector’s petty cash fund of $100 is replenished. At the time, the cash box contained $18 cash and receipts for taxi fares ($40), delivery charges ($12), and office supplies ($30). Prepare the journal entry to record the replenishment
M8-9 Accounting for Petty Cash Transactions Refer to M8-8. Prepare the journal entry that would be recorded to replenish the petty cash fund.
M8-8 Recognizing Voucher and Petty Cash Systems The following transactions occurred during the month. Indicate whether a voucher (V) or petty cash (PC) system would be used to process each transaction. ____ 1. A $10 cash payment is made to Starbucks to purchase coffee for a business client. ____ 2.
M8-7 Identifying Internal Control Weaknesses in Descriptions of Cash Payment Processes Each situation below describes an internal control weakness in the cash payments process. Identify which of the five internal control principles is violated, explain the weakness, and then suggest a change that
M8-6 Matching Cash Payment Processes to Internal Control Principles Match each of the following cash payment activities to the internal control principle to which it best relates by entering the appropriate letter in the space provided. ____ 1. The business manager has the only key to the check A.
M8-5 Identifying Internal Control Weaknesses in Descriptions of Cash Receipts Process Each situation below describes an internal control weakness in the cash receipts process. Identify which of the five internal control principles is violated, explain the weakness, and then suggest a change that
M8-4 Matching Cash Receipt Processes to Internal Control Principles Match each of the following cash receipt activities to the internal control principle to which it best relates, by entering the appropriate letter in the space provided. ____ 1. A list of checks received in the mail is prepared. A.
M8-3 Identifying Internal Control Principles Applied by a Merchandiser Identify the internal control principle represented by each point in the following diagram.Identify the internal control principle represented by each point in the following diagram. 1. One office employee places all merchan-
M8-2 Identifying Internal Control Procedures and Principles Fox Erasing has a system of internal control with the following procedures. Match the procedure to the corresponding internal control principle. Procedure Internal Control Principle ____ 1. The treasurer signs checks. ____ 2. The treasurer
M8-1 Classifying Sarbanes-Oxley (SOX) Objectives and Requirements Match each of the following SOX requirements to the corresponding objective by entering the appropriate letter in the space provided. ____ 1. Establish a tip line for employees A. Counteract incentives for fraud. to report
10. Assume a business has $2,000 cash in its checking account on August 1. On August 2, the business writes a check to establish a $100 petty cash fund. Later in the month, cash payments totaling $20 are made out of the fund and checks totaling $350 are written (including a check to replenish the
9. Upon review of the most recent bank statement, you discover that a check made out to your supplier for $86 was recorded in your Cash and Accounts Payable accounts as $68. Which of the following describes the actions to be taken when preparing your bank reconciliation? Balance per Bank Balance
8. Upon review of your company’s bank statement, you discover that you recently deposited a check from a customer that was rejected by your bank as NSF. Which of the following describes the actions to be taken when preparing your company’s bank reconciliation? Balance per Bank Balance per
7. Which of the following explains why almost all businesses use banking services?a. Banking services allow the business to keep only a minimal amount of cash on hand.b. Banking services make it easier for the business to transact with other businesses.c. Banking services enable the business to
6. Which of the following documents is least likely to be included in a voucher?a. Purchase order.b. Invoice.c. Purchase requisition.d. Remittance advice.
5. At most movie theaters, one employee collects cash and issues a receipt, and another employee collects the tear-away portion of that receipt. Which of the following internal control principles does this description best illustrate?a. Segregate duties.b. Establish responsibility.c. Restrict
4. Which of the following internal control principles underlies the requirement that all customers be given a sales receipt?a. Segregate duties.b. Establish responsibility.c. Restrict access.d. Document procedures.
3. Which of the following internal control principles is best exemplified by hiring internal auditors?a. Segregate duties.b. Establish responsibility.c. Restrict access.d. Independently verify.
2. Which of the following does not enhance internal control?a. Assigning different duties to different employees.b. Ensuring adequate documentation is maintained.c. Allowing access only when required to complete assigned duties.d. None of the above—all enhance internal control.
1. Which of the following was required of publicly traded companies prior to the laws arising from SOX?a. Internal control report from management.b. Internal control audit by external auditors.c. Financial statement audit by external auditors.d. Tip lines for anonymously submitting concerns about
21. Define cash and indicate the types of items that should be reported as cash. Define cash equivalents and give two examples of a cash equivalent.
20. What are the purposes of a bank reconciliation? What balances are reconciled?
19. Describe three ways in which banking services help businesses control cash.
18. In what ways is a petty cash system similar to and different from an imprest payroll system?
17. What is the primary internal control goal for cash payments?
16. How is cash received in person independently verified?
15. What internal control functions are performed by a cash register? How are these functions performed when cash is received by mail?
14. What is the primary internal control goal for cash receipts?
13. What are the three limitations of internal control?
12. In what way does a mandatory vacation policy act as a control?
11. In what ways can independent verification occur?
10. In what ways does documentation act as a control?
9. What are some of the methods for restricting access?
8. Why should responsibilities for certain duties, like cash handling and cash recording, be separated? What specific responsibilities should be separated?
7. Why is it a good idea to assign each task to only one employee?
6. What are five common internal control principles?
5. From the perspective of a CEO or CFO, what does internal control mean?
4. What aspect(s) of the Sarbanes-Oxley Act of 2002 might allow the good character of employees to prevail?
3. What aspect(s) of the Sarbanes-Oxley Act of 2002 might reduce opportunities for fraud?
2. What aspect(s) of the Sarbanes-Oxley Act of 2002 might counteract the incentive to commit fraud?
1. What are internal controls and why are they needed?
CP7-5 Calculating and Recording the Effects of Lower of Cost or Market (LCM) on Ending Inventory Assume you recently obtained a job in the Miami head office of Perfumania, the largest specialty retailer of discounted fragrances in the United States. Your job is to estimate the amount of write-down
CP7-4 Making Ethical Decisions: A Mini Case David Exler is the CEO of AquaGear Enterprises, a seven-year-old manufacturer of boats. After many long months of debate with the company’s board of directors, David obtained the board’s approval to expand into water ski sales. David firmly believed
CP7-3 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
CP7-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s 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. 1. Does Lowe’s hold more or less
CP7-1 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 section of the text’s Web site at www.mhhe.com/LLPW1e. 1. How much inventory does the company hold at the end of the most
PB7-8 (Supplement B) Estimating Inventory Using the Retail Inventory Method Indieser, Inc.’s accounting records indicated the following at the end of the quarter: Cost Retail Beginning inventory $252,000 $ 315,000 Purchases 676,000 845,000 Goods available for sale 928,000 1,160,000 Sales 980,000
PB7-7 (Supplement B) Estimating Inventory Using the Gross Profit Method Greeley & Morgan, LLP uses the gross profit method to estimate cost of goods sold and ending inventory for its quarterly financial statements. Last year, net sales were $328,125 and cost of goods sold were $210,000. Its
PB7-6 (Supplement A) Analyzing the Effects of Three Inventory Methods in a Periodic Inventory System Using the information in PB7-1, calculate the cost of goods sold and ending inventory under (a) FIFO, (b) LIFO, and (c) weighted average in combination with a periodic inventory system. (Round the
PB7-5 Calculating and Interpreting the Inventory Turnover Ratio and Days to Sell Amazon.com reported the following amounts in its financial statements (in millions): Current Year Prior Year Net sales revenue $8,490 $6,921 Cost of sales 6,451 5,319 Beginning inventory 480 294 Ending inventory 566
PB7-4 Analyzing and Interpreting the Effects of Inventory Errors “Oops, I Did It Again” was the song being sung by the accountants at Spears & Cantrell when they announced inventory had been overstated by $30 (million) at the end of the second quarter. The error was not discovered and corrected
PB7-3 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market Mondetta Clothing prepared its annual financial statements dated December 31, 2008. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary 2008
PB7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Perpetual Inventory System Mojo Industries uses a perpetual inventory system. At the end of the accounting period, January 31, 2009, the inventory records showed the following for an item that sold at $9 per unit: Transactions
PA7-8 (Supplement B) Estimating Inventory Using the Retail Inventory Method Fleming Enterprises’ accounting records indicated the following at the end of the quarter: Cost Retail Beginning inventory $ 84,000 $112,000 Purchases 318,000 424,000 Goods available for sale $402,000 $536,000 Sales
PA7-7 (Supplement B) Estimating Inventory Using the Gross Profit Method Bunky’s Business Solutions uses the gross profit method to estimate cost of goods sold and ending inventory for its quarterly financial statements. Last year, net sales were $750,000 and cost of goods sold were $540,000. The
PA7-6 (Supplement A) Analyzing the Effects of the LIFO Inventory Method in a Periodic Inventory System Using the information in PA7-1, calculate the cost of goods sold and ending inventory under (a) FIFO, (b) LIFO, and (c) weighted average in combination with a periodic inventory system. (Round the
PA7-5 Calculating and Interpreting the Inventory Turnover Ratio and Days to Sell Harman International Industries is a world leading producer of loudspeakers and other electronics products, which are sold under brand names like JBL, Infinity, and Harman/Kardon. The company reported the following
PA7-4 Analyzing and Interpreting the Effects of Inventory Errors The income statement for Sherwood Company summarized for a four-year period shows the following: 2005 2006 2007 2008 Sales revenue $2,000,000 $2,400,000 $2,500,000 $3,000,000 Cost of goods sold 1,400,000 1,660,000 1,770,000 2,100,000
PA7-3 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market Springer Anderson Gymnastics prepared its annual financial statements dated December 31, 2009. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The
PA7-2 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average (Perpetual Inventory) Orion Iron Corp. uses a perpetual inventory system. At the end of the annual accounting period, December 31, 2009, the accounting records provided the following information:
PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Perpetual Inventory System Gladstone Company uses a perpetual inventory system. At the end of the annual accounting period, December 31, 2007, the accounting records for the most popular item in inventory showed the
E7-17 (Supplement B) Estimating Inventory Using the Retail Inventory Method Ralph’s Clothing’s accounting records indicated the following at the end of the quarter: Cost Retail Beginning inventory $26,000 $ 41,600 Purchases 48,000 76,800 Goods available for sale 74,000 118,400 Sales 100,400
E7-16 (Supplement B) Estimating Inventory Using the Gross Profit Method Hartman Co.’s accounting records contained the following information related to the month of November: Beginning inventory $16,000 Purchases 52,000 Net sales 75,000 Estimated gross profit percentage 30% Estimate cost of goods

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