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business
principles financial accounting
Financial Accounting 8th Edition Paul D Kimmel, Jerry J Weygandt, Donald E Kieso - Solutions
Discover errors in recording transac¬ tions and correct them.AppendixLO1
Use horizontal analysis to compare financial statements from different periods.AppendixLO1
A debit may signify:A. an increase in an asset account.B. a decrease in an asset account.C. an increase in a liability account.D. an increase in the capital stock account.AppendixLO1
The type of account with a nomial credit balance is:A. an asset. C. a revenue.B. dividends. D. an expense.AppendixLO1
A debit balance in which of the following accounts would indicate a likely error?A. Accounts Receivable B. Cash C. Fees Earned D. Miscellaneous Expense AppendixLO1
The receipt of cash from customers in payment of their accounts would be recorded by a:A. debit to Cash; credit to Accounts Receivable.B. debit to Accounts Receivable; credit to Cash.C. debit to Cash; credit to Accounts Payable.D. debit to Accounts Payable; credit to Cash.AppendixLO1
The form listing the titles and balances of the ac¬ counts in the ledger on a given date is the:A. income statement.B. balance sheet.C. retained earnings statement.D. trial balance.AppendixLO1
What is the difference between an account and a ledger?AppendixLO1
Do the terms debit and credit signify increase or decrease or can they signify either? Explain.AppendixLO1
Explain why the rules of debit and credit are the same for liability accounts and stockholders’ equity accounts.AppendixLO1
What is the effect (increase or decrease) of a debit to an expense account (a) in terms of retained earnings and (b) in terms of expense?AppendixLO1
What is the effect (increase or decrease) of a credit to a revenue account (a) in terms of retained earnings and (b) in terms of revenue?AppendixLO1
Kemp Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of August 31 has a credit balance of $3,000, and there is no undeposited cash on hand, (a) Assuming no errors occurred during journalizing or posting, what caused
McElwee Company performed services in May for a specific customer for a fee of $7,500. Payment was received the following June, (a) Was the revenue earned in May or June? (b) What accounts should be debited and credited in (1) May and (2) June?AppendixLO1
What proof is provided by a trial balance?AppendixLO1
If the two totals of a trial balance are equal, does it mean that there are no er¬ rors in the accounting records? Explain.AppendixLO1
Assume that a trial balance is prepared with an account balance of $18,950 listed as $18,590 and an account balance of $7,200 listed as $720. Identify the trans¬ position and the slide.AppendixLO1
Assume that when a purchase of supplies of $1,250 for cash was recorded, both the debit and the credit were journalized and posted as $1,520. (a) Would this error cause the trial balance to be out of balance? (b) Would the trial balance be out of balance if the $1,250 entry had been journalized
A,ssume that Margarita Consulting erroneously recorded the payment of $7,500 of dividends as a debit to salary expense, (a) How would this error affect the Chapter 2 • Analyzing Transactions 81 RtMWOMO equality of the trial balance? (b) How would this error affect the income state¬ ment,
Assume that Blitzkrieg Realty Co. borrowed $25,000 from First Union Bank and Trust. In recording the transaction, Blitzkrieg erroneously recorded the receipt of $25,000 as a debit to cash, $25,000, and a credit to fees earned, $25,000. (a) How would this error affect the equality of the trial
In journalizing and posting the entry to record the purchase of supplies on ac¬ count, the accounts receivable account was credited in error. What is the pre¬ ferred procedure to correct this error?AppendixLO1
Banks rely heavily upon customers’ deposits as a source of funds. Demand de¬ posits normally pay interest to the customer, who is entitled to withdraw at any time without prior notice to the bank. Checking and NOW (negotiable order of withdrawal) accounts are the most common form of demand
Explain how the matching concept relates to the accrual basis of accounting.AppendixLO1
Explain why adjustments are neces- C-.: sary and list the characteristics of adjusting entries.AppendixLO1
Journalize entries for accounts requir-ing adjustment.AppendixLO1
Summarize the adjustment process and prepare an adjusted trial balance.AppendixLO1
Use vertical analysis to compare finan¬ cial statement items with each other and with industry averages.AppendixLO1
Which of the following items represents a deferral?A. Prepaid insurance B. Wages payable C. Fees earned D. Accumulated depreciation AppendixLO1
If the supplies account, before adjustment on May 31, indicated a balance of $2,250, and supplies on hand at May 31 totaled $950, the adjusting entry would be:A. debit Supplies, $950; credit Supplies Expense, $950.B. debit Supplies, $1,300; credit Supplies Expense,$1,300.C. debit Supplies Expense,
The balance in the unearned rent account for Jones Co. as of December 31 js $1,200. If Jones Co. failed to record the adjusting entry for $600 of rent earned during December, the effect on the balance sheet and income statement for December is:A. assets understated $600; net income
If the estimated amount of depreciation on equip¬ ment for a period is $2,000, the adjusting entry to record depreciation would be:A. debit Depreciation Expense, $2,000; credit Equip¬ ment, $2,000.B. debit Equipment, $2,000; credit Depreciation Ex¬ pense, $2,000.C. debit Depreciation Expense,
How are revenues and expenses reported on the income statement under (a) the cash basis of accounting and (b) the accrual basis of accounting?AppendixLO1
Fees for services provided are billed to a customer during 2005. The customer remits the amount owed in 2006. During which year would the revenues be re¬ ported on the income statement under (a) the cash basis? (b) the accrual basis?AppendixLO1
Employees performed seivices in 2005, but the wages were not paid until 2006. During which year would the wages expense be reported on the income state¬ ment under (a) the cash basis? (b) the accrual basis?AppendixLO1
Is the matching concept related to (a) the cash basis of accounting or (b) the accrual basis of accounting?AppendixLO1
Is the balance listed for cash on the trial balance, before the accounts have been adjusted, the amount that should normally be reported on the balance sheet? Explain.AppendixLO1
Is the balance listed for supplies on the trial balance, before the accounts have been adjusted, the amount that should normally be reported on the balance sheet? Explain.AppendixLO1
Why are adjusting entries needed at the end of an accounting period?AppendixLO1
What is the difference between adjusting entries and correcting entries^AppendixLO1
Identify the five different categories of adjusting entries frequently required at the end of an accounting period.AppendixLO1
If the effect of the credit portion of an adjusting entiy is to increase the balance of a liability account, which of the following statements describes the effect of the debit portion of the entiy?a. Increases the Ivalance of a revenue account.b. Increases the balance of an expense account.c.
Does eveiy adjusting entiy have an effect on determining the amount of net in¬ come for a period? Explain.AppendixLO1
What is the nature of the balance in the prepaid insurance account at the end of the accounting period (a) Ivefore adjustment? (b) after adjustment?AppendixLO1
On August I of the current year, a business paid the August rent on the build¬ ing that it occupies, (a) Do the rights acquired at August 1 represent an asset or an expense? (b) What is the justification for debiting Rent Expense at the time of payment?AppendixLO1
(a) Explain the purpose of the two accounts: Depreciation Expen.se and Accu¬ mulated Depreciation, (b) What is the normal balance of each account? (c) Is it CListomaiy for the balances of the two accounts to be equal in amount? (d) In what financial statements, if any, will each account
Review the seven basic steps of the accounting cycle.AppendixLO1
Prepare a work sheet.AppendixLO1
Prepare financial statements from a work sheet AppendixLO1
Prepare the adjusting and closing entries from a work sheet.AppendixLO1
Explain what is meant by the fiscal year and the natural business year.AppendixLO1
Analyze and interpret the financial solvency of a business by computing working capital and the current ratio.AppendixLO1
Which of the following accounts in the Adjusted Trial Balance columns of the work sheet would be extended to the Balance Sheet columns?A. Utilities Expense C. Dividends B. Rent Revenue D. Miscellaneous Expense AppendixLO1
Which of the following accounts would be classi¬ fied as a current asset on the balance sheet?A. Office Equipment B. Land C. Accumulated Depreciation D. Accounts Receivable AppendixLO1
Which of the following entries closes the dividends account at the end of the period?A. Debit the dividends account, credit the income summary account;B. Debit the retained earnings account, credit the dividends account.C. Debit the income summary account, credit the dividends account.D. Debit the
Which of the following accounts would not be closed to the income summary account at the end of a period?A. Fees Earned B. Wages Expense C. Rent Expense D. Accumulated Depreciation AppendixLO1
Which of the following accounts would not be in¬ cluded in a post-closing trial balance?A. Cash B. Fees Earned C. Accumulated Depreciation D. Capital Stock AppendixLO1
(a) What is the most important output of the accounting cycle? (b) Do all com¬ panies have an accounting cycle? Explain.AppendixLO1
Is the work sheet a substitute for the financial statements? Discuss.AppendixLO1
In the Income Statement columns of the work sheet, the Debit column total is greater than the Credit column total before the amount for the net income or net loss has been included. Would the income statement report a net income or a net loss? Explain.AppendixLO1
In the Balance Sheet columns of the work sheet for Teton Co. for the current year, the Debit column total is $68,500 greater than the Credit column total be¬ fore the amount for net income or net loss has been included. Would the in¬ come statement report a net income or a net loss?
Describe the nature of the assets that compose the following sections of a bal¬ ance sheet: (a) current assets, (b) property, plant, and equipment.AppendixLO1
What is the difference between a current liability and a long-term liability?AppendixLO1
What types of accounts are referred to as temporary accounts?AppendixLO1
Why are closing entries required at the end of an accounting period?AppendixLO1
What is the difference between adjusting entries and closing entries?AppendixLO1
Describe the four entries that close the temporary accounts.AppendixLO1
What is the purpose of the post-closing trial balance?AppendixLO1
What is the natural business year?AppendixLO1
Why might a department store select a fiscal year ending January 31, rather than a fiscal year ending December 31?AppendixLO1
The fiscal years for several well-known companies were as follows:Company Fiscal Year Ending Company Fiscal Year Ending Kmart January 30 Toys "R" Us, Inc.February 3 J.C.Penney January 26 Federated Department Stores February 3 WQMO Zayre Corp.January 26 The Limited, Inc.February 2 Chapter 4 •
If a company has positive working capital, will its current ratio always be greater than 1? Explain.AppendixLO1
Distinguish between multiple-step and single-step income statements. LO3
Explain the computation and importance of gross profit. LO3
Distinguish between departmental and consolidated income statements. LO3
Indicate the primary purpose of the statement of cash flows. LO3
Distinguish among operating, investing, and financing activities. LO3
Prepare a statement of cash flows using the indirect method. LO3
Prepare a statement of cash flows using the direct method. LO3
Titanic Candy reported net income of $2.5 million in 2004. Depreciation for the year was$260,000, accounts receivable decreased $350,000, and accounts payable decreased $310,000.Compute net cash provided by operating activities using the indirect approach. LO3
Kate’s Uniforms Co. has accounts receivable of $14,000 at January 1, 2004, and $24,000 at December 31, 2004. Sales revenues for 2004 were $470,000. What is the amount of cash receipts from customers in 2004? LO3
The T-accounts for Equipment and the related Accumulated Depreciation for Stone Kitchen Equipment Company at the end of 2004 are as follows. LO3 Equipment Accumulated Depreciation Beg. bal. 80,000 Disposals 22,000 Disposals 5,500 Beg. bal. 44,500 Acquisitions 41,600 Depr. 12,000 End. bal. 99,600
The following T-account is a summary of the cash account of Amy’s Candied Apples. LO3 Cash (Summary Form)Balance, 1/1/04 8,000 Receipts from customers 364,000 Payments for goods 200,000 Dividends on stock investments 6,000 Payments for operating expenses 140,000 Proceeds from sale of equipment
Presented below is financial information for two different companies. Compute missing amounts.(SO 1) LO3 Amoruso Tamburri Company Company Sales $90,000 (d)Sales returns (a) $ 5,000 Net sales 83,000 95,000 Cost of goods sold 56,000 (e)Gross profit (b) 38,000 Operating expenses 15,000 (f)Net income
Britney Hotels Corporation had the following transactions during 2004. LO3 1. Issued $50,000 par value common stock for cash.2. Collected $16,000 of accounts receivable.3. Declared and paid a cash dividend of $25,000.4. Sold a long-term investment with a cost of $15,000 for $15,000 cash.5. Issued
The current sections of Depeche Ice balance sheets at December 31, 2003 and 2004, are presented below. LO3 Prepare the operating activities section—indirect method.(SO 6)DEPECHE ICE Comparative Balance Sheets (partial)December 31 2004 2003 Current assets Cash $105,000 $ 99,000 Accounts receivable
An analysis of comparative balance sheets, the current year’s income statement, and the LO3 general ledger accounts of Winfrey Movies uncovered the following items. Assume all items involve cash unless there is information to the contrary.1. Issuance of capital stock. 8. Purchase of land.2.
The 2004 accounting records of Ryder Beer Co. reveal the following transactions and events. LO3 Payment of interest $ 6,000 Collection of accounts receivable $180,000 Cash sales 38,000 Payment of salaries and wages 65,000 Receipt of dividend revenue 14,000 Depreciation expense 18,000 Payment of
The income statement of Rebecca Sherrick Company is shown below. LO3 REBECCA SHERRICK COMPANY Income Statement For the Year Ended December 31, 2004 Sales $7,100,000 Cost of goods sold Beginning inventory $1,700,000 Purchases 5,430,000 Goods available for sale 7,130,000 Ending inventory 1,920,000
Purpose: Learn about the SEC. LO3 Address: www.sec.gov/index.html Steps 1. From the SEC homepage, choose About the SEC.Instructions Answer the following questions.(a) How many enforcement actions does the SEC take each year against securities law violators?What are typical infractions?(b) After the
A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is:(a) an account receivable.(b) a trade receivable.P8-1A(c) a note receivable.(d) a classifi ed receivable.
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July
Citibank charges 4% for its credit card use. The entry to record this transaction by Good Stuff Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to:(a) Cash $48,000 and Service Charge Expense $2,000.(b) Accounts Receivable $48,000 and Service Charge Expense $2,000.(c) Cash
Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co.The entry to record this transaction is:(a) Notes Receivable 1,030 Accounts Receivable 1,030(b) Notes Receivable 1,000 Accounts Receivable 1,000(c) Notes Receivable 1,000 Sales Revenue 1,000(d) Notes
Schleis Co. holds Murphy Inc.’s $10,000, 120-day, 9%note. The entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrued, is:(a) Cash 10,300 Notes Receivable 10,300(b) Cash 10,000 Notes Receivable 10,000(c) Accounts Receivable 10,300 Notes Receivable
Prall Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of
What is its average collection period (days)?(a) 2,555 (c) 52(b) 30 (d) 210
Troope Supply Co. has the following transactions related to notes receivable during the last 3 months of 2017.Oct. 1 Loaned $16,000 cash to Juan Vasquez on a 1-year, 10% note.Dec. 11 Sold goods to A. Palmer, Inc., receiving a $6,750, 90-day, 8% note.16 Received a $6,400, 6-month, 9% note in
Presented here are selected transactions related to B. Dylan Corp.Mar. 1 Sold $20,000 of merchandise to Potter Company, terms 2/10, n/30.11 Received payment in full from Potter Company for balance due on existing accounts receivable.12 Accepted Juno Company’s $20,000, 6-month, 12% note for
Compute the missing amounts for each of the following notes.Annual Total Principal Interest Rate Time Interest(a) 6% 60 days $ 270$30,000 8% 3 years (d)$60,000 (b) 5 months $2,500$50,000 11% (c) $2,750
Compute interest and find the maturity date for the following notes.Date of Interest Note Principal Rate (%) Terms(a) June 10 $80,000 6% 60 days(b) July 14 $50,000 7% 90 days(c) April 27 $12,000 8% 75 days
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