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business
principles financial accounting
Financial Accounting 8th Edition Paul D Kimmel, Jerry J Weygandt, Donald E Kieso - Solutions
An inexperienced bookkeeper prepared the following trial balance that does not balance. Prepare a correct trial balance, assuming all account balances are normal. LO9 BIRELLIE COMPANY Trial Balance December 31, 2017 Debit Credit Cash $20,800 Prepaid Insurance $ 3,500 Accounts Payable 2,500 Unearned
Boyd Docker recorded the following transactions during the month of April. LO9 Apr. 3 Cash 3,400 Service Revenue 3,400 16 Rent Expense 500 Cash 500 20 Salaries and Wages Expense 300 Cash 300 Post these entries to the Cash account of the general ledger to determine the ending balance in cash. The
The following accounts are taken from the ledger of Chillin’ Company at December 31, 2017. LO9 Notes Payable $20,000 Cash $6,000 Common Stock 25,000 Supplies 5,000 Equipment 76,000 Rent Expense 2,000 Dividends 8,000 Salaries and Wages Payable 3,000 Salaries and Wages Expense 38,000 Accounts
Brady Company entered into these transactions during May 2017, its fi rst month of operations. LO9 1. Stockholders invested $40,000 in the business in exchange for common stock of the company.2. Purchased computers for office use for $30,000 from Ladd on account.3. Paid $4,000 cash for May rent on
During 2017, its fi rst year of operations as a delivery service, Persimmon Corp.entered into the following transactions. LO9 1. Issued shares of common stock to investors in exchange for $100,000 in cash.2. Borrowed $45,000 by issuing bonds.3. Purchased delivery trucks for $60,000 cash.4. Received
A tabular analysis of the transactions made during August 2017 by Wolfe Company during its fi rst month of operations is shown below. Each increase and decrease in stockholders’ LO9 equity is explained.Analyze transactions and compute net income.(LO 1), AP Assets = Liabilities + Stockholders’
Selected transactions for Front Room, an interior decorator corporation, in its fi rst month of business, are as follows. LO9 1. Issued stock to investors for $15,000 in cash.2. Purchased used car for $10,000 cash for use in business.3. Purchased supplies on account for $300.4. Billed customers
This information relates to McCall Real Estate Agency. LO9 Oct. 1 Stockholders invest $30,000 in exchange for common stock of the corporation.2 Hires an administrative assistant at an annual salary of $36,000.3 Buys office furniture for $3,800, on account.6 Sells a house and lot for E. C. Roads;
Transaction data for McCall Real Estate Agency are presented in E3-8. LO9 Instructions Journalize the transactions. Do not provide explanations.
The T-accounts below summarize the ledger of Salvador’s Gardening Company, Inc.at the end of the fi rst month of operations. LO9 Cash Apr. 1 15,000 Apr. 15 800 12 700 25 3,500 29 800 30 900 Accounts Receivable Apr. 7 3,400 Apr. 29 800 Supplies Apr. 4 5,200 Accounts Payable Apr. 25 3,500 Apr. 4
Selected transactions from the journal of Baylee Inc. during its fi rst month of operations are presented here. LO9 Date Account Titles Debit Credit Aug. 1 Cash 8,000 Common Stock 8,000 10 Cash 1,700 Service Revenue 1,700 12 Equipment 6,200 Cash 1,200 Notes Payable 5,000 25 Accounts Receivable
Here is the ledger for Kriscoe Co. LO9 Cash Oct. 1 7,000 Oct. 4 400 10 980 12 1,500 10 8,000 15 250 20 700 30 300 25 2,000 31 500 Accounts Receivable Oct. 6 800 Oct. 20 700 20 920 Supplies Oct. 4 400 Oct. 31 180 Common Stock Oct. 1 7,000 25 2,000 Dividends Oct. 30 300 Service Revenue Oct. 6 800 10
The bookkeeper for Birmingham Corporation made these errors in journalizing and posting. LO9 1. A credit posting of $400 to Accounts Receivable was omitted.2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.3. A collection on account of $100 was journalized and posted
The accounts in the ledger of Rapid Delivery Service contain the following balances on July 31, 2017. LO9 Accounts Receivable $13,400 Prepaid Insurance $ 2,200 Accounts Payable 8,400 Service Revenue 15,500 Cash ? Dividends 700 Equipment 59,360 Common Stock 40,000 Maintenance and Salaries and Wages
Review the transactions listed in E3-1 for Thyme Advertising Company. Classify each transaction as either an operating activity, investing activity, or fi nancing activity, or if no cash is exchanged, as a noncash event. LO9
Review the transactions listed in E3-3 for Persimmon Corp. Classify each transaction as either an operating activity, investing activity, or fi nancing activity, or if no cash is exchanged, as a noncash event. LO9
Nona Curry started her own consulting fi rm, Curry Consulting Inc., on May 1, 2017. The following transactions occurred during the month of May. LO9 May 1 Stockholders invested $15,000 cash in the business in exchange for common stock.2 Paid $600 for offi ce rent for the month.3 Purchased $500 of
This is the trial balance of Lacey Company on September 30. LO9 LACEY COMPANY Trial Balance September 30, 2017 Debit Credit Cash $19,200 Accounts Receivable 2,600 Supplies 2,100 Equipment 8,000 Accounts Payable $ 4,800 Unearned Service Revenue 1,100 Common Stock 15,000 Retained Earnings
This trial balance of Washburn Co. does not balance. LO9 WASHBURN CO.Trial Balance June 30, 2017 Debit Credit Cash $ 3,090 Accounts Receivable $ 3,190 Supplies 800 Equipment 3,000 Accounts Payable 3,686 Unearned Service Revenue 1,200 Common Stock 9,000 Dividends 800 Service Revenue 3,480 Salaries
The bookkeeper for Roger’s Dance Studio made the following errors in journalizing and posting. LO9 1. A credit to Supplies of $600 was omitted.2. A debit posting of $300 to Accounts Payable was inadvertently debited to Accounts Receivable.3. A purchase of supplies on account of $450 was debited
The fi nancial statements of Apple Inc. in Appendix A at the back of this textbook contain the following selected accounts, all in thousands of dollars. LO9 Common Stock $ 23,313 Accounts Payable 30,196 Accounts Receivable 17,460 Selling, General, and Administrative Expenses 11,993 Inventories
The fi nancial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. LO9 Instructions(a) Based on the information contained in these fi nancial statements, determine the normal balance for:Columbia Sportswear VF
Amazon.com, Inc.’s fi nancial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. LO9 Instructions(a) Based on the information contained in the fi nancial statements, determine the normal balance of the listed accounts for each
Saira Morrow operates Dressage Riding Academy, Inc. The academy’s primary sources of revenue are riding fees and lesson fees, which are provided on a cash basis. Saira also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders pay in advance of expected use.
Identify the sections of a classifi ed balance sheet. LO8
Use ratios to evaluate a company’s profi tability, liquidity, and solvency. LO8
Discuss fi nancial reporting concepts. LO8
Current assets are listed: LO8(a) by order of expected conversion to cash.(b) by importance.(c) by longevity.(d) alphabetically.
The balance in retained earnings is not affected by: LO8(a) net income.(b) net loss.(c) issuance of common stock.(d) dividends.
Which is an indicator of profi tability? LO8(a) Current ratio.(b) Earnings per share.(c) Debt to assets ratio.(d) Free cash fl ow.
For 2017, Spanos Corporation reported net income $26,000, net sales $400,000, and weightedaverage shares outstanding 4,000. There were preferred dividends of $2,000. What was the 2017 earnings per share? LO8(a) $6.00. (c) $99.50.(b) $6.50. (d) $100.00.
Which of these measures is an evaluation of a company’s ability to pay current liabilities? LO8(a) Earnings per share.(b) Current ratio.(c) Both (a) and (b).(d) None of the above.
The following ratios are available for Reilly Inc. and O’Hare Inc.Current Debt to Earnings Ratio Assets Ratio per Share Reilly Inc. 2:1 75% $3.50 O’Hare Inc. 1.5:1 40% $2.75 Compared to O’Hare Inc., Reilly Inc. has: LO8(a) higher liquidity, higher solvency, and higher profi tability.(b) lower
Companies can use free cash fl ow to: LO8(a) pay additional dividends.(b) acquire more property, plant, and equipment.(c) pay off debts.(d) All of the above.
What is the primary criterion by which accounting information can be judged? LO8(a) Consistency.(b) Predictive value.(c) Usefulness for decision-making.(d) Comparability.
Neutrality is an ingredient of: LO8 Faithful Representation Relevance(a) Yes Yes(b) No No(c) Yes No(d) No Yes
The characteristic of information that evaluates whether it is large enough to impact a decision. LO8(a) Comparability. (c) Cost.(b) Materiality. (d) Consistency
Suppose the following information (in thousands of dollars) is available for H. J. Heinz Company—famous for ketchup and other fi ne food products—for the year ended April 30, 2017. LO8 Prepaid insurance $ 168,182 Buildings $4,344,269 Land 56,007 Cash 617,687 Goodwill 4,411,521 Accounts
Suppose the following data were taken from the 2017 and 2016 fi nancial statements of American Eagle Outfi tters. (All dollars are in thousands.) LO8 2017 2016 Current assets $1,020,834 $1,189,108 Total assets 1,867,680 1,979,558 Current liabilities 376,178 464,618 Total liabilities 527,216 562,246
Listed here are items taken from the income statement and balance sheet of Bargain Electronics, Inc. for the year ended December 31, 2017. Certain items have been combined for simplifi cation. (Amounts are given in thousands.) LO8 Notes payable (due in 3 years) $ 50.5 Cash 141.1 Salaries and wages
What is meant by the term operating cycle? LO8
Define current assets. What basis is used for ordering individual items within the current assets section? LO8
Distinguish between long-term investments and property, plant, and equipment. LO8
How do current liabilities differ from long-term liabilities? LO8
Identify the two parts of stockholders’ equity in a corporation and indicate the purpose of each. LO8
Name ratios useful in assessing (a) liquidity,(b) solvency, and (c) profitability. LO8
What do these classes of ratios measure? LO8(a) Liquidity ratios.(b) Profi tability ratios.(c) Solvency ratios.
Holding all other factors constant, indicate whether each of the following signals generally good or bad news about a company. LO8(a) Increase in earnings per share.(b) Increase in the current ratio.(c) Increase in the debt to assets ratio.(d) Decrease in free cash fl ow.
(a) What are generally accepted accounting principles(GAAP)?(b) What body provides authoritative support for GAAP? LO8
(a) What is the primary objective of financial reporting?(b) Identify the characteristics of useful accounting information. LO8
What is the distinction between comparability and consistency? LO8
Describe the constraint inherent in the presentation of accounting information. LO8
Your roommate believes that accounting standards are uniform throughout the world. Is your roommate correct? Explain. LO8
What is the economic entity assumption? Give an example of its violation. LO8
What was Apple’s largest current asset, largest current liability, and largest item under “Assets” at September 27, 2014? LO8
The accompanying chart shows the qualitative characteristics of useful accounting information. Fill in the blanks. LO8 Fundamental Qualities Relevance (a)(b)(c)Faithful Representation (d)Neutral (e)Enhancing Qualities (f)(g)(h)Understandability Usefulness
Mylar Corporation has collected the following information related to its December 31, 2017, balance sheet. LO8 Accounts receivable $22,000 Equipment $180,000 Accumulated depreciation—equipment 50,000 Inventory 58,000 Cash 13,000 Supplies 7,000 Prepare the assets section of Mylar Corporation’s
The following fi nancial statement items were taken from the fi nancial statements of Gomez Corp. LO8 ____ Trademarks ____ Inventory ____ Notes payable (current) ____ Accumulated depreciation ____ Interest revenue ____ Land ____ Income taxes payable ____ Common stock ____ Debt investments
The following information is available for Nguoi Corporation. LO8 2017 2016 Current assets $ 54,000 $ 36,000 Total assets 240,000 205,000 Current liabilities 22,000 30,000 Total liabilities 72,000 100,000 Net income 80,000 40,000 Net cash provided by operating activities 90,000 56,000 Preferred
The following characteristics, assumptions, principles, and constraint guide the FASB when it creates accounting standards.Relevance Periodicity assumption Faithful representation Going concern assumption Comparability Historical cost principle Consistency Full disclosure principle Monetary unit
The following are the major balance sheet classifi cations.Current assets (CA) Current liabilities (CL)Long-term investments (LTI) Long-term liabilities (LTL)Property, plant, and equipment (PPE) Stockholders’ equity (SE)Intangible assets (IA) LO8 Instructions Classify each of the following
The major balance sheet classifications are listed in E2-1. LO8 Instructions Classify each of the following financial statement items based upon the major balance sheet classifications listed in E2-1.____ Prepaid advertising ____ Patents ____ Equipment ____ Bonds payable ____ Trademarks ____ Common
Suppose the following items were taken from the December 31, 2017, assets section of the Boeing Company balance sheet. (All dollars are in millions.) LO8 Inventory $16,933 Patents $12,528 Notes receivable—due after Buildings 21,579 December 31, 2018 5,466 Cash 9,215 Notes receivable—due before
Suppose the following information (in thousands of dollars) is available for H. J. Heinz Company—famous for ketchup and other fine food products—for the year ended April 30, 2017. LO8 Prepaid insurance $ 125,765 Buildings $4,033,369 Land 76,193 Cash 373,145 Goodwill 3,982,954 Accounts
Suppose the following items were taken from the 2017 financial statements of Texas Instruments, Inc. (All dollars are in millions.) LO8 Common stock $2,826 Accumulated depreciation—Prepaid rent 164 equipment $3,547 Equipment 6,705 Accounts payable 1,459 Stock investments (long-term) 637 Patents
Nordstrom, Inc. operates department stores in numerous states. Selected fi nancial statement data (in millions of dollars) for a recent year follow. LO8 End of Year Beginning of Year Cash and cash equivalents $ 72 $ 358 Receivables (net) 1,942 1,788 Merchandise inventory 900 956 Other current
The chief fi nancial offi cer (CFO) of Myeneke Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2017, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to
Suppose the following data were taken from the 2017 and 2016 fi nancial statements of American Eagle Outfi tters. (All numbers, including share data, are in thousands.) LO8 2017 2016 Current assets $ 925,359 $1,020,834 Total assets 1,963,676 1,867,680 Current liabilities 401,763 376,178 Total
Presented below are the assumptions and principles discussed in this chapter. LO8 1. Full disclosure principle 4. Periodicity assumption 2. Going concern assumption 5. Historical cost principle 3. Monetary unit assumption 6. Economic entity assumption Instructions Identify by number the accounting
Comparative fi nancial statement data for Loeb Corporation and Bowsh Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2017. LO8 Loeb Corporation Bowsh Corporation 2017 2017 Net sales $1,800,000 $620,000 Cost of goods sold 1,175,000 340,000 Operating expenses
The following are fi nancial statements of Ohara Company. LO8 OHARA COMPANY Income Statement For the Year Ended December 31, 2017 Net sales $2,218,500 Cost of goods sold 1,012,400 Selling and administrative expenses 906,000 Interest expense 78,000 Income tax expense 69,000 Net income $ 153,100
Condensed balance sheet and income statement data for Danke Corporation are presented as follows. LO8 DANKE CORPORATION Balance Sheets December 31 2017 2016 Assets Cash $ 28,000 $ 20,000 Receivables (net) 70,000 62,000 Other current assets 90,000 73,000 Long-term investments 62,000 60,000 Property,
Selected fi nancial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) Suppose the data were taken from the 2017 fi nancial statements of each company. LO8 Target Wal-Mart (1/31/17) (1/31/17)Income Statement Data for Year Net sales $64,948 $401,244 Cost
After investigating the different forms of business organization, Natalie Koebel decides to operate her business as a corporation, Cookie Creations Inc. She then begins LO8 the process of getting her business running.
The fi nancial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Assume Columbia’s weighted-average number of shares outstanding was 227,514,000, and VF’s was 56,997,000. LO8 Instructions(a) For each
Suppose the following information was reported by Gap, Inc. LO8 2017 2016 2015 2014 2013 Total assets (millions) $7,065 $7,985 $7,564 $7,838 $8,544 Working capital $1,831 $2,533 $1,847 $1,653 $2,757 Current ratio 1.87:1 2.19:1 1.86:1 1.68:1 2.21:1 Debt to assets ratio .42:1 .39:1 .42:1 .45:1 .39:1
As a fi nancial analyst in the planning department for Erin Industries, Inc., you must develop ratios from the comparative fi nancial statements. This information is to be used to convince creditors that, despite a slight decline in sales, Erin Industries, Inc. is liquid, solvent, and profi table,
B. P. Palmer is the chief executive offi cer of Future Products. Palmer is an expert engineer but a novice in accounting. LO8 Instructions Write a letter to B. P. Palmer that explains (a) the three main types of ratios; (b) examples of each, how they are calculated, and what they measure; and (c)
Current assets under IFRS are listed generally: LO8(a) by importance.(b) in the reverse order of their expected conversion to cash.(c) by longevity.(d) alphabetically.
In what ways does the format of a statement of financial of position under IFRS often differ from a balance sheet presented under GAAP? LO8
What term is commonly used under IFRS in reference to the balance sheet? LO8
Identify the forms of business organization and the uses of accounting information. (LO 3)
Explain the three principal types of business activity. (LO 3)
Describe the four fi nancial statements and how they are prepared. (LO 3)
Which is not one of the three forms of business organization? (LO 3)(a) Sole proprietorship. (c) Partnership.(b) Creditorship. (d) Corporation.
Which is not one of the three primary business activities? (LO 3)(a) Financing. (c) Advertising.(b) Operating. (d) Investing.
Which of the following is an example of a fi nancing activity? (LO 3)(a) Issuing shares of common stock.(b) Selling goods on account.(c) Buying delivery equipment.(d) Buying inventory.
Net income will result during a time period when: (LO 3)(a) assets exceed liabilities.(b) assets exceed revenues.(c) expenses exceed revenues.(d) revenues exceed expenses.
Which statement presents information as of a specifi c point in time? (LO 3)(a) Income statement.(b) Balance sheet.(c) Statement of cash fl ows.(d) Retained earnings statement.
Which fi nancial statement reports assets, liabilities, and stockholders’ equity? (LO 3)(a) Income statement.(b) Retained earnings statement.(c) Balance sheet.(d) Statement of cash fl ows.
Stockholders’ equity represents: (LO 3)(a) claims of creditors.(b) claims of employees.(c) the difference between revenues and expenses.(d) claims of owners.
As of December 31, 2017, Rockford Corporation has assets of $3,500 and stockholders’ equity of $1,500.What are the liabilities for Rockford Corporation as of December 31, 2017? (LO 3)(a) $1,500. (c) $2,500.(b) $1,000. (d) $2,000.
The following items and amounts were taken from Ricardo Inc.’s 2017 income statement and balance sheet.(LO 3)Cash $ 84,700 Inventory $ 64,618 Retained earnings 123,192 Accounts receivable 88,419 Cost of goods sold 483,854 Sales revenue 693,485 Salaries and wages expense 125,000 Income taxes
Cozy Bear is a private camping ground near the Mountain Home Recreation Area. It has compiled the following fi nancial information as of December 31, 2017.(LO 3)Service revenue (from camping fees) $148,000 Dividends $ 9,000 Sales revenue (from general store) 35,000 Notes payable 50,000 Accounts
What are the three basic forms of business organizations?(LO 3)
What are the advantages to a business of being formed as a corporation? What are the disadvantages?(LO 3)
What are the advantages to a business of being formed as a partnership or sole proprietorship? What are the disadvantages?(LO 3)
“Accounting is ingrained in our society and is vital to our economic system.” Do you agree? Explain.(LO 3)
Who are the internal users of accounting data?How does accounting provide relevant data to the internal users?(LO 3)
Who are the external users of accounting data? Give examples.(LO 3)
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