ACCT 205

What statement would this be reported: cash invested in the business by Ur Mom

SCF

What statement would this be reported: cash received from the sale of land

SCF

Compute the interest accrued on each of the following notes payable owed by Northland Inc. on December 31

$200 (18,000*.10*40/369)

Compute the interest for the following note payable with add on interest Principal = $15,000 Interest Rate = 8% Term = 120 days

$400 ($15,000*0.08*120/360)

The following note transactions occurred during the year for Towell Company: Nov. 25 Towell issued a 90-day, nine percent note payable for $8,000 to Hyatt Company for merchandise. Dec. 7 Towell signed a 120-day, $12,000 note at the bank at ten percent. 22 Towell gave Barr, Inc., a $12,000, ten percent, 60-day note in payment of account. Calculate the amount of the necessary interest accrual for each note payable at December 31

$72 (8,000*0.09*36/360)

Lewis Company uses the allowance method for recording its expected credit losses. It estimates credit losses at 1 percent of credit sales, which were $900,000 during the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for Doubtful Accounts had a balance of $10,200 before adjustment. Determine the amount and the financial statement effect of the adjustment to record credit losses for the year.

$9000 Bad debt expense Income statement: decrease assets (allowance for doubtful accounts) Decrease stockholder's equity Income Statement Increase expenses decrease net income

Miller, Inc., analyzed its accounts receiv- able balances at December 31 and arrived at the aged balances listed below, along with the percent- age that is estimated to be uncollectible 0-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,000 1 31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 2 61-120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 5 121-180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 10 Over 180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 25 $262,00 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,040 on December 31, before any adjustments Determine the amount of the adjustment for estimated credit losses on December 31

($180,000 x 1% = $1,800 40,000 x 2% = 800 22,000 x 5% = 1,100 12,000 x 10% = 1,200 8,000 x 25% = 2,000 6,900 Less: Balance before adjustment 1,040) $5,860

Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: 0-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 1 31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 2 61-120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 5 121-180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 10 Over 180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 25 $131,000 Determine the amount of the adjustment for estimated credit losses on December 31

($90,000 x 1% = $ 900 20,000 x 2% = 400 11,000 x 5% = 550 6,000 x 10% = 600 4,000 x 25% = 1,000 3,450 Less: Balance before adjustment 520) $2,930

A delivery truck costing $18,000 is expected to have a $1,500 salvage value at the end of its useful life of four years or 125,000 miles. Assume that the truck was pur- chased on January 2. Calculate the depreciation expense for the second year using each of the following depreciation methods: straight line method

((18,000-1,500)/4) $1,425

Lewis Company uses the allowance method for recording its expected credit losses. It estimates credit losses at 1 percent of credit sales, which were $900,000 during the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for Doubtful Accounts had a balance of $10,200 before adjustment. Show how accounts receivable and allowance for doubtful accounts would appear in the December 31 balance sheet.

(Accounts receivable $150,000 Less: Allowance for doubtful accounts 19,200 ($10,200 + 9,000)) $130,800

Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at one percent of credit sales, which were $1,800,000 during the year. On December 31, the Accounts Receivable balance was $300,000, and the Allowance for Doubtful Accounts had a credit balance of $20,400 before adjustment Show how accounts receivable and allowance for doubtful accounts would appear in the December 31 balance sheet

(Accounts receivable $300,000 Less: Allowance for doubtful accounts 38,400 $20,400 + $18,000) $261,600

Invoice price ................................................................. $20,000 Applicable sales tax ........................................................... 1,200 Cash discount taken for prompt payment........................................... 400 Freight paid.................................................................. 260 Cost of insurance coverage on machine while in transit ............................... 125 Installation costs.............................................................. 1,000 Testing and adjusting costs ..................................................... 475 Repair of damages to machine caused by the firm's employees ......................... 550 Prepaid maintenance contract for first year of machine's use ........................... 300 Determine the acquisition cost of the machine

(Invoice price $20,000 Less: Cash discount 400 Net invoice price 19,600 Sales tax 1,200 Freight 260 Insurance 125 Installation costs 1,000 Testing and adjusting 475) Total original cost $22,660

The accounts below are from the general ledger of The Bast Company. For each letter, describe the type of business transaction(s) or event(s) that would most likely be reflected by entries to the account. For example, the answer to (a) is amounts for services performed for clients on account. a. An increase to Accounts Receivable b. A decrease to Accounts Receivable c. An increase to Notes Payable d. An increase to Office Equipment e. A decrease to Accounts Payable f. An increase to Accounts Payable g. An increase to Professional Fees Earned h. An increase to Dividends i. An increase to Common Stock j. An increase to Wage Expense

(a) Dollar amount of services performed for clients on account. (b) Dollar amount collected from clients on account. (c) Funds borrowed in exchange for written promissory note to repay. (d) Dollar amount of office equipment purchased. (e) Amount paid to suppliers on account. (f) Amount purchased from suppliers on account. (g) Amount of revenue earned by providing services for clients (h) Dividends paid by the firm. (i) Amount of capital invested in the common stock of the firm. (j) Amount of wage expense incurred.

A delivery truck costing $18,000 is expected to have a $1,500 salvage value at the end of its useful life of four years or 125,000 miles. Assume that the truck was pur- chased on January 2. Calculate the depreciation expense for the second year using each of the following depreciation methods: double-declining balance

100 percent/4 x 2 = 50 percent. $18,000 x 0.5 = $9,000, first year ($18,000 ‒ $9,000) x 0.5 = $4,500, second year

Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at one percent of credit sales, which were $1,800,000 during the year. On December 31, the Accounts Receivable balance was $300,000, and the Allowance for Doubtful Accounts had a credit balance of $20,400 before adjustment Determine the amount and financial statement effect of the adjustment to record the credit losses for the year

1,800,000*.01=$18,000 Balance sheet: decrease assets (allowance for doubtful accounts) increase stockholder's equity Income statement: increase expenses decrease net income

The beginning and ending balances of retained earnings for the year were $30,000 and $35,000, respectively. If dividend payments from stockholders' equity exceed new capital contributions during the year by $3,000, determine the net income or net loss for the year.

8,000 net income

indicate the amount shown as a liability on the balance sheet of Kane, Inc., at December 31 Kane has accounts payable of $110,000 for merchandise included in the year-end inventory

Accounts payable, $110,000

What statement would this be reported: Accounts recievable

BS

What statement would this be reported: land

BS

What statement would this be reported: notes payable

BS

What statement would this be reported: supplies

BS

What is assets on

Balance Sheet

indicate the amount shown as a liability on the balance sheet of Kane, Inc., at December 31 Kane provides a profit-sharing bonus for its executives equal to five percent of the reported before-tax income for the current year. The estimated before-tax income for the current year is $600,000.

Bonuses payable, $30,000 (current liability)

indicate the amount shown as a liability on the balance sheet of Kane, Inc., at December 31 On December 15, Kane declared a $70,000 cash dividend payable on January 15 of the fol- lowing year to shareholders of record on December 31.

Dividends payable $70,000 (current liability)

indicate the amount shown as a liability on the balance sheet of Kane, Inc., at December 31 During November and December of the current year, Kane sold products to a firm and guaran- teed them against product failure for 90 days. Estimated costs of honoring this provision next year are $2,200.

Estimated liability for product warranty, $2,200 (current liability)

A delivery truck costing $18,000 is expected to have a $1,500 salvage value at the end of its useful life of four years or 125,000 miles. Assume that the truck was pur- chased on January 2. Calculate the depreciation expense for the second year using each of the following depreciation methods: units-of-production

Expense per mile = ($18,000 ‒ $1,500)/125,000 = $0.132 $0.132 x 28,000 = $3,696 second year

Is the activity Operating, financing or investing? (O F I) issuance of common stock

F

Is the activity Operating, financing or investing? (O F I) repayment of a loan

F

T/F Once established, US GAAP is rarely, if ever, modified

False

T/F US GAAP is established by the IASB

False

T/F US GAAP is universally accepted in all countries in the world

False

Is the activity Operating, financing or investing? (O F I) investment of excess cash in the shares of another company

I

Is the activity Operating, financing or investing? (O F I) purchase of equipment to manufacture a company's products

I

Which group has taken the lead in developing a set of international accounting principles?

IASB

Revenue

IS

What statement would this be reported: supplies expense

IS

What statement would this be reported: net income

IS and SSE

Identify and briefly discuss two major benefits that would result from the adoption of a global set of international accounting principles.

Improve the operation of the international capital market and reduce the financial reporting costs of multinational companies

Miller, Inc., analyzed its accounts receiv- able balances at December 31 and arrived at the aged balances listed below, along with the percent- age that is estimated to be uncollectible 0-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,000 1 31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 2 61-120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 5 121-180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 10 Over 180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 25 $262,00 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,040 on December 31, before any adjustments Determine the financial statement effect of a write off of the Lyons Company's account on April 10 of the following year in the amount of $425

Increase Allowance for Doubtful accounts, decrease accounts receivable

Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: 0-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 1 31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 2 61-120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 5 121-180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 10 Over 180 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 25 $131,000 Determine the financial statement effect of a write off of the Rose's Company's account on April 10 of the following year in the amount of $425

Increase assets (allowance for doubtful accounts) Decrease assets (accounts receivable)

indicate the amount shown as a liability on the balance sheet of Kane, Inc., at December 31 Kane agreed to purchase a $28,000 drill press in the following January.

Not recorded as a liability, an accountable transaction has not yet occured

Is the activity Operating, financing or investing? (O F I) payment of employee salaries

O

Is the activity Operating, financing or investing? (O F I) sale of merchandise inventory

O

What kind of business organization is this? (Sole proprietorship, partnership, corporation) Unlimited liability

Sole proprietorship and partnership

The Chicago Daily Times Corporation (CDT) publishes a daily newspaper. A 52-week subscription sells for $208. Assume that CDT sells 100 subscriptions on January 1. None of the subscriptions are cancelled as of March 31. What is the financial statement effect of the receipt of the subscriptions on January 1

Step 1: increase cash (20,800) increase liabilities (20,800) Step 2: Decrease liabilities (400) increase stockholder's equity (20,800/52=400) Income statement: increase revenues (400), increase net income (400)

T/F the international counterpart to the FASB is the IASB

True

Identify where the following items will appear in a company's annual report: Management Discussion and Analysis (MD&A), notes to the financial statements, or the auditor's report. a. A comment that the financial statements appear to be fairly presented b. A discussion about new competition likely to occur next year c. A quantitative summary of notes payable appearing on the balance sheet d. The "secret" ingredients in the company's special sauce

a) auditor's report b) MD&A c) Notes to financial statements d) not disclosed

8-3 Capital or Revenue: Shively's initial application for a building permit was denied by the city as not conforming to environmental standards. Shively disagreed with the decision and spent $6,000 in attorney's fees to convince the city to reverse its position and issue the permit.

capital

Capital or revenue Due to unanticipated sandy soil conditions, and on the advice of construction engineers, Shively spent $58,000 to extend the footings for the addition to a greater depth than originally planned.

capital

capital or revenue Shively spent $4,100 to have the company logo sandblasted into the concrete above the entrance to the addition

capital

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above paid cash to retire bonds payable at a loss

cash flow from a financing activity

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above gave large cash contribution to a local university

cash flow from an operating activity

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above received advance payments from customers on orders for custom-made goods

cash flow from an operating activity

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above received cash as settlement of lawsuit

cash flow from an operating activity

Type of accounting with this report (managerial, financial, tax) Special reports for regulators of a public utility

combination as needed

What kind of business organization is this? (Sole proprietorship, partnership, corporation) Easier to raise funds

corporation

What kind of business organization is this? (Sole proprietorship, partnership, corporation) relatively more difficult to establish

corporation

What is the effect of each action on the accounting deal thing? paid rent for the month

decrease assets decrease stockholder's equity

What is the effect of each action on the accounting deal thing? paid for desk purchased in transaction above

decrease liabilities, decrease assets

What is the effect of each action on the accounting deal thing? paid employees salaries for the month

decrease stockholder's equity, decrease assets

What is the effect of each action on the accounting deal thing? the company is divided

decrease stockholder's equity, decrease assets

Type of accounting with this report (managerial, financial, tax) audited financial statements

financial

what activity does this cash flow item relate to? bonds payable issued for cash

financing activity

what activity does this cash flow item relate to? payment of cash dividends declared in previous year

financing activity

What is the effect of each action on the accounting deal thing? received amount due from a client in transaction above

increase assets, decrease assets

What is the effect of each action on the accounting deal thing? purchased an office desk on account

increase assets, increase liabilities

What is the effect of each action on the accounting deal thing? rendered services and billed the client

increase assets, increase stockholder's equity

What is the effect of each action on the accounting deal thing? rendered services to a client for cash

increase assets, increase stockholder's equity

what activity does this cash flow item relate to? acquisition of plant assets for cash

investing activity

what activity does this cash flow item relate to? purchase of short-term investments for cash

investing activity

what activity does this cash flow item relate to? sale of long term investments for cash

investing activity

Type of accounting with this report (managerial, financial, tax) budget for internal use by management

managerial

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above acquired a patent in exchange for common stock

noncash investing and financing activity

indicate whether it is (1) a cash flow from an operating activity, (2) a cash flow from an investing activity, (3) a cash flow from a financing activity, (4) a noncash investing and financing activity, or (5) none of the above invested cash in 60-day commercial paper (a cash eq)

none of the above (a change in the composition of cash and cash equivalents)

what activity does this cash flow item relate to? cash receipts from customers for services rendered

operating activity

what activity does this cash flow item relate to? payment of income taxes

operating activity

In each of the following cases, (a) identify the aspect of the accounting environment primarily responsible for the ethical pressure on the accountant and (b) indicate the appropriate behavioral response for the accountant: James Jehring, a tax accountant, is preparing an income tax return for a client. The client asks Jehring to take a sizable deduction on the tax return for business-related travel even though the client states that he has no documentation to support the deduction. "I don't think the IRS will audit my return," declares the client

pressure for a good number, the accountant should refuse to do it

In each of the following cases, (a) identify the aspect of the accounting environment primarily responsible for the ethical pressure on the accountant and (b) indicate the appropriate behavioral response for the accountant: Willa English, an accountant for Dome Construction Company, has just finished putting the numbers together for a construction project on which the firm is going to submit a bid next month. At a social gathering that evening, a friend casually asks English what Dome's bid is going to be. Ms. English knows that the friend's brother works for a competitor of Dome

pressure to disclose confidential / sensitive information, the accountant should not discuss the contract

In each of the following cases, (a) identify the aspect of the accounting environment primarily responsible for the ethical pressure on the accountant and (b) indicate the appropriate behavioral response for the accountant: The manager of Cross Department Store is ending his first year with the firm. December's business was slower than expected, and the firm's annual results are trailing last year's results. The manager instructs Kyle Tarpley, the store accountant, to include sales revenues from the first week of January in the December data. "This way, we'll show an increase over last year," declares the manager.

pressure to report good short-term profits, the accountant should refuse to do it

Capital or revenue Shively spent $3,000 to send each of the addition's subcontractors a side of beef as a thank-you gift for completing the project on schedule.

revenue

capital or revenue Shively invited the mayor to a ribbon-cutting ceremony to open the plant addition. It spent $25 to purchase the ribbon and scissors.

revenue

What kind of business organization is this? (Sole proprietorship, partnership, corporation) full control

sole proprietorship

What kind of business organization is this? (Sole proprietorship, partnership, corporation) Business income combined with owners income for income tax purposes

sole proprietorship and partnership

Type of accounting with this report (managerial, financial, tax) tax return for state income taxes

tax