Acct 151 Exam 1
Audit Report
A report that describes the auditor's opinion of the fairness of the financial statement presentations and the evidence to support that opinion
Current Liability Examples
Accounts Payable Income Taxes Payable Utilities Payable Wages Payable
Cash paid on dividends payable
Debit: Dividends Payable
Declared $145 in dividends to be paid in the following year.
Debit: Retained Earnings (SE) 145 Credit Dividends Payable (L) 145
Paid payroll, $3,500 during the year.
Debit: wage expense (SE) 3500 Credit: Cash (A) 3500
FASB
Financial Accounting Standards Board sets generally accepted accounting principles (GAAP)
Stockholders Equity
Financing provided by owners and by business operations
GAAP
General accepted accounting principles
Which of the following properly describes the impact on the financial statements when a company borrows $38,000 from a local bank?
Liabilities Increased 38,000
Institutional Investor
Manager of pension, mutual, and endowment funds that invest on the behalf of others.
Unit of Measure
Measurement of information about an entity in terms of the dollar or other national monetary unit
Operating Income
Net Sales - COGS - Operating Expenses
EPS
Net income/ Common Stock Outstanding
Gross Profit (Margin)
Net sales- COGS
A local company is a sole proprietorship (one owner); its owner buys a car for $10,000 for personal use. Answer from the local company's point of view.
No exchange
A women's clothing retailer orders 30 new display stands for $300 each for future delivery.
No exchange
A manufacturing firm declares a $100,000 cash dividend to be distributed to stockholders next period.
Receive retained earnings Give dividends payable
Common Stock
Represents the shares issued at par value
PVH Corp. receives payment from Macy's for the events described in (d) and (e). Answer from PVH's standpoint. (this is f)
Revenue not affected
SEC
Securities and Exchange Commision
Notes Payable
The account that is credited when money is borrowed from a bank
During 2016, Rock Company's cash balance increased from $76,000 to $92,000. Rock's net cash flow from operating activities was $38,000 and its net cash flow from financing activities was $12,500. How much was Rock's net cash flow from investing activities?
The change in cash is ending balance $92,000 − beginning balance $76,000 = $16,000. $16,000 = Net cash flow from operating activities $38,000 +/− Net cash flow from investing activities + Net cash flow from financing activities $12,500; $16,000 = 38,000 +/− X + $12,500. Solve for X = Investing activities = −$34,500.
Monetary Unit Assumption
The concept that accounting information should be measure and reported in the national monetary unit without adjustments for changes in purchasing power
Historical cost
The concept that assets should be recorded at the amount paid on the exchange date
Going Concern Assumption
The concept that businesses will operate into the foreseeable future
A company purchases a delivery van by paying $7,500 cash and by signing a $27,500 note payable. Which of the following correctly describes the recording of the delivery van purchase?
The delivery van account is debited for 35,000 The cost of the asset is recorded at cash paid plus all noncash considerations. The delivery van account is debited for $35,000. ($7,500 + $27,500 = $35,000).
Revenues-Expenses= Net Income
The income statement equation
Borrowed $3,000 on a line of credit with the bank.
Total Asset Turnover- Decrease ROA- Decrease Gross Profit Percentage- NE Debit: Cash(A) 3000 Credit: Notes Payable (L) 3000
Cash paid on accrued interest payable
debit: interest payable
Income statement
statement of operations that reports revenues, expenses, and net income for a stated period of time
Order of Balance Sheet
1. Current Assets 2. Long term investments 3. PP&E 4. Intangible Assets 5. Other non current assets 1. Current Liabilities 2. Long term liabilities 3. Common stock and additional paid in capital 4. Retained earnings
A landlord collected $5,400 cash from a tenant for December 2016's rent but the tenant's rent for December is $8,800. Which of the following is true with respect to the landlord's financial statements using generally accepted accounting principles?
8800 would appear on the income statement as rent revenue earned Revenue is recognized on the income statement when it has been earned, regardless of whether cash has been collected.
During 2016, Canton Company's assets increased $95,700 and the liabilities decreased $19,300. Canton Company's stockholders' equity at December 31, 2016 was $213,500. What amount was stockholders' equity at January 1, 2016?
98,500 Stockholders' equity ($98,500) at January 1, 2016 = Stockholders' equity ($213,500) at December 31, 2016 − the increase in stockholders' equity ($95,700 + 19,300) during 2016.
Account
A standardized format used to accumulate data about each item reported on financial statements
Accounts Receivable
Amounts owed from customers
Prepaid Expenses
An asset account used to record cash paid before expenses have been incurred
Transaction
An exchange between an entity and other parties
Corporation
An incorporated entity that issues shares of stock as evidence of ownership
Sole propriertorship
An unincorporated business owned by one person
Partnership
An unincorporated business owned by two or more persons
Balance Sheet
Assets=Liabilities + Stockholder's Eq
Top Company's 2016 sales revenue was $160,000 and 2015 sales revenue was $140,000. Top's total assets as of December 31, 2016 were $210,000 and total assets as of January 1, 2016 were $190,000. What is Top's total asset turnover ratio?
Average total assets = $200,000 = ($210,000 + $190,000) ÷ 2. Total asset turnover ratio = .80 = $160,000 ÷ $200,000.
CPA
Certified Public Accountant
Board of Directors (Audit Committee)
Composed of nonmanagement independent directors with financial knowledge, is responsible for ensuring that processes are in place for maintaining the integrity of the company's accounting and reporting
Amount of dividends declared for the period
Credit: Dividends payable
Made full payment for the furniture and fixtures purchased on account in (e).
Debit: Accounts Payable (L) 13600 Credit: Cash (A) 13600
Borrowed $10,000 cash from a bank.
Debit: Cash (A) 10000 Credit: Notes Payable (L) 10000
Received a $3,500 deposit on a townhouse to be rented for five days in January.
Debit: Cash (A) 3500 Credit: Unearned rent revenue (L) 3500
Purchased plant and equipment for $636 in cash.
Debit: Plant and equipment (A) 636 Credit: Cash (A) 636
Declared $597 in dividends at the end of the year to be paid the following year.
Debit: Retained Earnings (SE) 597 Credit: Dividends Payable (L) 597
Jay estimated telephone usage at $440 for December, but nothing has been recorded or paid.
Debit: Utilities Expense (SE) 440 Credit: Utilities Payable (L) 440
Wages earned by employees during December, unpaid and unrecorded at December 31, amounted to $2,700. The last payroll was December 28; the next payroll will be January 6.
Debit: Wages Expense (SE) 2700 Credit: Wages Payable (L) 2700
Wages payable, $4.
Debit: Wages Expense (SE) 4 Credit: Wages Payable (L)
Wages of $5,600 earned by employees during November were unpaid and unrecorded at November 30. The next payroll date will be December 5 of the next fiscal year.
Debit: Wages Expense (SE) 5600 Credit: Wages Payable (L) 5600
February 14 Paid pilot $2,300 in wages for flying in January (recorded as expense in January).
Debit: Wages Payable (L) 2300 Credit: Cash (A) 2300
Expenses
Decreases in assets or increases in liabilities from central ongoing operations
Financial Position
Economic Resources that the company owns and the sources of financing for those resources
FASB
Financial Accounting Standards Board
Assets=Liabilities + Stockholders Equity
Fundamental Accounting Model
Gross Profit %
Gross Profit/Net Sales
Debits
Increase assets, decrease liabilities and Stockholders equity
IASB
International Accounting Standards Board
ROA
Net Income/ Average Total Assets
Net Profit Margin
Net Income/Net Sales
Current Year: Net sales $1,217,882 Net income $59,387 Average shareholders' equity $212,711 Average total assets $403,162 Prior Year: Net Sales $1,126,397 Net Income $55,425 Average Shareholders equity $246,119 Average total assets $394,143 Compute ROA for the current and prior years. Would security analysts more likely increase or decrease their estimates of share value on the basis of this change?
ROA= Net Income/ Average total assets Current Year: 59,387/403,162 = 0.147 Prior Year: 55,425/ 394,143 = 0.141 Security analysts would be more likely to increase their estimates of share value on the basis of this change. The company increased its earnings by $0.006 for each $1 of investment and, hence, increased the corresponding value of that investment.
A company purchases a piece of land for $50,000 cash. An appraiser for the buyer values the land at $52,500.
Receive land Give cash
Income before taxes
Revenues-all expenses (except for income tax expense)
PVH Corp. completes production of the shirts described in (d) and delivers the order. Answer from PVH's standpoint.
Sales Revenue= 15,000
Fucillo Automotive Group (offering a wide variety of car and truck brands) sells a Ford F-150 truck with a list, or "sticker," price of $48,050 for $46,500 cash.
Sales Revenue= 46,500
Accounting Entity
The organization for which financial data are to be collected (separate and distinct from its owners)
Press Release
Written public news announcement that is normally distributed to major news services. Initial announcement of hiring of new VP of sales Initial announcement of quarterly earnings
an expense incurred, not yet paid or recorded
accrued expense
property taxes incurred, not yet paid
accrued expense
a revenue earned, not yet collected
accrued revenue
rent not yet collected, already earned
accrued revenue
At the beginning of January, Turner Construction Company pays $963 for magazine advertising to run in monthly publications each of the first three months of the year.
advertising expense=321
During the last week of January, the campus bookstore sold 500 accounting texts received in (e) at a sales price of $230 each.
cost of goods sold=80,000
an expense not yet incurred, paid in advance
deferred expense
office supplies on hand to be used next accounting period
deferred expense
rent revenue collected, not yet earned
deferred revenue
A revenue not yet earned , collected in advance
deffered revenue
A company purchases for $18,000 cash a new delivery truck that has a list, or sticker, price of $21,000.
receive equipment give cash
Derek Incorporated has its delivery van repaired in January for $600 and charges the amount on account.
repairs expense= 600
Ford Motor Company issues $15 million in new common stock.
revenue not effected
Destiny USA (formerly Carousel Mall in Syracuse, NY) had janitorial supplies costing $3,500 in storage. An additional $2,600 worth of supplies was purchased during January. At the end of January, $1,400 worth of janitorial supplies remained in storage.
supplies expense=4700
Michigan State plays the first football game referred to in (i). (this is j)
ticket sales revenue= 3,900,000
Hass Company, a farm equipment company, receives its phone bill at the end of January for $154 for January calls. The bill has not been paid to date.
utilities expense=154
A company's January 1, 2016 balance sheet reported total assets of $111,000 and total liabilities of $48,000. During January 2016, the following transactions occurred: (A) the company issued stock and collected cash totaling $21,000; (B) the company paid an account payable of $5,100; (C) the company purchased supplies for $2,900 with cash; (D) the company purchased land for $41,000 paying $18,000 with cash and signing a note payable for the balance. What is total stockholders' equity after the transactions above?
Beginning equity = $111,000 - $48,000 = $63,000. Only transaction (A) affects stockholders' equity. Therefore, stockholders' equity = $63,000 + $21,000 = $84,000.
Non Current Asset Examples
Buildings Land Long Term Investments
Separate-Entity Assumption
Business transactions are accounted for separately from the transactions of the owners
Investing Activities
Buying or selling items such as plant and equipment used in the production of beverages
Information Service
A company that gathers, combines, and transmits (paper and electronic) financial and related information
Publicly traded
A company that is bought and sold on stock exchanges
Assets EX
Accounts Receivable Cash and cash equivalents Trademarks and Intangibles PP&E Inventories
Current Asset Examples
Accounts Receivable Merchandise Inventory Notes Receivable (due in six months) Prepaid Rent Supplies
Operating Activities
Day to day process of purchasing materials and other parts from suppliers, manufacturing, and delivering, collecting cash, and paying suppliers
Several Nike investors sold their own stock to other investors on the stock exchange for $84.
NO JOURNAL ENTRY
The Unearned Rental Revenue account includes $4,100 of revenue to be earned in January of next year.
NO journal entry required
Assets personally owned by a stockholder
NOT IN IS, BS, or CFS
At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supporting documents. Shipping supplies on hand, January 1 of the current year $ 13,000 Purchases of shipping supplies during the current year 75,000 Shipping supplies on hand, counted on December 31 of the current year 20,000
Debit: Shipping Supplies Expense (SE) 68000 Credit: Shipping Supplies (A) 68000 Beg Balance + Supplies Purchased- Supplies on Hand at End= Supplies Used=68000
The store used delivery equipment all year that cost $60,500; $12,100 was the estimated annual depreciation.
Debit: Depreciation Expense (SE) 12100 Credit: Accumulated Depreciation (A) 12100
Did not record $15,000 depreciation on the equipment costing $115,000.
Debit: Depreciation Expense (SE) 15000 Credit: Accumulated Depreciation (A) 15000
John's used boat-lifting equipment that cost $180,000; $18,000 was the estimated depreciation for current year.
Debit: Depreciation Expense (SE) 18000 Credit: Accumulated Depreciation (A) 18000
Depreciation on rental autos, amounting to $24,000 for the current year, was not recorded.
Debit: Depreciation Expense (SE) 24000 Credit: Accumulated Depreciation (A) 24000
Depreciation expense for the current year, $9.
Debit: Depreciation Expense (SE) 9 Credit: Accumulated depreciation (A) 9
Purchased additional short-term investments for $7,616 cash.
Debit: Short term investments (A) 7616 Credit: Cash (A) 7616
Purchased $15,000 of equipment, paying $3,000 in cash and owing the rest on accounts payable to the manufacturer.
Debit: Equipment (A) 15,000 Credit: Cash (A) -3000 Accounts Payable (L) 12000
Purchased equipment for use in the business at a cost of $18,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
Debit: Equipment (A) 18000 Credit: Notes Payable (L) 13500 Cash (A) 4500
Purchased a new snowplow for $98,000 cash on December 31.
Debit: Equipment(A) 98000 Credit: Cash (A) 98000
February 2 Purchased fuel costing $490 on account for the next flight to Dallas.
Debit: Fuel Expense (SE) 490 Credit: Accounts Payable (L) 490
Purchased and used fuel of $750 in delivery vehicles during the year (paid for in cash).
Debit: Fuel Expense (SE) 750 Credit: Cash (A) 750
Purchased furniture and fixtures for the warehouse for $16,000, paying $2,400 cash and the rest on account. The amount is due within 30 days.
Debit: Furniture and Fixtures (A) 16000 Credit: Accounts Payable (L) 13600 Cash (A) 2400
Income tax expense, $11.
Debit: Income Tax Expense (SE) 11 Credit: Income taxes payable (L) 11
The income tax expense is $5,800. Payment of income tax will be made next year.
Debit: Income tax expense (SE) 5800 Credit: Income tax payable (L) 5800
A two-year insurance premium of $4,800 was paid on October 1 of the current year for coverage beginning on that date. The bookkeeper debited the full amount to Prepaid Insurance on October 1.
Debit: Insurance Expense (SE) 600 Credit: Prepaid Insurance (A) 600
On July 1 of the current year, a two-year insurance premium amounting to $2,400 was paid in cash and debited in full to Prepaid Insurance. Coverage began on July 1 of the current year.
Debit: Insurance Expense (SE) 600 Credit: Prepaid Insurance (A) 600
Failed to adjust Prepaid Insurance to reflect that $650 of insurance coverage has been used.
Debit: Insurance Expense (SE) 650 Credit: Prepaid Insurance (A) 650
Insurance expired during the current year, $7.
Debit: Insurance Expense (SE) 7 Credit: Prepaid Insurance (A) 7
Interest on a $15,000, one-year, 8 percent note payable dated October 1 of the current year was not recorded. The 8 percent interest is payable on the maturity date of the note.
Debit: Interest Expense (SE) 300 Credit: Interest Payable (L) 300 Interest payable/Expense = $15,000 × 0.08 × 3 / 12 = 300
John's borrowed $300,000 at an 11 percent annual interest rate on April 1 of the current year to expand its boat storage facility. The loan requires John's to pay the interest quarterly until the note is repaid in three years. John's paid quarterly interest on July 1 and October 1.
Debit: Interest Expense (SE) 5500 Credit: Interest Payable (L) 5500
Purchased for $3,100 cash The University of Pennsylvania, Notre Dame, The University of Texas at Austin, and Michigan State University baseball caps as inventory to sell online.
Debit: Inventory (A) 3100 Credit: Cash (A) 3100
Purchased $32,305 inventory on account.
Debit: Inventory (A) 32,305 Credit: Accounts Payable (L) 32,305
Purchased $13,000 of land; paid $4,000 in cash and signed a mortgage note for the balance.
Debit: Land (A) 130000 Credit: Cash (A) 4000 Mortgage Notes Payable (L) 9000
Which of the following journal entries is correct when a business entity purchases land costing $30,000 by signing a one-year note payable?
Debit: Land (A) 30000 Credit: Notes Payable (L) 30000
Maintenance expense excludes $1,100, representing the cost of maintenance supplies used during the current year.
Debit: Maintenance Expense (SE) 1100 Credit: Maintenance Supplies (A) 1100
Incurred $62,000 in routine maintenance expenses for the chairlifts; paid cash.
Debit: Maintenance Expense (SE) 62,000 Credit: Cash (A) 62,000
Purchased ski equipment inventory for $35,000 on account to sell in the ski shops. (C)
Debit: Merchandise Inventory (A) 35,000 Credit: Accounts Payable (L) 35,000
Lent $2,500 to one of the investors who signed a note due in six months.
Debit: Notes Receivable (A) 2500 Credit: Cash (A) 2500
Loaned $800 to an employee who signed a note.
Debit: Notes Receivable (A) 800 Credit: Cash (A) 800
Office supplies on hand at January 1 of the current year totaled $450. Office supplies purchased and debited to Office Supplies during the year amounted to $500. The year-end count showed $275 of supplies on hand.
Debit: Office Supplies Expense (SE) 675 Credit: Office Supplies (A) 675
February 25 Purchased on account $2,550 in spare parts for the planes.
Debit: Part Supplies (A) 2550 Credit: Accounts Payable (L) 2550
Paid $1,800 for a one-year fire insurance policy on the warehouse (recorded as a prepaid expense).
Debit: Prepaid Insurance (A) 1800 Credit: Cash (A) 1800
February 1 Paid $275 for rent of hangar space in February.
Debit: Rent Expense (SE) 275 Credit: Cash (A) 275
Boat repair supplies on hand at the beginning of the current year totaled $18,900. Repair supplies purchased and debited to Supplies during the year amounted to $45,200. The year-end count showed $15,600 of the supplies on hand.
Debit: Supplies Expense (SE) 48500 Credit: Supplies (A) 48500
One-fourth of the basement space is rented to Heald's Specialty Shop for $560 per month, payable monthly. At the end of the current year, the rent for November and December had not been collected or recorded. Collection is expected in January of the next year.
Debit: Rent Receivable (A) 1120 Credit: Rent Revenue (SE) 1120
Did not accrue $1,400 owed to the company by another company renting part of the building as a storage facility.
Debit: Rent Receivable (A) 1400 Credit: Rent Revenue (SE) 1400
Paid $1,450 for the current month's rent of a warehouse and another $1,450 for next month's rent.
Debit: Rent expense(SE) 1450 Prepaid Rent(A) 1450 Credit: Cash(A) 2900
Dittman's Variety Store operates a repair shop to meet its own needs. The shop also does repairs for M. Carlos. At the end of the current year, Carlos had not paid $800 for completed repairs. This amount has not yet been recorded as Repair Shop Revenue. Collection is expected during January of next year.
Debit: Repair Accounts Receivable (A) 800 Credit: Repair Shop Revenue (SE) 800
February 27 Declared a $200 cash dividend to be paid in March.
Debit: Retained Earnings (SE) 200 Credit: Dividends Payable (L) 200
Wages for the last three days of December amounting to $730 were not recorded or paid.
Debit: Salaries and wage expense (SE) 730 Credit: Salaries and Wages Payable (L) 730
Ted Granger borrowed $7,000 for personal use from a local bank, signing a one-year note.
No transaction occured
Assume Idaho Company recorded the following adjusting journal entry at year-end: Insurance expense $2,400 Prepaid insurance $2,400 If the beginning balance in prepaid insurance was $400 and $4,500 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?
Prepaid insurance = $2,500 = $400 + $4,500 - $2,400.
The remaining basement of the store is rented for $1,600 per month to another merchant, M. Carlos, Inc. Carlos sells compatible, but not competitive, merchandise. On November 1 of the current year, the store collected six months' rent in the amount of $9,600 in advance from Carlos; it was credited in full to Unearned Rent Revenue when collected.
Debit: Unearned Rent Revenue (L) 3200 Credit: Rent Revenue (SE) 3200
The Johnson family paid John's $4,500 on November 1 to store its sailboat for the winter until May 1 of the next fiscal year. John's credited the full amount to Unearned Storage Revenue on November 1.
Debit: Unearned Storage Revenue (L) 750 Credit: Storage Revenue (SE) 750
Failed to adjust the Unearned Fee Revenue account to reflect that $1,500 was earned by the end of the year.
Debit: Unearned fee revenue (L) 1500 Credit: Fee revenue (SE) 1500
Incurred $68 in utility usage during the year; paid $55 in cash and owed the rest on account.
Debit: Utilities Expense (SE) 68 Credit: Accounts Payable (L) 13 Cash (A) 55
Paid $245,000 in wages to employees for the month of December.
Debit: wages expense (SE) 245000 Credit: Cash (A) 245000
Cash paid on accrued income taxes
Debit:Income taxes payable
Liabilities EX
Debt due within a year (current) Taxes Payable Accounts Payable Long Term Debt
Liabilities
Debt or obligations
Recorded sales on account of $400 and related cost of goods sold of $300.
Gross Profit- Increase Operating Income- Increase ROA- increase Debit: Accounts Receivable (A) 400 COGS (SE) 300 Credit: Sales Revenue (SE) 400 Inventory (A) 300 *Note that net income goes up by $100 as does ending assets. As a consequence, average assets ((beginning + ending)/2) increases by only one-half of that amount or $50.
Incurred additional research and development expense of $100, which was paid in cash.
Gross Profit- NE Operating Income- Decrease ROA- Decrease Debit: R&D Expense (SE) 100 Credit: Cash (A) 100
Issued additional shares of common stock for $260 cash.
Gross Profit- NE Operating Income- NE ROA- Decrease Debit: Cash(A) 260 Credit: Common stock and additional paid in capital (SE) 260
Declared and paid dividends of $90.
Gross Profit- NE Operating Income- NE ROA- Increase Debit: Retained Earnings (SE) 90 Credit: Cash (A) 90
On December 31, 2016, Krug Company reported total assets of $480,000 prior to the following adjusting entries: Depreciation expense was $50,000; Accrued sales revenue totaled $34,000; Accrued expenses totaled $24,000; Used insurance: $4,000; the insurance was initially recorded as prepaid. Rent revenue earned: $2,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. How much are Krug's total assets after the adjusting entries?
Total assets = $460,000 = $480,000 − $50,000 + $34,000 − $4,000
Purchased $700 of inventory on account.
Total Asset Turnover- Decrease ROA- Decrease Gross Profit Percentage- NE Debit: Inventory (A) 700 Credit: Accounts Payable (L) 700
Incurred salary expense of $1,000 paid for in cash.
Total Asset Turnover- Increase ROA- Decrease Gross Profit Percentage- NE Debit: Salaries Expense (SE) 1000 Credit: Cash (A) 1000
Sold $500 of goods on account. The related cost of goods sold was $300. Gross profit margin was 45 percent before this sale
Total Asset Turnover- Increase ROA- Increase Gross Profit Percentage- Decrease Debit: Accounts Receivable (A) 500 COGS (SE) 300 Credit: Sales Revenue (SE) 500 Inventory (A) 300 Note**** that net income goes up by $200 as does ending assets. As a consequence, average assets ((beginning + ending)/2) increases by only one-half of that amount or $100. So ROA increases. Also, since the gross margin percentage on this sale was 40 percent (($500 - $300)/$500), and the gross margin percentage before the sale was 45%, this transaction will lower the ratio
Provided $2,000 of services on account.
Total Asset Turnover- Increase ROA- Increase Gross Profit Percentage- Increase Debit: Accounts Receivable (A) 2000 Credit: Sales Revenue (SE) 2000
Total Asset Turnover ratio
Total asset turnover ratio = Sales (or Operating) Revenues/ Average Total Assets = $109,000 ÷ [($58,020 + $65,180) / 2] = $109,000 ÷ $61,600 = 1.77
At the beginning of April, Warren Corporation's assets totaled $256,000 and liabilities totaled $76,000. During April the following summarized transactions occurred: Additional shares of stock were sold for $28,000 cash. A building costing $111,000 was purchased using $18,000 cash and by signing an $93,000 long-term note payable. Short-term investments costing $10,600 were purchased using cash. $11,600 was paid to an employee as a loan; the employee signed a six-month note in exchange for the loan. How much are Warren's total assets at the end of April?
Total assets = $377,000 = $256,000 + $28,000 + $111,000 - $18,000 (building payment)
Hasbro is one of the world's leading toy manufacturers and the maker of such popular board games as Monopoly, Scrabble, and Clue, among others. Listed here are selected aggregate transactions from a recent year (dollars in millions). a) Recorded sales on account of $4,285.6 and related cost of goods sold of $1,836.3. b) Issued debt due in six months with a principal amount of $500.0. c) Incurred research and development expense of $197.6, which was paid in cash. Calculate effect on each for Current Assets, Gross Profit, and Current Liabilities
a) Current Assets $2449.3 Gross Profit $2449.3 Current Liabilities $0 Note that Gross Profit increases (by $2,449.3) since it is defined as Sales (increased by $4,285.6) less Cost of Goods Sold (increased by only $1,836.3). b) Current Assets 500 Gross Profit 0 Current Liabilities 500 c) Current Assets (197.6) Gross Profit 0 Current Liabilities 0 Note that Research and Development Expense is not included in Cost of Goods Sold and, hence, has no effect on Gross Profit
What would be the direction of the effect of the following transactions on the following ratios ( + for increase, − for decrease)? Consider each item independently. (Select "NE" if there is no effect.) a) Repaid principal of $2,000 on a long-term note payable with the bank. b) Recorded rent expense of $100 paid for in cash.
a) Net Profit Margin- NE ROA- Increase Current Ratio- Decrease Debit: Notes Payable Long term (L) 2000 Credit: Cash(A) 2000 b) Net Profit Margin- Decrease ROA- Decrease Current Ratio- Decrease Debit: Rent Expense(SE) 100 Credit: Cash (A) 100
On January 31, Fucillo Automotive Group determines that it will pay its salespersons $15,560 in commissions related to January sales. The payment will be made in early February. Answer from Fucillo's standpoint.
commission expense= 15,560
Stockholders EQ
common stock and retained earnings that occurred during a specific period of time
Martin Company receives and pays in January a $2,034 invoice (bill) from a consulting firm for services received in January. Answer from Martin's standpoint.
consulting expense=2034
PVH Corp., manufacturer of IZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger apparel, completes production of 450 men's shirts ordered by Macy's department stores at a cost of $10 each and delivers the order. Answer from PVH Corp.'s standpoint.
cost of goods sold=4500
Accrual of additional interest expense
credit: interest payable
PCAOB
Public Company Accounting Oversight Board sets auditing standards for independent auditors of public companies
Form 10-Q
Quarterly report filed by public companies with the SEC that contains additional unaudited financial information. Complete quarterly income statement, balance sheet, and cash flow statement
A new company is formed and sells 100 shares of $1 par value stock for $12 per share to investors..
Receive Cash Give common stock and additional paid in capital
A company purchases 100 shares of Apple Inc. common stock as an investment for $5,000 cash.
Receive Investments Give cash
A construction company signs a contract to build a new $500,000 warehouse for a corporate customer. At the signing, the corporation writes a check for $50,000 to the construction company as the initial payment for the construction (receiving construction in progress).
Receive a building Give cash
A company borrows $1,000 from a local bank and signs a six-month note for the loan.
Receive cash Give notes payable
A company orders and receives 10 personal computers for office use for which it signs a note promising to pay $25,000 within three months.
Receive equipment Give notes payable
A manufacturing company acquires the patent (an intangible asset) on a new digital satellite system for television reception, paying $500,000 cash and signing a $400,000 note payable due in one year.
Receive intangibles Give cash and notes payable
A company pays $1,500 principal on its note payable (ignore interest).
Receive notes payable Give cash
A publishing firm purchases for $40,000 cash the copyright (an intangible asset) to a manuscript for an introductory accounting text.
Recieve intangibles Get cash
Accrual basis accounting
Record revenues when earned and expenses when incurred
Revenue recognition Principle
Record revenues when earned and measurable (when the company transfers promised goods or services to customers, and in the amount the company expects to receive)
Cash Basis Accounting
Record revenues when received and expenses when paid
Annual Report
Report containing the four basic financial statements for the year, related notes, and often statements by management and auditors. Summarized financial data for 5 year period Notes to financial statements Four basic financial statements for the year Description of those responsible for financial statements
Form 8-K
Report of special events (e.g., auditor changes, mergers) filed by public companies with the SEC. Announcement of a change in auditors
Stockholders equity EX
Retained Earnings Common Stock
SOX
Sarbanes-Oxley Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud.
The CHS Company paid $54,000 cash to its landlord on November 1, 2016 for rent covering the six-month period from November 1, 2016 through April 30, 2017. The books are adjusted only at year-end. Which of the following does not correctly describe the effect on CHS Company's financial statements of the December 31, 2016 adjusting entry?
Stockholders Equity Increases 18000 The time period from November 1, 2016 to December 31, 2016 consumes two months of rent expense ($18,000), which results in a decrease to stockholders' equity.
During 2016, Sensa Corporation incurred operating expenses amounting to $180,000 of which $95,000 was paid in cash; the balance will be paid during 2017. Which of the following is correct for the 2016 year-end balance sheet?
Stockholders equity decreases by 180,000 , assets decrease by 95,000, and liabilities increase 85000 The full operating expense amount reduces net income, which reduces stockholders' equity through the retained earnings account. The portion paid in cash reduces assets and the unpaid portion of the expense must be recognized as an increase to liabilities.
An Iowa State University employee works eight hours, at $15 per hour, on January 31; however, payday is not until February 3. Answer from the university's point of view.
wages expense=120
Statement of cash flows
inflows and outflows of cash for a period of time
Wang Company paid $4,800 for a fire insurance policy on January 1. The policy covers 12 months beginning on January 1. Answer from Wang's point of view.
insurance expense= 400
A new grill is purchased and installed at a Wendy's restaurant at the end of the day on January 31; a $12,750 cash payment is made on that day.
no expense incurred
Fucillo Automotive Group pays its salespersons $13,800 in commissions related to December automobile sales. Answer from Fucillo's standpoint.
no expense incurred
Parillo's Taxi Company pays a $595 invoice from a consulting firm for services received and recorded in December.
no expense incurred
The University of Florida orders 60,000 season football tickets from its printer and pays $8,340 in advance for the custom printing. The first game will be played in September. Answer from the university's standpoint.
no expense incurred
The campus bookstore receives 500 accounting texts at a cost of $160 each. The terms indicate that payment is due within 30 days of delivery.
no expense incurred
Signed an agreement with a cleaning service to pay $120 per week for cleaning the corporate offices next year.
not transaction incurred
Retained Earnings
Cumulative Earnings of a company that are not distributed to the owners End Balance= Beginning Balance + Net Income- Dividends
The Pioneer Company has provided the following account balances: Cash $39,700; Short-term investments $5,700; Accounts receivable $7,700; Supplies $56,500; Long-term notes receivable $3,700; Equipment $104,500; Factory Building $197,000; Intangible assets $7,700; Accounts payable $28,300; Accrued liabilities payable $3,150; Short-term notes payable $17,400; Long-term notes payable $100,500; Common stock $197,000; Retained earnings $76,150. What are Pioneer's total current liabilities?
Current liabilities = $48,850 = $28,300 + $3,150 + $17,400
Expense EX
Cost of Products Sold Selling, General, and Administrative Expenses Income Taxes Interest Expense Provision for Income Taxes (aka Income Tax Expense) Rental and Royalty Costs
Accrual of additional income tax expense
Credit: Income taxes payable
Which of the following is correct when land costing $21,000 is sold for $25,000? The land was a component of property and equipment on the balance sheet.
Gain on sale of land is credited for 4000 When an asset is sold for more than its cost, a gain on the sale is reported. This is recorded by crediting the gain on sale of land account for the amount the sales price exceeded cost.
Operating Cycle
The time it takes to purchase goods or services from suppliers, sell goods or services to customers, and collect cash from customers
McGraw-Hill Education uses $3,800 worth of electricity and natural gas in its headquarters building for which it has not yet been billed.
Utilities expense=3800
Revenues earned were $78,000, of which $9,000 were uncollected at the end of the year. Operating expenses incurred were $34,000, of which $3,000 were unpaid at the end of the year. Dividends declared were $16,000, of which $1,000 were unpaid at the end of the year. Income tax expense is $16,720. What is the amount of net income reported on Sparty's income statement?
$27,280 = $78,000 − $34,000 − $16,720
On April 1, 2016, the premium on a one-year insurance policy was purchased for $6,000 cash with the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of the following correctly describes the effect on the financial statements of the December 31, 2016 adjusting entry?
$6,000 ÷ 12 = $500 per month and 9 months of coverage has been used. The insurance expense and reduction in prepaid insurance is $500 × 9 = $4,500.
During 2016, Sigma Company earned service revenue amounting to $800,000, of which $645,000 was collected in cash; the balance will be collected in January 2017. Also in 2016 there were collections of cash prior to the delivery of goods/services totaling $11,400. What amount should the 2016 income statement report for service revenues?
$800,000 of service revenue was earned during 2016; therefore that amount should be recorded on the income statement.
During the fiscal year ended 2016, a company had revenues of $310,000, cost of goods sold of $180,000, and an income tax rate of 30 percent on income before income taxes. What was the company's 2016 net income?
($310,000 − $180,000) = Income before income taxes $130,000. Income tax expense = 30% × $130,000 = $39,000. Net income = $130,000 − $39,000 = $91,000
Lantz Company has provided the following information: Cash sales totaled $240,000. Credit sales totaled $484,000. Cash collections from customers for services yet to be provided totaled $84,000. A $20,000 loss from the sale of property and equipment occurred. Interest income was $8,200. Interest expense was $18,400. Supplies expense was $340,000. Rent expense for the store was $34,000. Wages expense was $44,000. Other operating expenses totaled $74,000. Unearned revenue was 3,300. What is the amount of Lantz's income before income taxes?
201,800 Operating revenue = $724,000 = $240,000 + $484,000 Operating expenses = $492,000 = $340,000 + $34,000 + $44,000 + $74,000 Operating income = $232,000 = $724,000 − $492,000 Income before taxes = $201,800 = $232,000 − $20,000 + $8,200 − $18,400
Lantz Company has provided the following information: Cash sales totaled $250,000. Credit sales totaled $485,000. Cash collections from customers for services yet to be provided totaled $85,000. A $21,000 loss from the sale of property and equipment occurred. Interest income was $8,300. Interest expense was $18,500. Supplies expense was $320,000. Rent expense for the store was $35,000. Wages expense was $45,000. Other operating expenses totaled $75,000. Unearned revenue was $3,700. What is the amount of Lantz's income from operations (operating income)?
239000 Operating revenues = $735,000 = $250,000 + $485,000 Operating expenses = $496,000 = $320,000 + $35,000 + $45,000 + $75,000+ $21,000 Operating income = $239,000 = $735,000 − $496,000
The common stock account balance at the beginning of the year was $15,000 and the year-end balance was $17,500. The additional paid-in capital account balance increased $4,000 during the year. The retained earnings balance at the beginning of the year was $85,000 and the year-end balance was $94,000. Net income was $41,000. How much were Superior's dividend declarations during its recent year of operation?
32,000 Ending retained earnings ($94,000) = Beginning retained earnings ($85,000) + Net income ($41,000) - Dividends declared ($32,000).
A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. What is the balance in the contributed capital account?
32,000 Stockholders' equity ($44,000) = Assets ($80,000) - Liabilities ($36,000). Stockholders' equity ($44,000) = Contributed capital of common stock and additional paid-in capital ($32,000) + Retained earnings ($12,000).
Centex, Inc. issued 40,000 shares of its $1 par value common stock for $25 per share. The journal entry to record the stock issue would include which of the following?
A credit to common stock for $40,000
On July 1, 2016, Goode Company borrowed $210,000. The company signed a note payable with interest at 4 percent per year. The note and interest are due on December 31, 2016. On December 31, 2016, Goode paid $214,200 to settle the debt in full. Assuming no accruals for interest have been made during the year, transaction analysis of the $214,200 cash payment on December 31, 2016 should reflect which of the following?
A decrease in liabilities of 210000, a decrease in stockholders equity of 4200 and a decrease in assets of 214,200 Liabilities decrease by the face value of the loan, $210,000. Interest expense is $4,200 for the period, thus net income and stockholders' equity decreases by this amount. To recognize the payment of the loan and interest, assets must decrease by $214,200.
Par Value
A legal amount per share
Unearned Revenue
A liability account used to record cash received before revenues have been earned
Accounting
A system that collects and process financial information about an organization and reports that info to decision makers
Financial Analyst
Adviser who analyzes financial and other economic info to form forecasts and stock recommendations
Audit
An examination of financial reports to ensure that they represent what they claim and conform with principles
Form 10-K
Annual report filed by public companies with the SEC that contains additional detailed financial information Summarized financial data for 5 year period Notes to financial statements Four basic financial statements for the year Description of those responsible for financial statements Detailed description of the company's competition
Quarterly Report
Brief unaudited report for quarter normally containing summary income statement and balance sheet. Summarized income statement for the quarter
A company's January 1, 2016 balance sheet reported total assets of $154,000 and total liabilities of $62,000. During January 2016, the company completed the following transactions: (A) paid a note payable using $12,000 cash (no interest was paid); (B) collected a $11,000 accounts receivable; (C) paid a $5,400 accounts payable; and (D) purchased a truck for $5,400 cash and by signing a $22,000 note payable from a bank. The company's January 31, 2016 balance sheet would report which of the following?
Assets = $158,600 = $154,000 - $12,000 - $5,400 - $5,400 + $27,400 Liabilities = $66,600 = $62,000 - $12,000 - $5,400 + $22,000 Stockholders' equity = $92,000 = Assets ($158,600) - Liabilities ($66,600)
The Kroger Co. is one of the largest retailers in the United States and also manufactures and processes some of the food for sale in its supermarkets. Kroger reported the following January 31 balances in its statement of stockholders' equity (dollars in millions): Current Year: Common stock $959 Paid-in capital $3427 Retained earnings $8,571 Prior Year: Common Stock $958 Paid in capital $3394 Retained Earnings $8225 During the current year, Kroger reported net income of $602 How much did Kroger declare in dividends for the year? Show SE equity for common stock issuance:
Beginning RE + Net income - Dividends = Ending RE Dividends = Beginning RE + Net income - Ending RE Dividends = $8,225 + $602 - $8,571 = $256 Debit: Cash(A) 34 Credit: Additional Paid in Capital (SE) 33 Common Stock (SE) 1
Financing Activities
Borrowing or paying back money to lenders or receiving additional funds from stockholders etc
Cadet Company paid an accounts payable of $1,500. This transaction should be recorded on the payment date as follows:
Debit: Accounts Payable (L) 1500 Credit: Cash (A) 1500
Paid half the charges incurred on account in (c). this is i
Debit: Accounts Payable (L) 17500 Credit: Cash (A) 17500
Paid $32,074 cash on accounts payable.
Debit: Accounts Payable (L) 32,074 Credit Cash (A) 32,074
Provided $39,323 in service to customers during the year, with $28,558 on account and the rest received in cash.
Debit: Accounts Receivable (A) 28558 Cash (A) 10,765 Credit: Service revenue (SE) 39323
John's winterized (cleaned and covered) three boats for customers at the end of November, but did not record the service for $3,300.
Debit: Accounts Receivable (A) 3300 Credit: Service Revenue (SE) 3300
Sold a pair of skis from a ski shop to a customer for $800 on account. (The cost of the skis was $500). Hint: Record two entries. (F)
Debit: Accounts Receivable (A) 800 Credit: Ski shop sales revenue (SE) 800 Debit: Cost of Goods Sold (SE) 500 Credit: Merchandise Inventory (A) 500
On October 1, John's paid $2,200 to the local newspaper for an advertisement to run every Thursday for 12 weeks. All ads have been run except for three Thursdays in December to complete the 12-week contract.
Debit: Advertising Expense (SE) 1650 Credit: Prepaid Advertising (A) 1650
February 10 Paid $175 for an advertisement in the local paper to run on February 19.
Debit: Advertising Expense (SE) 175 Credit: Cash (A) 175
Placed advertisements on Google for a total of $280 cash.
Debit: Advertising Expense (SE) 280 Credit: Cash (A) 280
Purchased additional buildings for $172 and equipment for $270; paid $432 in cash and signed a long-term note for the rest.
Debit: Buildings (A) 172 Equipment (A) 270 Credit: Cash (A) 432 Notes Payable (L) 10
Sold caps totaling $2,000, half of which was charged on account. The cost of the caps sold was $1,200. (Hint: Make two entries.)
Debit: Cash (A) 1000 Accounts Receivable (A) 1000 Credit: Sales Revenue (SE) 2000 Debit: COGS (SE) 1200 Credit: Inventory (A) 1200
Borrowed $181 from a bank, signing a short-term note.
Debit: Cash (A) 181 Credit: Short term notes payable (L) 181
Borrowed $2,300,000 from the bank on December 1, signing a note payable due in six months.
Debit: Cash (A) 2.3 mil Credit Short term note payable (L) 2.3 mil
Received $250 from a customer on account.
Debit: Cash (A) 250 Credit: Accounts Receivable (A) 250
Received an additional contribution from investors who provided $3,000 in cash and land valued at $15,000 in exchange for 1,000 shares of stock in the company.
Debit: Cash (A) 3000 Land (A) 15000 Credit: Common Stock (SE) 100 Additional Paid in Capital (SE) 17900
Sold daily lift passes in December for a total of $320,000 in cash.
Debit: Cash (A) 320000 Credit: lift revenue (SE) 320000
Issued 100 shares of $2 par value common stock for $345 cash.
Debit: Cash (A) 345 Credit: Common Stock (SE) 200 Additional Paid in Capital (SE) 145
Sold $390,000 of January through March season passes and received cash.
Debit: Cash (A) 390000 Credit: Unearned Pass Revenue (L) 390000
Received $39,043 on account paid by customers.
Debit: Cash (A) 39043 Credit: Accounts Receivable (A) 39043
Sold $4,313 in short-term investments for $4,313 in cash.
Debit: Cash (A) 4313 Credit: Short term investments (A) 4313
Issued 2,300 shares of $0.01 par value common stock to investors for cash at $23 per share.
Debit: Cash (A) 52900 Credit: Common Stock(SE) 23 Additional Paid in Capital (SE) 52,877
Borrowed $67,000 from the bank to provide additional funding to begin operations; the note is due in two years.
Debit: Cash (A) 67,000 Credit: Long term notes payable (L) 67000
Received $70,000 total cash from the six investors; each investor was issued 8,400 shares of common stock with a par value of $0.10 per share.
Debit: Cash (A) 70000 Credit: Common Stock (SE) 5040 Additional Paid In Capital (SE) 64960
February 4 Received customer payment of $820 to ship several items to Philadelphia next month.
Debit: Cash (A) 820 Credit: Unearned Revenue (L) 820
February 7 Flew cargo from Denver to Dallas; the customer paid $910 for the air transport.
Debit: Cash (A) 910 Credit: Transport Revenue (SE) 910
Received investment of cash by organizers and distributed to them 1,000 shares of $1 par value common stock with a market price of $40 per share.
Debit: Cash 40,000 Credit: Common Stock 1,000 Additional Paid in Capital 39,000
February 18 Flew cargo for two customers from Dallas to Albuquerque for $3,800; one customer paid $1,600 cash and the other asked to be billed.
Debit: Cash(A) 1600 Accounts Receivable (A) 2200 Credit: Transport Revenue (SE) 3800
Received $400 on account from the customer in (f). this is j
Debit: Cash(A) 400 Credit: Accounts Receivable (A) 400
Assets
Economic resources owned by the entity. Measured at the total cost cost incurred to acquire it
Current Assets
Economic resources to be used or turned into cash within one year
On January 1, 2016, Miller Corporation had retained earnings of $8,000,000. During 2016, Miller reported net income of $1,400,000, declared dividends of $500,000, and issued common stock for $1,210,000. What were Miller's retained earnings on December 31, 2016?
Ending retained earnings ($8,900,000) = Beginning retained earnings ($8,000,000) + Net income ($1,400,000) − Dividends ($500,000).
Dual Effects
Every transaction has at least two effects on the accounting equation
Mama June Pizza Company sold land costing $39,000 for $51,000 cash. Which of the following statements concerning the land sale is correct?
Income before income taxes increased 12000 The excess cash received over the cost of the land is recognized as a gain on sale of land. This is recorded as part of operating income (before income taxes).
Gains
Increases in assets or decreases in liabilities from peripheral transactions
Independent auditor
Independent CPA who examines financial statements and attests to their fairness.
Stockholders Equity
Indicate amount of financing provided by owners of the business and reinvested earnings.
Private Investor
Individual who purchases shares in companies.
Creditor
Institution or supplier that lends money
On September 1 of the current year, a bank lends $1,500 to a company; the note principal and $150 ($1,500 × 10 percent) annual interest are due in one year. Answer from the bank's standpoint.
Interest Revenue = 12.50
IFRS
International Financial Reporting Standards
On December 31, 2016, The Bates Company's revenue is $380,000 and expenses total $250,000 before consideration of the following: Accrued wages total $18,000; Accrued revenues total $50,000; Depreciation expense is $24,000; Rental revenue of $7,000 was earned; the rent from a tenant was initially recorded by Bates as unearned rent revenue; The income tax rate is 40% of income before income taxes. What is Bates' net income after consideration of the above information?
Net Income 87000 Revenues $437,000 = $380,000 + $50,000 + $7,000. Expenses $292,000 = $250,000 + $18,000 + $24,000. Income before taxes $145,000. Income tax expense 58,000 = $145,000 × .40. Net Income $87,000.
Net Profit Margin Ratio
Net Income/ Net Sales (Operating revenues
Revenue EX
Net Sales Net Product Sales
Total Asset Turnover
Net Sales/ Average total assets
Colby Corporation has provided the following information: Operating revenues from customers were $205,700. Operating expenses for the store were $117,000. Interest expense was $8,500. Gain from sale of plant and equipment was $3,500. Dividend payments to Colby's stockholders were $7,500. Income tax expense was $35,000. Prepaid rent expense was 5,400. How much was Colby's net income?
Net income = $48,700 = $205,700 - $117,000 - $8,500 + $3,500 - $35,000 48700
Non Current Liability Examples
Notes Payable (due in three years) Long term debt
Statement of Cash Flows
Operating Activities Investing Activities Financing Activities
On October 1, 2016, Adams Company paid $3,360 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2016, which of the following account balances are correct after adjusting entries have been made?
Prepaid Insurance 2940 Insurance Expense 420 $3,360/24 = $140 per month. Three months have been used (Oct, Nov, and Dec) so $140 × 3 = $420. This $420 needs to be recorded as the expense. The balance in prepaid insurance is $3,360 - $420 = $2,940.
On December 31, 2016, Krug Company reported pretax income of $130,000 prior to the following adjusting entries: Depreciation expense: $21,000; Accrued sales revenue: $19,000; Accrued expenses: $11,000; Used insurance: $6,000; the insurance was initially recorded as prepaid. Rent revenue earned: $4,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. How much is Krug's pretax income after the adjusting entries?
Pretax income = $115,000 = $130,000 - $21,000 + $19,000 - $11,000 - $6,000 + $4,000.
Madrid Company has provided the following data (ignore income taxes): 2016 revenues were $88,500. 2016 net income was $35,300. Dividends declared and paid during 2016 totaled $7,100. Total assets at December 31, 2016 were $231,000. Total stockholders' equity at December 31, 2016 was $146,000. Retained earnings at December 31, 2016 were $93,000. Which of the following is not correct?
Retained Earnings Increased 35,300 during 2016 Total assets ($231,000) = Total liabilities + stockholders' equity. Total liabilities = Total assets ($231,000) - Stockholders' equity ($146,000) = $85,000. Stockholders' equity ($146,000) = Common stock + Retained earnings ($93,000). Solve for Common stock = $53,000. Net income ($35,300) = Revenues ($88,500) - Expenses. Solve for Expenses = $53,200. Retained earnings increased by net income ($35,300) - dividends ($7,100). Retained earnings increased by $28,200.
Lena Company has provided the following data (ignore income taxes): 2016 revenues were $83,000. 2016 expenses were $49,200. Dividends declared and paid during 2016 totaled $8,300. Total assets at December 31, 2016 were $191,000. Total liabilities at December 31, 2016 were $117,000. Common stock at December 31, 2016 was $33,000. Which of the following is correct?
Retained Earnings at December 31, 2016 were $41,000 Stockholders' equity = $74,000 (Total assets $191,000 - Total liabilities $117,000). Stockholders' equity ($74,000) = Common stock ($33,000) + Retained earnings. Retained earnings = $41,000.
Macy's department store orders 1,000 men's shirts for $15 each for future delivery from PVH Corp., manufacturer of IZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger apparel. The terms require payment in full within 30 days of delivery. Answer from PVH Corp.'s standpoint.
Revenue not affected
A popular ski magazine company receives a total of $12,345 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company's standpoint.
Revenue not earned
Income Statement Basic
Revenue-Expenses
Balance Sheet
Statement of financial position that reports dollar amounts for the assets, liabilities, and stockholders equity at a specific point in time
Which of the following statements is false when Mama June Pizza Company paid $50,000 cash on accounts owed to suppliers?
Supplies expense was increased by 50,000 Paying suppliers cash owed on account does not result in an incurred expense but a reduction in assets (cash) and liabilities (accounts payable).
Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing $8,300 were used to make pizzas during July. Which of the following statements is false with respect to the use of the ingredients?
Supplies was debited for 8300 Supplies is an asset account and is reduced with a credit for $8,300.
Recorded a full year of accrued interest expense on a $17,000, 9 percent note payable that has been outstanding only since November 1.
The accidentally did- Debit: Interest Expense (SE) 1530 Credit: Interest Payable (L) 1530 Should have done- Debit: Interest Expense (SE) 255 Credit: Interest Payable (L) 255
Willie Company's retained earnings increased $29,000 during 2016. What was Willie's 2016 net income or loss given that Willie declared $56,000 of dividends during 2016?
The increase in retained earnings $29,000 equals net income of $85,000 less dividends $56,000. Net income was 85,000
On December 31, 2016, Krug Company reported total liabilities of $130,000 prior to the following adjusting entries: Depreciation expense: $35,000; Accrued sales revenue: $33,000; Accrued expenses: $16,000; Used insurance: $7,000; the insurance was initially recorded as prepaid. Rent revenue earned: $5,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. How much are Krug's total liabilities after the adjusting entries?
Total liabilities = $141,000 = $130,000 + $16,000 - $5,000.
Relevance
Useful information has predictive and feedback value
Faithful representation
Useful information should be complete, neutral, and free from error
A customer purchases a ticket from American Airlines for $780 cash to travel the following January. Answer from American Airlines's standpoint.
revenue not effected
Michigan State University receives $19,500,000 cash for 80,000 five-game season football tickets.
revenue not effected
Precision Builders signs a contract with a customer for the construction of a new $1,500,000 warehouse. At the signing, Precision receives a check for $200,000 as a deposit on the future construction. Answer from Precision's standpoint.
revenue not effected
Dell pays its computer service technicians $403,000 in salaries for the two weeks ended January 7. Answer from Dell's standpoint.
salaries expense= 201,500
Sears, a retail store, sells a $300 lamp to a customer who charges the sale on his Sear's credit card. Answer from Sears's standpoint.
sales revenue= 300
A customer orders and receives 10 personal computers from Dell; the customer promises to pay $9,600 within three months. Answer from Dell's standpoint.
sales revenue= 9,600
