Ch 1-4 Accounting Homework

Dave's Duds reported cost of goods sold of $1,700,000 this year. The inventory account increased by $250,000 during the year to an ending balance of $595,000. What was the cost of merchandise that Dave's purchased during the year? A) $1,105,000. B) $1,450,000. C) $1,950,000. D) $2,295,000.

$1,950,000

On December 31, 2020, Coolwear, Inc. had a balance in its prepaid insurance account of $56,400. During 2021, $94,000 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $46,000. Insurance expense for 2021 was: A) $150,400. B) $104,400. C) $10,400. D) $94,000.

$104,000

Stinley Co. paid utilities of $142,000 during 2021. At the end of 2021, utilities payable equals $33,000 and utilities expense equals $161,000. What was the balance of utilities payable at the beginning of 2021? A) $19,000. B) $38,000. C) $14,000. D) $33,000.

$14,000 Explanation $33,000 - $161,000 utilities expense + $142,000 utilities paid = $14,000.

On August 1, 2021, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2022. On January 31, 2022, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: Operating loss Feb. 1, 2021-Jan. 31, 2022$129,000 Estimated operating losses, Feb. 1-June 30, 2022 81,000 Impairment of division assets at Jan. 31, 2022 28,000 In its income statement for the year ended January 31, 2022, Rocket would report a before-tax loss on discontinued operations of: Multiple Choice $(129,000). $(53,000). $(210,000). $(157,000).

$157,000 Explanation $(129,000) + $(28,000) = $(157,000)

Howard Inc. had prepaid rent of $75,000 and $80,000 at the end of 2020 and 2021, respectively. During 2021, Howard recorded $240,000 in rent expense in its income statement. Cash outflows for rent in 2021 were: A) $245,000. B) $235,000. C) $250,000. D) $240,000.

$245,000 Explanation $240,000 + $5,000 increase in prepaid rent = $245,000.

Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $12,000 during the year to an ending balance of $71,000. What was supplies expense for Carolina Mills during the year? A) $258,000. B) $234,000. C) $306,000. D) $282,000.

$258,000

The following information is provided for Sacks Company before closing entries. Cash$12,000 Supplies 4,500 Prepaid rent 2,000 Salaries expense 4,500 Equipment 65,000 Service revenue 30,000 Miscellaneous expenses 20,000 Dividends 3,000 Accounts payable 5,000 Common stock 68,000 Retained earnings 8,000 What is the amount of total shareholders' equity? A) $68,500. B) $78,500. C) $83,500. D) $5,000.

$78,500 Total shareholders' equity includes common stock plus (ending) retained earnings. Common stock is $68,000. Ending retained earnings = beginning retained earnings ($8,000) plus revenues ($30,000) less expenses ($24,500) less dividends ($3,000) = $10,500.Total shareholders' equity = $68,000 + $10,500 = $78,500. Alternatively, total stockholders' equity = total assets ($83,500) - total liabilities ($5,000).

Super Corporation receives $4,000,000 from investors when issuing them shares of its stock. Super's entry to record this transaction would include which of the following?

- - - - - - - — - - - - Debit - - -Credit Cash - - - - - - - - - -Yes - - - - No Common stock - - -No - - - - -Yes

On December 31, 2021, the end of Larry's Used Cars' first year of operations, the accounts receivable was $54,200. The company estimates that $2,500 of the year-end receivables will not be collected. Accounts receivable in the 2021 balance sheet will be valued at: A) $54,200. B) $56,700. C) $2,500. D) $51,700.

$51,700 ($54,200 - $2,500)

The Hamada Company sales for 2021 totaled $150,000 and purchases totaled $87,000. Selected January 1, 2021, balances were: accounts receivable, $19,000; inventory, $14,900; and accounts payable, $10,100. December 31, 2021, balances were: accounts receivable, $14,100; inventory, $18,500; and accounts payable, $13,700. Net cash flows from these activities were: A) $71,500. B) $82,000. C) $63,000. D) $67,900.

$71,500

Major Co. reported 2021 income of $316,000 from continuing operations before income taxes and a before-tax loss on discontinued operations of $67,000. All income is subject to a 25% tax rate. In the income statement for the year ended December 31, 2021, Major Co. would show the following line-item amounts for income tax expense and net income: A) $62,250 and $237,000 respectively. B) $79,000 and $249,000 respectively. C) $79,000 and $186,750 respectively. D) $62,250 and $383,000 respectively.

$79,000 and $186,750 respectively Income x taxes= then minus it for after tax income then loss of D O x tax benefit= Then reduce it then subtract after tax income with reduced LDO Explanation Income from continuing operations before income taxes$316,000 Income tax expense 79,000 Income from continuing operations$237,000 Loss on discontinued operations (net of $16,750 tax benefit) (50,250) Net income$186,750

Listed below are year-end account balances ($ in millions) taken from the records of Symphony Stores. Debit Credit Accounts receivable663 Building and equipment923 Cash58 Interest receivable48 Inventory16 Land169 Notes receivable (long-term)493 Prepaid rent20 Supplies10 Trademark45 Accounts payable 637 Accumulated depreciation 68 Additional paid-in capital 485 Dividends payable 21 Common stock (at par) 13 Income tax payable 61 Notes payable (long-term) 817 Retained earnings 314 Deferred revenue 29 TOTALS . 2,445 2,445 What would Symphony report as total shareholders' equity? A) $791 millions. B) $1,629 millions. C) $812 millions. D) $833 millions.

$812 millions. Total shareholders' equity: $485 + $13 + $314 = $812 RE, CS, APC

Listed below are year-end account balances ($ in millions) taken from the records of Symphony Stores. Debit Credit Accounts receivable660 Building and equipment934 Cash55 Interest receivable46 Inventory22 Land150 Notes receivable (long-term)467 Prepaid rent37 Supplies10 Trademark43 Accounts payable 535 Accumulated depreciation 74 Additional paid-in capital 471 Dividends payable 28 Common stock (at par) 19 Income tax payable 51 Notes payable (long-term) 895 Retained earnings 317 Deferred revenue 34 TOTALS 2,424 2,424 What would Symphony report as total current assets? A) $870 millions. B) $845 millions. C) $1,703 millions. D) $830 millions.

$830 millions. Total current assets: $660 + $55 + $46 + $22 + $37 + $10 = $830 (added AR, In R, Inventory, Pre R, Supplies

Rowdy's Restaurants cash flow ($ in millions) Cash received from: Customers$4,050 Interest on investments 350 Sale of land 250 Sale of Rowdy's common stock 900 Issuance of debt securities 3,500 Cash paid for: Interest on debt$ 450 Income tax 230 Debt principal reduction 3,000 Purchase of equipment 7,000 Purchase of inventory 2,500 Dividends on common stock 650 Operating expenses 800 Rowdy's would report net cash inflows (outflows) from investing activities in the amount of: A) $(3,250) million. B) $(6,750) million. C) $250 million. D) $(7,000) million.

(6,750) million Explanation Sale of land- - - - - - - - - - - - - - - - - - - $250 Purchase of equipment - - - - - - - - - - - (7,000) Cash outflows from investing activities -$(6,750)

Cendant Corporation's results for the year ended December 31, 2021, include the following material items: Sales revenue ———————————————————-$6,320,000 Cost of goods sold ————————————————- 3,790,000 Selling and administrative expenses ——————- 1,260,000 Loss on sale of investments ————————————182,000 Loss on discontinued operations ————————- 487,000 Loss on impairment from continuing operations 79,000 Cendant Corporation's income from continuing operations before income taxes for 2021 is: A) $1,067,200. B) $1,009,000. C) $1,088,000. D) $522,000.

1,009,000 Explanation $6,320,000 - $3,790,000 - $1,260,000 - $182,000 - $79,000 = $1,009,000

The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown below. Assets ———————————————-Liabilities and Equity Current assets: ——————————Current liabilities: Cash$67 ——————————————Accounts payable$226 Accounts receivable (net) 183 —Other current liabilities 71 Notes receivable 51 ———————Total current liabilities 297 Inventory 201 ———————————Long-term liabilities 104 Prepaid expenses 25 ——————-Total liabilities 401 Total current assets 527 —————Shareholders' equity: Equipment (net) 259 ———————Common stock 150 ———————————————————-Retained earnings 235 ———————————————————Total shareholders' equity 385 Total assets$786 —————————Total liabilities and equity$786 The acid-test ratio is (Round your answer to 2 decimal places.): A) 1.01. B) 1.31. C) 0.30. D) 1.77.

1.01 Acid test ratio: ($527 - $201 - $25) / $297 = 1.01 Current assets/ current liabilities

Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below. Current liabilities$185 - Income before interest and taxes$123 10% Bonds, long-term 390 - - - - Interest expense 39 Total liabilities 575 - - - - - - - - - Income before tax 84 Shareholders' equity - - - - - - - -Income tax 25 Common stock 216 - - - - - — ——Net income$59 Retained earnings 284 Total shareholders' equity 500 Total liabilities and equity$1,075 HHF's debt to equity ratio is (Round your answer to 2 decimal places.): Multiple Choice A) 1.87. B) 0.55. C) 0.78. D) 1.15.

1.15 total liabilities/ total shareholders equity Debt to equity ratio: $575/$500 = 1.15

Bird Brain Co. reported net income of $45,400 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts payable were $23,700 and $24,900 respectively. Year-end balances in these accounts were $21,100 and $28,100, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be: A) $46,000. B) $39,600. C) $45,400. D) $51,200.

51,200 (add differences) 23,700-21,100= 2,600 24,900-28,100= -3,200 45,400+2,600+3,200 = 51,200

The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown below. Assets Current assets: Cash - - - - - - - - - - - - - - - - $79 Accounts receivable (net) - - -176 Notes receivable - - - - - - - - -68 Inventory - - - - - - - - - - - - - -211 Prepaid expenses - - - - - - - -39 - - -Total current assets - - - - - - - -573 Equipment (net) - - - - - - - - - 275 Total assets - - - - - - - - - — - - - - - $848 Liabilities and Equity Current liabilities: Accounts payable - - - - - - $226 Other current liabilities - - - 67 - - Total current liabilities - - - - - 293 Long-term liabilities - - - - - 95 - - Total liabilities - - - - - - - - - - 388 Shareholders' equity: Common stock - - - - - - - - -147 Retained earnings - - - - - - -313 Total shareholders' equity - - - - 460 Total liabilities and equity - - - - $848 The current ratio is (Round your answer to 2 decimal places.): A) 0.68. B) 1.48. C) 2.08. D) 1.96.

1.96 Current Ratio= current assets/ current liabilities 573 / 293 = 1.96

Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): - - - - - - - - - - - - - - - - - - - - - 2021 - - - - -2020 Accounts receivable (net)- - - - $24 - - - - - $35 Net sales- - - - - - - - - - - - - - -$134 - - - - - $119 Cost of goods sold - - - - - - - - $83 - - - - - $74 Net income - - - - - - - - - - - - - $24 - - - - - $33 Inventory turnover 6.15 Return on assets 12.1% Equity multiplier 2.55 Dowling's average inventory balance for 2021 is: A) 13.2. B) 13.9. C) 15.0. D) 13.5.

13.5 Explanation Inventory turnover = Cost of goods sold / (Average inventory), so Average inventory = COGS / (Inventory turnover) = 83 / 6.15 = 13.5.

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: - - - - - - - - - - - - - - - - - - — - - - - 2021 - - - - - -2020 Accounts receivable - - - - - - - - - -$66,000 - - - - -$49,000 Merchandise inventory - - - - - - - - - -41,000 - - - - - -61,000 Net sales - - - - - — - - - - - - - - - - —345,000 - - - - -330,000 Cost of goods sold - - - - - - - — - - -140,000 - - - - - 121,000 Total assets - - - - - - - - - - - —- - - -451,000 - - - - -418,000 Total shareholders' equity - - - — - - - 266,000 - - - - -238,000 Net income - - - - - - - - - - — —. - - - 52,000 - - - —- 41,000 Hulkster's 2021 profit margin is (rounded 1 dec): A) 6.6%. B) 15.1%. C) 11.5%. D) 19.5%.

15.1% Explanation $52,000 / $345,000 = 15.1%

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: - - - - - - - - - - - - - - - - - - - - 2021 - - - - - -2020 Accounts receivable- - - - - -$52,000 - - - -$42,000 Merchandise inventory - - - - -34,000 - - - - -47,000 Net sales - - - - - - - - - - - - - -216,200 - - - -210,000 Cost of goods sold - - - - - - - 126,000 - - - -114,000 Total assets - - - - - - - - - - - -437,000 - - - -411,000 Total shareholders' equity - - -252,000 - - - -231,000 Net income - - - - - - - - - - - - -41,500 - - - -34,000 Hulkster's 2021 return on shareholders' equity is: A) 15.7%. B) 8.7%. C) 19.2%. D) 17.2%.

17.2% Explanation $41,500 / (252,000 + 231,000)/2 = 17.2%

Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): Explanation Return on assets = Net income / (Average assets), so Average assets = Net income / ROA = 20 / 0.103 = 194 Accounts receivable (net) - - - -$20 - - - - - -$16 Net sales - - - - - - - - - - - - - - -$115 - - - - - -100 Cost of goods sold - - - - - - - - $60 - - - - - - 55 Net income - - - - - - - - - - - - - $20 - - - - - - 17 Inventory turnover 5.22 Return on assets 10.3% Equity multiplier 2.36 Dowling's average total assets for 2021 is (rounded): A) 210. B) 115. C) 32. D) 194.

194 Explanation Return on assets = Net income / (Average assets), so Average assets = Net income / ROA = 20 / 0.103 = 194

Listed below are year-end account balances ($ in millions) taken from the records of Symphony Stores. Debit Credit Accounts receivable 710 Building and equipment 920 Cash 39 Interest receivable30 Inventory16 Land150 Notes receivable (long-term)450 Prepaid rent20 Supplies8 Trademark40 Accounts payable 560 Accumulated depreciation 80 Additional paid-in capital 485 Dividends payable 30 Common stock (at par) 15 Income tax payable 65 Notes payable (long-term) 800 Retained earnings 308 Deferred revenue 40 TOTALS2,383 2,383 What would Symphony report as total assets? A) $2,303 millions. B) $2,318 millions. C) $2,463 millions. D) $2,383 millions.

2,3303 million Total assets: $710 + ($920 − $80) + $39 + $30 + $16 + $150 + $450 + $20 + $8 + $40 = $2,303

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: ——————————————————————-2021 ——— —-2020 Accounts receivable —————————$58,000 - -$45,000 Merchandise inventory ———————— 37,000 —— 53,000 Net sales ————————————————236,900 ——231,000 Cost of goods sold ——————————132,000 ——-117,000 Total assets ——————————————-443,000 ——414,000 Total shareholders' equity ——————258,000 ——234,000 Net income ———————————————46,000 ———37,000 Hulkster's 2021 inventory turnover is: A) 3.57. B) 5.26. C) 2.93. D) 3.49.

2.93 Explanation $132,000/ (37,000 + 53,000)/2 = 2.93

Hong Kong Clothiers reported revenue of $5,130,000 for its year ended December 31, 2021. Accounts receivable at December 31, 2020 and 2021, were $321,900 and $353,100, respectively. Using the direct method for reporting cash flows from operating activities, Hong Kong Clothiers would report cash collected from customers of: A) $5,171,200. B) $5,161,200. C) $5,098,800. D) $5,130,000.

5,098,800 Cash collections = $321,900 + $5,130,000 - $353,100 = $5,098,800

Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below. Current liabilities$196 - Income before interest and taxes$131 10% Bonds, long-term 360 - - - - Interest expense 36 Total liabilities 556 - - - - - - - - - Income before tax 95 Shareholders' equity - - - - - - - -Income tax 21 Common stock 213 - - - - - - - - -Net income$74 Retained earnings 288 Total shareholders' equity 501 Total liabilities and equity$1,057 HHF's long-term debt to equity ratio equity is: A) 169.0%. B) 0.0%. C) 139.2%. D) 71.9%.

71.9% Long-term debt to equity ratio: $360/$501 = 71.9%

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: ———————————————————2021———————— 2020 Accounts receivable —————- $64,000 ————— $48,000 Merchandise inventory —————40,000 ——————-59,000 Net sales —————————————235,200 ——————229,000 Cost of goods sold ———————138,000 ——————120,000 Total assets ———————————-449,000 ——————417,000 Total shareholders' equity ——- 264,000 ——————237,000 Net income ———————————— 50,500 —————— 40,000 Hulkster's 2021 average days in inventory is (rounded): A) 121 days. B) 106 days . C) 131 days. D) 73 days.

73 Days Explanation Inventory turnover=$138,000=2.79(40,000 + 59,000)/2 Average days in inventory = 365/2.79 = 130.8 days = 131 days rounded.

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: - - - - - - - - - - - —- - - - - — - - - 2021 - - — - -2020 Accounts receivable - - - - - - -$46,000 — - -$39,000 Merchandise inventory - - - - - - -31,000 - - - - 41,000 Net sales - - - - - - - - - - - - - - - 212,500 - - - 206,000 Cost of goods sold - - - - - — - - 120,000 - - - - 111,000 Total assets - - - - - - - - - - - - - -431,000 - - - 408,000 Total shareholders' equity - - - - 246,000 - - - -228,000 Net income - - - - - - - - - - - - - - 37,000 - - - - -31,000 Hulkster's 2021 average collection period is: A) 73 days. B) 115 days. C) 135 days. D) 119 days.

73 days Explanation Receivable turnover=$212,500 / (46,000 + 39,000)/2 = 5 Average collection period = 365/5.00 = 73 days

Rent collected in advance is: A) A temporary account, not in the balance sheet at all. B) A liability account in the balance sheet. C) An asset account in the balance sheet. D) A shareholders' equity account in the balance sheet.

A liability account in the balance sheet

Making insurance payments in advance is an example of: A) A prepaid expense transaction. B) A deferred revenue transaction. C) An accrued receivable transaction. D) An accrued liability transaction.

A prepaid expense transaction

Matching is: A) An asset classification procedure. B) A cash basis reporting principle. C) A valuation method. D) A result of recognizing revenues and expenses that arise from the same transaction.

A result of recognizing revenues and expenses that arise from the same transaction.

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash.Porite's practice is an example of: A) Accrual accounting B) The matching principle C) Cash basis accounting D) Economic entity

Accrual accounting

Which financial statement provides information for a point in time only? A) Income statement. B) Statement of shareholders' equity. C) Balance sheet. D) Statement of cash flows.

Balance sheet

Cash flows from investing do not include cash flows from: A) borrowing. B) the sale of equipment. C) the purchase of other corporation's securities. D) lending money to another corporation.

Borrowing

Somerset Leasing received $19,200 for 12 months' rent in advance. How should Somerset record this transaction?

Cash - - - - - - - - - - 19,200 - - -Deferred rent revenue - 19,200

Prepayments occur when: A) Manufactured goods await quality control inspections. B) Sales are delayed pending credit approval. C) Cash flow precedes expense recognition. D) Customers are unable to pay the full amount due when goods are delivered.

Cash flow precedes expense recognition

Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $659,000. Depreciation and amortization expense of $94,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable$29,000 Increase in inventory 9,900 Increase in prepaid expenses 9,200 Increase in salaries payable 10,700 Decrease in income taxes payable 18,000 Required:Prepare the operating activities section of the 2021 statement of cash flows.

Cash flows from operating activities: Net income—————————————————$659,000 Adjustments for noncash effects: Depreciation and amortization expense - 94,000 Changes in operating assets and liabilities: Decrease in accounts receivable - - - - -$29,000 Increase in inventory - - - - - - - - - - - - - -(9,900) Increase in prepaid expenses - - - - - - - - (9,200) Increase in salaries payable - - - - - - - - - 10,700 Decrease in income taxes payable - - - - (18,000) Net cash flows from operating activities: 755,600

Recognizing expected losses immediately, but deferring expected gains, is an example of: A) Conservatism B) Timeliness C) Cost-effectiveness D) Materiality

Conservatism

Surefeet Corporation changed its inventory valuation method. Which characteristic is jeopardized by this change? A) Feedback value. B) Comparability. C) Representational faithfulness. D) Consistency.

Consistency

XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a: A) Credit to common stock. B) Credit to retained earnings. C) Credit to revenue. D) Debit to investments.

Credit to common stock

Cash flows from financing activities include: A) Dividends received. B) Dividends paid. C) Interest received. D) Interest paid.

Dividends paid

Independent auditors express an opinion on the: A) Fairness of financial statements. B) Ongoing access to capital markets for additional financing. C) Soundness of a company's future. D) Quality of a company's management.

Fairness of financial statements

Fundamental qualitative characteristics of accounting information are: A) Faithful representation and relevance. B) Comparability and consistency. C) Neutrality and consistency. D) Relevance and comparability.

Faithful representation and relevance

Balance sheet accounts are referred to as temporary accounts because their balances are always changing. True or False

False

T or F Intangible assets usually are reported in the balance sheet as current assets.

False

T or F The balance sheet can be considered a change or flow statement.

False

The assumption that in the absence of contrary information a business entity will continue indefinitely is the: A) Periodicity assumption B) Entity assumption C) Historical cost assumption D) Going concern assumption

Going concern assumption

The relationship between revenue from selling inventory and the cost of that inventory is measured as: A) Operating income. B) Net income. C) Income before taxes. D) Gross profit.

Gross Profit

Which of the following profit amounts usually will be listed in both the single-step and multiple-step formats of the income statement? A) Gross profit. B) Operating income. C) Net nonoperating income. D) Income before taxes.

Income before taxes

Patents, copyrights, franchises, and trademarks are examples of: A) Property, plant and equipment. B) Intangible assets. C) Investments. D) Current assets.

Intangible assets

Mama's Pizza Shoppe borrowed $6,200 at 12% interest on May 1, 2021, with principal and interest due on October 31, 2022. The company's fiscal year ends June 30, 2021. What adjusting entry is necessary on June 30, 2021?

Interest expense - - - - - -124 - - - Interest payable - - - - - - 124

(Ch2 19-39) Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2,400 and is expected to sell for $3,800. How should Ace record the purchase?

Inventory - - - - - - - - - - -2,400 - - -Accounts Payable - - - - - - -2,400

Which of the following is not true about net operating cash flow? A) It is easy to understand and all information required to measure it is factual. B) It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows. C) Over short periods, it may not be indicative of long-run cash-generating ability. D) It is the difference between cash receipts and cash disbursements from providing goods and services.

It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows

When a company accrues salaries at the end of the accounting period: A) Its debt to equity ratio decreases. B) Its acid-test ratio increases. C) Its current ratio increases. D) Its debt to equity ratio increases.

Its debt to equity ratio increases.

Johnstone Controls had the following situations on December 2021. On March 31, 2021, the company lent $48,000 to another company. A note was signed with principal and interest at 5% payable on March 31, 2022. On September 30, 2021, the company paid its landlord $17,600 representing rent for the period September 30, 2021, to September 30, 2022. Johnstone debited prepaid rent. Supplies on hand at the end of 2020 totaled $1,310. Additional supplies costing $5,210 were purchased during 2021 and debited to the supplies account. At the end of 2021, supplies costing $2,910 remain on hand. Vacation pay of $6,550 for the year that had been earned by employees was not paid or recorded. The company records vacation pay as salaries expense. Prepare the necessary adjusting entries for Johnstone Controls at the end of its December 31, 2021, fiscal year-end for each of the above situations.

Journal entry

Of the following, the most important objective for financial reporting is to provide information useful for: A) Determining taxable income. B) Increasing future profits. C) Making decisions. D) Providing accountability.

Making decisions

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of: A) Revenue recognition. B) Economic entity. C) Matching. D) Conservatism.

Matching

Enhancing qualitative characteristics of accounting information include each of the following except: A) Verifiability B) Materiality C) Timeliness D) Comparability

Materiality

Most real-world income statements are presented using which format? A) Income-step. B) Magnitude-step. C) Multiple-step. D) Single-step.

Multiple-step

Consider the following two separate events for a company during the year: 1. Loss on sale of investments = $30. 2. Unrealized gain on investment from increase in fair value = $20.The company reports the unrealized gain as a component of other comprehensive income. By how much would these two events affect net income and comprehensive income, ignoring tax effects? Net income = $(10); Comprehensive income = $20. Net income = $(30); Comprehensive income = $(10). Net income = $0; Comprehensive income = $(10). Net income = $(30); Comprehensive income = $20.

Net income = $(30); Comprehensive income = $(10).

The conceptual framework's qualitative characteristic of faithful representation includes: A) Predictive value. B) Timeliness. C) Confirmatory value. D) Neutrality.

Neutrality

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows: A) Operating, $18,000; financing, $0. B) Operating, $0; financing, $18,000. C) Operating, $12,000; financing, $6,000. D) Operating, $2,000; financing, $16,000.

Operating, $12,000; financing, $6,000

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. 1.Issued 36,000 shares of common stock in exchange for $360,000 in cash. 2.Purchased equipment at a cost of $52,000. $16,000 cash was paid and a note payable to the seller was signed for the balance owed. 3.Purchased inventory on account at a cost of $102,000. The company uses the perpetual inventory system. 4.Credit sales for the month totaled $126,000. The cost of the goods sold was $76,000. 5.Paid $5,600 in rent on the warehouse building for the month of March. 6.Paid $6,600 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. 7.Paid $76,000 on account for the merchandise purchased in 3. 8.Collected $61,000 from customers on account. 9.Recorded depreciation expense of $1,600 for the month on the equipment. 1) classify each as a financing, investing, and/or operating activity 2) Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $46,000.

Operating: (5,600) - (6,600) - (76,000)- 61,000 Investing: (16,000) Finance: 360,000 Total 316,000

Temporary accounts do not include: A) Depreciation expense. B) Salaries payable. C) Supplies expense. D) Cost of goods sold.

Salaries Payable

On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $3,618,000. The company provided $7,500,000 of services in June and received full payment in July. Royal also incurred expenses of $2,258,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $578,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?R - - -Cash Basis - - -Accrual Basis a. $5,242,000 - - - -$5,242,000 b. $8,860,000 - - - -$4,664,000 c. $7,500,000 - - - - $5,242,000 d. $7,500,000 - - - -$4,664,000 A) Option a B) Option b C) Option c D) Option d

Option C

The primary focus for financial accounting information is to provide information useful for: Investing decisions Credit decisions a. Yes Yes b. Yes No c. No Yes d. No No A) Option c. B) Option a. C) Option d.

Option a

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2021, and charged the $2,880 premium to Insurance expense. At its December 31, 2021, year-end, Yummy Foods would record which of the following adjusting entries?

Prepaid insurance - - - 2,280 - - Insurance expense - - - - - 2,280

The FASB's conceptual framework's qualitative characteristics of accounting information include: A) Going concern. B) Relevance. C) Full disclosure. D) Historical cost.

Relevance

Accrued liabilities: A) Result from services received before payment is made. B) Are deferred charges to expense. C) Result from payment before services are received. D) Are generally paid in services rather than cash.

Results from services received before payment is made

Net income equals: A) Cash receipts minus cash payments. B) Assets minus liabilities. C) Revenues minus expenses. D) Revenues minus cost of goods sold.

Revenue minus expenses

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $31,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?

Salaries Expense- - - - - - 21,700 - - -Salaries Payable - - - - - - - -21,700

Liquidity refers to: A) The period until cash is used and refinancing becomes necessary. B) Financial leverage. C) The readiness of an asset to be converted to cash. D) The amount of cash on hand at a given time.

The readiness of an asset to be converted to cash.

Long-term solvency refers to: A) The risk that a company will not be able to pay its long-term debt. B) The profitability of a company over a long-term period of time. C) The amount of current assets relative to long-term assets. D) The efficiency with which a company manages its resources.

The risk that a company will not be able to pay its long-term debt.

Revenue typically should not be recognized until: A) Contracts have been signed and payment has been received. B) Collection has been made and warrantees have expired. C) Work has been performed and customer has been billed. D) The seller has transferred goods or services to a customer.

The seller has transferred goods or services to a customer

Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by 10 days the time to get information to investors and creditors. The qualitative concept improved is: A) Faithful representation. B) Timeliness. C) Comparability. D) Consistency.

Timeliness

Adjusting journal entries are recorded at the end of any period when financial statements are prepared.

True

T or F Accrued salaries and wages in a balance sheet represent salaries that have been earned by employees but not yet paid.

True

T or F Prepaid expenses are classified as current assets if the services purchased are expected to expire within 12 months or the operating cycle, whichever is longer.

True

Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is: A) Comparability. B) Reliability. C) Completeness. D) Verifiability.

Verifiability

Financial statement users typically begin their assessment of permanent earnings with: A) gross profit. B) sales revenue. C) net income. D) income from continuing operations.

income from continuing operations.

A company has decided to discontinue a component of its business but, when the reporting period ends, the component has not yet been sold. The amount that the company would report as income from discontinued operations is (ignore tax effects): A) income from operations for the year and the amount by which the component's fair value less cost to sell is less than book value. B) only the component's income from operations for the year. C) only the amount by which the component's fair value less cost to sell is less than book value. D) income from operations for the year and the amount by which the component's fair value less cost to sell is greater than book value.

income from operations for the year and the amount by which the component's fair value less cost to sell is less than book value

(CH 3) Notes payable that are due in two years are:

long-term liabilities

Earnings quality refers to: A) the ability of reported earnings to predict a company's future earnings. B) the ability of management to budget for expenditures in the following year. C) the ability of management to quickly collect cash from customers. D) the ability of management to sell its inventory for a profit.

the ability of reported earnings to predict a company's future earnings.