ACCT 205 - Exam #1
Match each of the following transactions of Lesch & Company with the appropriate letters, indicating the financial effect of the transaction. The key for the letters follows the list of transactions. The correct answer for Transaction (1) is given as an illustration: 1. Purchased supplies on account. 2. Paid interest on note payable. 3. Cash dividend was paid to stockholders. 4. Returned some defective supplies and received a reduction in the amount owed. 5. Made payment to settle note payable. 6. Received an invoice for utilities used. 7. Received payment in advance from the client for work to be done next month. 8. The stockholders contributed additional capital to the business
(1) a. Increase an asset d. Increase a liability (2) k. Increase an expense b. Decrease an asset (3) g. Increase dividends b. Decrease an asset (4) c. Decrease a liability b. Decrease an asset (5) c. Decrease a liability b. Decrease an asset (6) k. Increase an expense d. Increase a liability (7) a. Increase an asset d. Increase a liability (8) a. Increase an asset f. Increase common stock
Match each of the following transactions of L. Boyd & Company with the appropriate letters, indicating the financial effect of the transaction. The key for the letters follows the list of transactions. The correct answer for Transaction 1 is given as an illustration: 1. Stockholders contributed cash to the business. 2. Purchased equipment on account. 3. Received and immediately paid advertising bill. 4. Purchased supplies for cash. 5. Borrowed money from a bank, giving a note payable. 6. Billed customers for services rendered. 7. Made a partial payment on account for equipment. 8. Paid employee's salary. 9. Collected amounts due from customers billed in Transaction 6
(1) a. Increase an asset f. Increase common stock (2) a. Increase an asset d. Increase a liability (3) k. Increase an expense b. Decrease an asset (4) a. Increase an asset b. Decrease an asset (5) a. Increase an asset d. Increase a liability (6) a. Increase an asset j. Increase a revenue (7) c. Decrease a liability b. Decrease an asset (8) k. Increase an expense b. Decrease an asset (9) a. Increase an asset b. Decrease an asset
Calculate the unknown amount in each of the following five independent situations. The answer to the situation (a) is given as an example. Account Beginning Balance Ending Balance Other Information a. Cash . . . . . . . . . . . . . . . $ 6,100 $ 5,250 Total cash disbursed, $5,400. b. Accounts receivable . . . 8,500 9,300 Services on account, $16,500. c. Notes payable. . . . . . . . 15,000 20,000 Borrowed funds by issuing a note, $30,000. d. Accounts payable . . . . . 3,280 1,720 Payments on account, $2,900. e. Stockholders' equity . . . 32,000 46,000 Capital contribution, $5,000. Unknown Amounts Required a. Total cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,550 b. Total cash collected from credit customers . . . . . . . . . . . . . . . c. Notes payable repaid during the period . . . . . . . . . . . . . . . . . . d. Goods and services received from suppliers on account. . . . . e. Net income, assuming that no dividends were paid
(a) $4,550 ($5,250 + $5,400 -$6,100) (b) $15,700 ($8,500 + $16,500 -$9,300) (c). $25,000 ($15,000 + $30,000 -$20,000) (d) $1,340 ($1,720 + $2,900 -$3,280) (e) $9,000 ($46,000 - $5,000 -$32,000)
The accounts below are from the general ledger of The Bast Company. For each letter, describe the type of business transaction(s) or event(s) that would most likely be reflected by entries to the account. For example, the answer to (a) is amounts for services performed for clients on account. a. An increase to Accounts Receivable b. A decrease to Accounts Receivable c. An increase to Notes Payable d. An increase to Office Equipment e. A decrease to Accounts Payable f. An increase to Accounts Payable g. An increase to Professional Fees Earned h. An increase to Dividends i. An increase to Common Stock j. An increase to Wage Expense
(a) Dollar amount of services performed for clients on account. (b) Dollar amount collected from clients on account. (c) Funds borrowed in exchange for written promissory note to repay. (d) Dollar amount of office equipment purchased. (e) Amount paid to suppliers on account. (f) Amount purchased from suppliers on account. (g) Amount of revenue earned by providing services for clients (h) Dividends paid by the firm. (i) Amount of capital invested in the common stock of the firm. (j) Amount of wage expense incurred.
Following the example shown in (a) below, indicate the accounting effects of the listed transactions on the assets, liabilities, and stockholders' equity of Martin & Company, a corporation: a. Purchased, for cash, a desktop computer for use in the office. ANSWER: Increase assets (Office Equipment) Decrease assets (Cash) b. Rendered services and billed the client. c. Paid rent for the month. d. Rendered services to a client for cash. e. Received amount due from a client in Transaction (b). f. Purchased an office desk on account. g. Paid employees' salaries for the month. h. Paid for desk purchased in Transaction (f). i. The company paid a dividend.
(a) Increase assets (Office Equipment) Decrease assets (Cash) (b.) Increase assets (Accounts Receivable) Increase stockholders' equity (Sales Revenue) (c) Decrease stockholders' equity (increase Rent Expense) Decrease assets (Cash) (d) Increase assets (Cash) Increase stockholders' equity (Sales Revenue) (e) Increase assets (Cash) Decrease assets (Accounts Receivable) (f) Increase assets (Office Furniture) Increase liabilities (Accounts Payable) (g) Decrease stockholders' equity (increase Salaries Expense) Decrease assets (Cash) (h) Decrease liabilities (Accounts Payable) Decrease assets (Cash) (i) Decrease stockholders' equity (increase Dividends) Decrease assets (Cash)
In each of the following cases, (a) identify the aspect of the accounting environment primarily responsible for the ethical pressure on the accountant and (b) indicate the appropriate behavioral response for the accountant. 1. James Jehring, a tax accountant, is preparing an income tax return for a client. The client asks Jehring to take a sizable deduction on the tax return for business-related travel even though the client states that he has no documentation to support the deduction. "I don't think the IRS will audit my return," declares the client. 2. Willa English, an accountant for Dome Construction Company, has just finished putting the numbers together for a construction project on which the firm is going to submit a bid next month. At a social gathering that evening, a friend casually asks English what Dome's bid is going to be. Ms. English knows that the friend's brother works for a competitor of Dome. 3. The manager of Cross Department Store is ending his first year with the firm. December's business was slower than expected, and the firm's annual results are trailing last year's results. The manager instructs Kyle Tarpley, the store accountant, to include sales revenues from the first week of January in the December data. "This way, we'll show an increase over last year," declares the manager.
1. (a) Pressure for a "good" number (b) The accountant should refuse to do it. 2. (a) Pressure to disclose confidential/ sensitive information (b) The accountant should not discuss the contract. 3. (a) Pressure to report good short-term profits (b) The accountant should not do it.
Daniel Kelly, an attorney, opened his law practice on October 1. Prepare a horizontal worksheet using the format in Exhibit 2-3 with the following column headings: Cash; Accounts Receivable; Office Equipment; Legal Database Subscription; Accounts Payable; Common Stock; Revenue; Expense; and Dividends and record the following October transactions. Total the columns to show that assets equal liabilities plus stockholders' equity as of October 31. 1. Kelly started his law practice by contributing $19,500 cash to the business on October 1, receiving shares of common stock in the company. 2. Purchased office equipment on account, $10,400. 3. Paid office rent for October, $700. 4. Paid $9,600 to access online legal database for two years. 5. Billed clients for services rendered, $11,300. 6. Made $6,000 payment on account for the equipment purchased on October 2. 7. Paid legal assistant's salary, $2,800. 8. Collected $9,400 from clients previously billed for services. 9. Received invoice for October utilities, $180; it will be paid in November. 10. The company paid stockholders $1,500 as a cash dividend
1. 19,500 under cash and common stock 2. 10,400 under office equipment and accounts payable 3. 700 under expense & -700 under cash 4. 9,600 under legal database subscription & -9,600 under cash 5. 11,300 under accounts receivable and revenue 6. -6,000 under cash and accounts payable 7. 2,800 under expense & -2,800 under cash 8. 9,400 under cash & -9,400 under accounts receivable 9. 180 under accounts payable & expense 10. 1,500 under dividend & -1,500 under cash
Mead Pet Hospital, owned by R. Mead, a veterinarian, opened for business on December 1 of the current year. Prepare a horizontal worksheet using the format in Exhibit 2-3 with the following column headings: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Common Stock; Revenue; Expense; and Dividends. Record the following December transactions. Total the columns to show that assets equal liabilities plus stockholders' equity as of December 31. 1. Mead opened a checking account on December 1 at United Bank in the name of Mead Pet Hospital and deposited $20,000 cash. Mead received common stock for his investment. 2. Paid rent for December, $1,100. 3. Purchased office equipment on account, $2,900. 4. Purchased supplies for cash, $1,700. 5. Billed clients for services rendered, $7,300. 6. Paid secretary's salary, $1,950. 7. Paid $1,500 on account for the equipment purchased on December 3. 8. Collected $5,800 from clients previously billed for services. 9. The company paid stockholders $2,200 as a cash dividend.
1. 20,000 under cash and common stock 2. 1,100 under expense & -1,100 under cash 3. 2,900 under office equipment and accounts payable 4. 1,700 under supplies & -1,700 under cash 5. 7,300 under accounts receivable and revenue 6. 1,950 under expense & -1,950 under cash 7. -1,500 under cash and accounts payable 8. 5,800 under cash & -5,800 under accounts receivable 9. 2,200 under dividend & -2,200 under cash
Establish the correct sequence of steps in the accounting measurement process
1. Identify relevant economic activity 2. Quantify economic activity 3. Record in a systemic fashion
Identify the type of accounting associated with each type of report: Managerial, Financial, Tax, combination as needed. 1. Budget for internal use by management 2. Tax return for state income taxes 3. Audited financial statements 4. Special reports for regulators of a public utility
1. Managerial 2. Tax 3. Financial 4. Combination as needed
Match the following organizational attributes with the organizational form: 1. unlimited liability 2. full control 3. business income combined with owner(s) income for income tax purposes 4. relatively more difficult to establish 5. easier to raise funds
1. sole proprietorship & partnership 2. sole proprietorship 3. sole proprietorship & partnership 4. corporation 5. corporation
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A. Sales revenue = $14,800 B. Liabilities = $18,000 C. Dividends = $7,000 D. Assets = $26,000
Selected adjusted balances of the Rose Corporation, prepared as of December 31, are as follows: Adjusted Balances Service fees earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,500 Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200 Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,800 Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,700 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,900 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 Retained earnings, beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,700 Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 Identify the temporary accounts that will be closed to Retained Earnings. Once the closing process is completed, what is the ending balance in the Retained Earnings account?
All of these accounts are temporary with the exception of Common Stock and Retained Earnings. The balance of the Retained Earnings account after the closing process is $72,700 ($57,700 + $92,500 + 2,200 - 41,800-4,300-8,700-9,900 - $15,000).
From the following accounts, listed in alphabetical order, prepare a classified balance sheet for Berkly Wholesalers as of December 31. Accounts payable . . . . . . . . . . . . . . . . $ 43,000 Inventory. . . . . . . . . . . . . . . . . . . . . . . $117,000 Accounts receivable . . . . . . . . . . . . . . 40,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Building. . . . . . . . . . . . . . . . . . . . . . . . 67,000 Mortgage payable (long term) . . . . . . 78,000 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000 Office supplies . . . . . . . . . . . . . . . . . . 2,000 Common stock . . . . . . . . . . . . . . . . . . 111,000 Retained earnings . . . . . . . . . . . . . . . ? Salaries payable. . . . . . . . . . . . . . . . . 7,000
Assets Current Assets Cash = $26,000 Accounts receivable = $40,000 Inventory = $117,000 Office supplies = $2,000 Total Current Assets = $185,000 Noncurrent Assets Land = $45,000 Building = $67,000 Total Noncurrent Assets = $112,000 Total Assets = $297,000 Liabilities & Stockholders' Equity Current Liabilities Accounts payable = $43,000 Salaries payable = $7,000 Total Current Liabilities = $50,000 Long-term Liabilities Mortgage payable = $78,000 Total Liabilities = $128,000 Stockholders' Equity Common stock = $111,000 Retained earnings = $58,000 Total Stockholders' Equity = $169,000 Total Liabilities & Stockholders' Equity = $297,000
The Werthman Company collected the following information for the preparation of its December 31 classified balance sheet: Accounts receivable . . . . . . . . . . . . . . $15,000 Property, plant, and equipment . . . . $200,000 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Inventory. . . . . . . . . . . . . . . . . . . . . . 65,000 Other current assets. . . . . . . . . . . . . . 25,000 Other long-term assets . . . . . . . . . . . 40,000 Accounts payable . . . . . . . . . . . . . . . . 21,000 Common stock . . . . . . . . . . . . . . . . . 95,000 Long-term liabilities. . . . . . . . . . . . . . . 55,000 Retained earnings . . . . . . . . . . . . . . ? Other current liabilities . . . . . . . . . . . . 18,000 Prepare a classified balance sheet for Werthman Company
Assets Current Assets: Cash = $ 17,000 Accounts receivable = 15,000 Inventory = 65,000 Other current assets = 25,000 Total Current Assets = 122,000 Noncurrent Assets: Property, plant & equipment = 200,000 Other long-term assets = 40,000 Total Noncurrent Assets = 240,000 Total Assets = $362,000 Liabilities & Stockholders' Equity Current Liabilities: Accounts payable = $ 21,000 Other current liabilities = 18,000 Total Current Liabilities = 39,000 Noncurrent Liabilities: Long-term liabilities = 55,000 Total Liabilities = 94,000 Stockholders' Equity Common stock = 95,000 Retained earnings = 173,000 Total Stockholders' Equity = 268,000 Total Liabilities & Stockholders' Equity = $362,000
At the end of the first month of operations, the Bradley Company's accountant prepared financial statements that showed the following amounts: Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,000 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 In preparing the statements, the accountant overlooked the following items: a. Depreciation for the month, $1,000. b. Service revenue earned but not recorded at month-end, $1,500. c. Employee wages earned but unpaid at month-end, $250. Determine the correct amounts of assets, liabilities, and stockholders' equity at month-end and net income for the month
Assets/Liabilities/Stockholders' Equity/Net Income Reported amounts $60,000/$20,000/$40,000/$9,000 Depreciation (1,000)/ /(1,000)/(1,000) Unrecorded revenue 1,500/ /1,500/1,500 Accrued wages / /250/(250)/(250) Corrected amounts $60,500/$20,250/$40,250/$9,250
You have been asked to assist with the preparation of a statement of stockholders' equity for Maxx Company for the current year ended December 31. You determine the following balances: Beginning-of-year common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000 Beginning-of-year retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 REQUIRED Prepare a statement of stockholders' equity for Maxx Company for the current year.
CS RE TSE $5000 $7500 $12,500 400 400 2500 2500 (250) (250) $5,400 $9,750 $15,150
Using the same data as the previous question, calculate the operating-cash-flow-to-capital-expenditures ratio for Los Altos, Inc.
Cash flow from operating activities Net income = $96,000 Add (deduct) items to convert net income to cash basis Depreciation = 39,000 Amortization = 16,000 Gain on sale of equipment = (14,000) Accounts receivable increase = (7,000) Inventory increase = (13,000) Prepaid expenses increase = (8,000) Accounts payable decrease = (5,000) Wages payable decrease = (3,000) Cash provided by operating activities = 101,000 Sale of equipment = 12,000 Purchase of land = (100,000) Cash used by investing activities = (88,000) Cash flow from financing activities Issuance of common stock = 45,000 Retirement of bonds payable = (75,000) Payment of dividends = (6,000) Cash used by financing activities = (36,000) Net decrease in cash = (23,000) Cash at beginning of year = 30,000 Cash at end of year = $ 7,000
Creative Designs, a firm providing art services for advertisers, began business on June 1. Prepare a horizontal worksheet using the format in Exhibit 2-3 with the following column headings: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Common Stock; Revenue; Expense; and Dividends. Record the following transactions and total the columns to show that assets equal liabilities plus stockholders' equity as of June 30. June 1 Lisa Ryan invested $12,000 cash to begin the business; she received common stock for her investment. 2 Paid rent for June, $950. 3 Purchased office equipment on account, $6,400. 6 Purchased art materials and other supplies costing $3,800; paid $1,800 down with the remainder due within 30 days. 11 Billed clients for services, $4,700. 17 Collected $3,250 from clients on account. 19 Paid $3,000 on account to office equipment company (see June 3 transaction). 25 Lisa Ryan received a $2,000 dividend. 30 Paid utility bill for June, $350. 30 Paid salaries for June, $2,500.
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Using the following data for Los Altos, Inc., calculate the cash paid for rent: Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,000 Prepaid rent, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Prepaid rent, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Net income = $113,000 Add (deduct) items to convert net income to cash basis Accounts receivable increase = (5,000) Inventory decrease = 6,000 Prepaid insurance increase = (1,000) Accounts payable increase = 4,000 Wages payable decrease = (2,000) Cash provided by operating activities = $115,000
Cash flow from operating activities. . . . . . . . . . . . . . $1,500,000 Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . 850,000 Current liabilities, beginning of year . . . . . . . . . . . . . . . 300,000 Current liabilities, end of year. . . . . . . . . . . . . . . . . . . . . 360,000 Using the above data, calculate the operating-cash-flow-to-current-liabilities ratio for Los Altos, Inc.
Net income = $13,000 Add (deduct) items to convert net income to cash basis Accounts receivable increase (= 5,000) Inventory decrease = 26,000 Prepaid rent increase = (1,000) Accounts payable decrease = (6,000) Wages payable increase = 3,000 Cash provided by operating activities = $30,000
From the following accounts, listed in alphabetical order, prepare a multi-step income statement for Karlman Distributors for the year ended December 31. Selling, general and administrative expense . . . . $186,000 Sales revenue. . . . . . . . . $550,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 330,000 Income tax expense . . . . 10,000 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Sales revenue = $550,000 Costs of goods sold = 330,000 Gross profit on sales = 220,000 Selling, general, and administrative expenses = 186,000 Income from operations = 34,000 Other income and expense Interest expense = 3,000 Income before income tax = 31,000 Income tax expense = 10,000 Net income = 21,000
Determine the missing amount in each of the following cases: Assets Liabilities Stockholder's Equity $150,000 $92,000 ? ? $21,000. $42,000 $87,000 ? $ 61,000
Stockholders' Equity = $58,000 Assets = $63,000 Liabilities = $26,000
Prag Co. reported the following financial data for its most current year: Beginning-of-year common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000 Beginning-of-year retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,400 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,250 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,500 Issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 Compute Prag's end-of-year total stockholders' equity.
Total stockholders' equity = $80,000 + $175,400 + $32,250 - $8,500 + $15,000 = $294,150
For each transaction in E2-6A, indicate the related source document or documents that provide evidence supporting the transaction.
Transaction Date Source Document June 1 Investor's check, bank deposit slip 2. Bank check, lease contract 3 Seller's invoice 6 Seller's invoice, bank check 11 Invoices to customers 17 Client's checks, bank deposit slip 19 Seller's invoice, bank check 25 Bank check 30 Seller's invoice, bank check 30 Payroll records, bank checks
The following information appears in the re- cords of Bock Corporation at year-end: Accounts receivable = $23,000 Accounts payable = $11,000 Cash = $8,000 Common stock = $110,000 Retained earnings = $ ? Supplies = $9,000 Equipment, net = $138,000 a. Calculate the balance in retained earnings at year-end. b. If the amount of the retained earnings at the beginning of the year was $30,000, and $12,000 in dividends is paid during the year, calculate net income for the year.
a. $57,000 b. $39,000
Selected accounts of Ideal Properties Inc., a real estate management firm, are shown below as of January 31, before any adjustments have been made: Unadjusted Balances Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,660 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,930 Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,952 Unearned rent revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,250 Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100 Rent revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 Monthly financial statements are prepared. Using the Transaction Analysis Template, determine the financial statement effect of the following adjustments as of January 31: a. Prepaid Insurance represents a three-year premium paid on January 1. b. Supplies of $850 were on hand January 31. c. Office equipment is expected to last eight years. Depreciation is recorded monthly. d. On January 1, the firm collected six months' rent in advance from a tenant renting space for $875 per month. e. Accrued salaries not recorded as of January 31 are $490
a. -185 under assets (prepaid insurance), SE, and net income & 185 under expenses (insurance expense) - $6,680/36 months = $185 b. -1,080 under assets (supplies), SE, and net income & 1,080 under expenses (supplies expense) - $1,930 - $850 = $1,080 c. -62 under assets (accumulated depreciation), SE, and net income & 62 under expenses (depreciation expense) - $5,952/96 = $62 d. 875 under SE, revenues (rent revenue), and Net income & -875 under liabilities (unearned rent revenue) e. 490 under liabilities (salaries payable) and expenses (salary expense) & -490 under SE and net income
Determine the financial effect on the balance sheet and income statement for each of the following independent events using the Transaction Analysis Template (use the format in Exhibit 2-4). a. Paid $4,000 for six months rent, in advance. b. Borrowed $50,000 from a bank. c. Received an invoice for utilities used during the current month, $800. d. Paid dividends to stockholders, $25,000.
a. -4,000 under assets b. 50,000 under to assets and liabilities c. 800 under liabilities and expenses & -800 under stockholder's equity and net income d. -25,000 under assets and stockholder's equity
For each of the following unrelated situations, determine the financial statement effect using the Transaction Analysis Template: a. Unrecorded depreciation on equipment is $610. b. The Supplies account has a balance of $2,990. Supplies on hand at the end of the period totaled $1,100. c. On the date for preparing financial statements, an estimated utilities expense of $390 has been incurred, but no utility bill has been received. d. On the first day of the current month, rent for four months was paid and recorded as a $2,800 increase to Prepaid Rent and a $2,800 decrease in Cash. Monthly statements are now being prepared. e. Nine months ago, Solid Insurance Company sold a one-year policy to a customer and recorded the receipt of the premium by increasing Cash and Unearned Premium Revenue for $624. No adjusting entries have been prepared during the nine-month period. Annual financial statements are now being prepared. f. At the end of the accounting period, employee wages of $965 have been incurred but not paid. g. At the end of the accounting period, $300 of interest has been earned but not yet received on notes receivable.
a. -610 under SE, net income, and assets (accumulated depreciation) & 610 under expenses (depreciation expense) b. -1,890 under assets (Supplies), SE, and net income & 1,890 under expenses (supplies expense) $2,990 - $1,100 = $1,890 c. -390 under SE and net income & 390 under liabilities (account payable) and expenses (utilities expense) d. -700 under assets (prepaid rent), net income, and SE & 700 under expenses (rent expense) e. 468 under SE, revenues, and net income & -468 under liabilities f. -965 under net income and SE, 965 under liabilities, & 975 under expenses g. 300 under assets, SE, revenues, and net income
Determine the financial effect on the balance sheet and income statement for each of the following independent events using the Transaction Analysis Template (use the format in Exhibit 2-4). a. Purchased inventory on account, $10,000. b. Rendered services to clients on account, $12,000. c. Paid wages for the week, $1,600. d. Collected $8,000 from clients on account
a. 10,000 under assets and liabilities b. 12,000 under assets, liabilities, revenue, and net income c. -1,600 under assets, SE, and net income & 1,600 under expenses d. 8,000 under assets
Deluxe Building Services offers janitorial services on both a contract basis and an hourly basis. On January 1, Deluxe collected $20,100 in advance on a six-month contract for work to be performed evenly during the next six months. Using the Transaction Analysis Template, determine the financial statement effect of the following: a. the January 1st receipt of $20,100 for contract work b. the adjustment to be made on January 31, for the contract work done during January c. On January 31, a total of 30 hours of hourly rate janitor work was unbilled. The billing rate is $19 per hour. Provide the accrual needed on January 31. (Note: The firm uses the account Fees Receivable to reflect amounts due.
a. 20,100 under assets (cash) and liabilities (advances from customers) b. 3,350 under net income, revenue (service fee revenue), and stockholder's equity & -3,350 under liabilities (advances from customers) - January service fees earned $20,100/6 = $3350 c. 570 under assets (fees receivable), stockholder's equity, net income, and revenues (service fee revenues) - Accrue service fee 30 hrs x $19 = $570
The following information was taken from recent Apple Inc. financial statements. Numbers are in millions. 2017 2016 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,351 $ 45,687 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,319 321,686 REQUIRED a. What was Apple's return on assets for each year? b. Based on your answer from part a., how did the company's performance change from 2016 to 2017?
a. 2017 2016 ROA = $48,351 $45,687 $375,319 $321,686 = 12.9% 14.2% b. Apple's performance, as measured by its return on assets, decreased from 14.2% in 2016, to 12.9% in 2017.
For the following unrelated situations, determine whether the assets, liabilities, stockholders' equity, income and/or expense are overstated, understated or properly stated: a. The supplies account has a balance of $900. Supplies on hand at the end of the period totaled $400. No adjustment has been made. b. Employees worked the last three days of the month for which they have not been paid. No accrual has been made. c. An employment contract has been signed with an accountant to start working next month. No adjustment has been made.
a. Assets (Supplies) Overstated Stockholders' Equity Overstated Expenses (Supplies expense) Understated b. Liabilities (Wages payable) Understated Stockholders' Equity Overstated Expenses (Wages expense) Understated c. No financial statement effect (no transaction)
Identify the proper point to recognize revenue for each of the following transactions. a. Napoleon Industries sells and delivers a machine in January with terms of no payment due until six months later. b. Emma Company collects an advance deposit of $700 in July toward the purchase of a $3,000 piece of equipment that is delivered to the customer the following September. c. Ashley Corporation receives payment in October at the time of delivery of a rebuilt engine for a tractor
a. At time of sale. b. At delivery in September. c. At time of delivery in October.
Identify where the following items will appear in a company's annual report: Management Discussion and Analysis (MD&A), notes to the financial statements, or the auditor's report. a. A comment that the financial statements appear to be fairly presented b. A discussion about new competition likely to occur next year c. A quantitative summary of notes payable appearing on the balance sheet d. The "secret" ingredients in the company's special sauce
a. Auditor's report b. MD&A c. Notes to financial statements d. Not disclosed
Karl Flury operates a golf driving range. For each of the following financial items related to his business, indicate the financial statement (or statements) in which the item would be reported: a. Accounts receivable b. Cash received from the sale of land c. Net income d. Cash invested in the business by Flury e. Notes payable f. Supplies expense g. Land h. Supplies
a. Balance Sheet b. Statement of Cash Flows c. Income Statement and the Statement of Stockholders' Equity (or Statement of Retained Earnings) d. Statement of Cash Flows e. Balance Sheet f. Income Statement g. Balance Sheet h. Balance Sheet
Selected adjusted balances for Coyle Company are shown below as of January 31. The firm uses a calendar-year accounting period and makes monthly adjustments. Adjusted Balances as of January 31 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 800 Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 960 Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Wages payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 Truck. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,700 Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,610 a. If the amount in Supplies Expense represents the January 31 adjustment for the supplies used in January, and $620 worth of supplies were purchased during January, what was the January 1 balance of Supplies? b. The amount in the Insurance Expense account represents the adjustment made on January 31 for the January insurance expense. If the original insurance premium was for one year, what was the amount of the premium, and on what date did the insurance policy start? c. If we assume that no balance existed in Wages Payable or Wages Expense on January 1, how much cash was paid as wages during January? d. If the truck has a useful life of five years, what is the monthly amount of depreciation expense, and how many months has Coyle owned the truck
a. Balance, January 1 = $960 + $800 - $620 = $1,140. b. Amount of premium = $82 ´ 12 = $984. Therefore, five months' premium ($984 - $574 = $410; $410 / $82 = 5) has expired by January 31. The policy term began on September 1 of the previous year. c. Wages paid in January = $3,200 - $500 = $2,700. d. Monthly depreciation expense = $8,700/60 months = $145. Coyle has owned the truck for 18 months ($2,610/$145 = 18).
Using the information for the Seville Corporation above, calculate the cash flow from investing activities.
a. Cash flow from a financing activity b. Cash flow from an operating activity c. Non-cash investing and financing activity d. Cash flow from an operating activity e. Cash flow from an operating activity f. None of the above (a change in the composition of cash and cash equivalents)
Using the information for the Seville Corporation above, calculate the cash flow from operating activities.
a. Cash flow from an operating activity b. Cash flow from an investing activity c. Cash flow from an investing activity d. Cash flow from an operating activity e. Cash flow from a financing activity f. Cash flow from a financing activity g. Cash flow from an investing activity
Identify whether the following statements are true or false: a. U.S. GAAP is universally accepted in all countries in the world. b. U.S. GAAP is established by the IASB. c. Once established, U.S. GAAP is rarely, if ever, modified. d. The international counterpart to the FASB is the IASB
a. False b. False c. False d. True
Identify whether the following statements are true or false. a. The statement of cash flows reveals whether a firm is profitable. b. The statement of cash flows reveals a firm's financial health. c. The statement of cash flows reveals a firm's liquidity. d. The statement of cash flows reveals a firm's solvency.
a. False. The income statement reveals if a firm is profitable. b. True. The statement of cash flows reveals a firm's cash flow health. c. True. The statement of cash flows reveals a firm's liquidity from operations. d. False. The statement of cash flows is only for the current period and does not reveal future cash flows.
The worldwide acceptance of a global set of international accounting principles will provide certain benefits. a. Which group has taken the lead in developing a set of international accounting principles? b. Identify and briefly discuss two major benefits that would result from the adoption of a global set of international accounting principles.
a. International Accounting Standards Board (IASB) b. Improve the operation of the international capital market and reduce the financial reporting costs of multinational companies.
Identify each of the following activities as operating (O), investing (I), or financing (F): a. Payment of employee salaries b. Repayment of a loan c. Issuance of common stock d. Purchase of equipment to manufacture a company's products e. Sale of merchandise inventory f. Investment of excess cash in the shares of another company
a. Operating (O) b. Financing (F) c. Financing (F) d. Investing (I) e. Operating (O) f. Investing (I)
Determine the missing amount in each of the following cases: Assets Liabilities Stockholder's Equity $200,000 $85,000 ? ? $32,000 $28,000 $93,000 ? $52,000
a. Stockholders' Equity = $115,000 b. Assets = $60,000 c. Liabilities = $41,000
Determine the following: a. The stockholders' equity of a corporation that has assets of $450,000 and liabilities of $326,000. b. The assets of a corporation that has liabilities of $400,000, common stock of $200,000, and retained earnings of $185,000.
a. Stockholders' equity = $124,000 b. Assets = $785,000
Which of the following is not part of the triple bottom line reporting framework? a. Economic bottom line b. Social bottom line c. Competitive bottom line d. Environmental bottom line
c. Competitive bottom line
The beginning and ending balances of retained earnings for the year were $30,000 and $35,000, respectively. If dividend payments from stockholders' equity exceed new capital contributions during the year by $3,000, determine the net income or net loss for the year. a. $8,000 net loss b. $14,000 net income c. $2,000 net income d. $8,000 net income
d. $8,000 net income