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All Textbook Solutions for Survey of Accounting (Accounting I)

1SEQ The resources owned by a business are called: A. assets. B. liabilities. C. the accounting equation. D. stockholders’ equity.A listing of a business entity’s assets, liabilities, and stockholders’ equity as of a specific date is: A. a balance sheet. B. an income statement. C. a statement of changes in stockholders’ equity. D. a statement of cash flows.If total assets are $20,000 and total liabilities are $12,000, the amount of stockholders’ equity is: A. $32,000. B. $(32,000). C. $(8000). D. $8,000.5SEQ 1CDQ 2CDQ 3CDQ 4CDQ 5CDQ 6CDQ 7CDQ 8CDQ 9CDQ 10CDQ Briefly describe the nature of the information provided by each of the following financial statements: the income statement, the statement of stockholders’ equity, the balance sheet, and the statement of cash flows. In your descriptions, indicate whether each of the financial statements covers a period of time or is for a specific date.12CDQ What particular item of financial or operating data appears on both the income statement and the statement of stockholders’ equity? What items app ear on both the balance sheet and the statement of stockholders’ equity? What item appears on both the balance sheet and statement of cash flows?14CDQ On October 1, Wok Repair Service extended an offer of $100000 for land that had been priced for sale at $150,000. On December 19, Wok Rep air Service accepted the seller’s counteroffer of $110000. Describe how Wok Repair Service should record the land.16CDQ 1.1E 1.2E accounting equation The total assets and total liabilities for a recent year of Best Buy (BBY) and Gamestop (GME) are shown below. Determine the stockholders’ equity of each company.accounting equation The total assets and total liabilities for a recent year of Apple (AAPL) and HP (HPQ) formerly Hewlett- Packard are shown here. Determine the stockholders’ equity of each company.accounting equation Determine the missing amount for each of the following:accounting equation Determine the missing amounts (in millions) for the condensed balance sheets shown below.Net income and dividends The income statement of a corporation for the month of November indicates a net income of $90,000. During the same period, $100,000 in cash dividends were paid. Would it be correct to say that the business incurred a net loss of $10,000 during the month? Discuss.Net income and stockholders’ equity for four businesses Four different companies—Chang, Henry, Nagel, and Wilcox—show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders’ equity, arc summarized as follows: On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. (Hint: First determine the amount of increase or decrease in stockholders equity during the year.) Company Chang: No additional capital stock was issued. and no dividends were paid. Company Henry: No additional capital stock as issued, hut dividends of $90000 were paid. Company Nagel: Capital stock of $125,000 was issued, hut no dividends were paid. Company Wilcox: Capital stock of $125000 was issued, and dividends of $90000 were paid.Accounting equation and Income statement Staples, Inc., (SPLS) is a leading office products distributor, with retail stores in the United States, Canada, Asia, Europe, and South America. The following financial statement data were adapted from recent financial statements of Staples: a. Determine the missing data indicated for (1) and (2). b. Using the income statement data for Year 2, determine the amount of net income or loss.1.10E Income statement items Based on the data presented in Exercise 1.10, identify those items that would appear on the income statement.Financial statement items Identify each of the following items as (a) an asset, (h) a liability, (c) revenue, (d) an expense, or (e) a dividend:Statement of stockholders’ equity Financial information related to Webber Company for the month ended June 30, 20Y7, is as follows: Prepare a statement of stockholders’ equity for the month ended June 30, 20Y7.Income statement Maynard Services was organized on August 1, 20Y5. A summary of the revenue and expense transactions for August follows: Prepare an income statement for the month ended August 31.1.15E Balance sheets, net income Financial information related to Montana Interiors for October and November 20Y8 is as follows: a. Prepare balance sheets for Montana Interiors as of October 31 and as of November 30, 20Y8. b. Determine the amount of net income for November, assuming that no additional capital stock was issued and no dividends were paid during the month. c. Determine the amount of net income for November, assuming that no additional capital stock was issued hut dividends of $20000 were paid during the month.Financial statements Each of the following items is shown in the financial statements of ExxonMobil Corporation. Identify the financial statement (balance sheet or income statement) in which each item would appear. a. Accounts payable b. Cash equivalents c. Crude oil inventory d. Equipment e. Exploration expenses f. Income taxes payable g. Investments h. Long-term debt i. Marketable securities j. Notes and loans payable k. Operating expenses l/ Prepaid taxes m. Retained earnings n Sales o Selling expenses Statement of cash flows Indicate whether each of the following cash activities would be reported on the statement of cash flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity. 1. Issued common stock 2. Paid rent 3. Paid for office equipment 4. Sold services 5. Issued a note payable 6. Sold excess office equipment 7. Paid officers salaries 8. Paid for advertising 9. Paid insurance 10. Paid dividends 1.19E Statement of cash flows Looney Inc. was organized on July 1, Year 1. A summary of cash flows for July follows. Prepare a statement of cash flows for the month ended July 31, Year 1.1.21E Financial statement items Amazon.com, Inc., (AMZN) operates as an online retailer in North America and Internationally. Both Amazon and third parties, via the Amazon.com Web site, sell products across various product categories. The following items were adapted from a recent annual report of Amazon.com for the year ending December 31: Using the following notations, indicate on which financial statement you would find each of the preceding items. (Note: An item may appear on more than one statement.) IS Income statement Income statement Based on the Amazon.com, Inc., financial statement data shown in Exercise 1-22, prepare an income statement for the year ending December 31.Financial statement items Though the McDonald’s (MCD) menu of hamburgers, cheeseburgers, the Big Mac, Quarter Pounder, Filet-O-Fish, and Chicken McNugges is easily recognized. McDonalds finan cial statements may not be as familiar. The following items sere adapted from a recent annual report of McDonalds Corporation: 1. Accounts payable 2. Accrued Interest payable 3. Cash 4. Cash provided by operations S. Common Stock 6. Food and packaging costs used in operations 7. Income tax expense 8. Interest expense 9. Inventories 10. Long-term debt payable 11. Net income Net increase in cash Notes payable Notes receivable Occupancy and rent expense Payroll expense Prepaid expenses not yet used in operations Property and equipment 19. Retained earnings 20. Sales Identify the financial statement on which each of the preceding items would appear. An item may appear on more than one statement. Use the following notations:Financial statements Outlaw Realty, organized August 1. 20Y7, is owned and operated by Julie Baxter. How many errors can you find in the following financial statements for Outlaw Realty, prepared after its first month of operations? Assume that the cash balance on August 31, 20Y7, is $51,600 and that cash flows from operating activities is reported correctly.Accounting concepts Match each of the following statements with the appropriate accounting concept. Sonic concepts may he used more than once, while others may not be used at all. Use the notat ions shown to indicate the appropriate accounting concept. Statements 1. Assume that a business will continue forever. 2. Material litigation involving the corporation is described in a note. 3. Monthly utilities costs are reported as expenses along with the monthly revenues. 4. Personal transactions of owners are kept separate from the business. 5. This concept supports relying on an independent actuary (statistician), rather than the chief operating officer of the coq)ration, to estimate a pension liability. 6. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. 7. Land worth $800,000 is reported at its original purchase price of $220,000. 8. This concept justifies recording only transactions that are expressed in dollars. 9. If this concept was ignored, the confidence of users in the financial statements could not be maintained. 10. The changes in financial condition are reported at the end of the month.1.27E Income statement, retained earnings statement, and balance sheet The amounts of the assets and liabilities of Glacier Travel Service as of September 30, 20Y6, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $150000 and the common stock was $50000 as of October 1, 20Y5, the beginning of the current year. Dividends of $10000 were paid during the year. Instruction Prepare an income statement for the current year ended september 30, 20Y6.Income statement, retained earnings statement, and balance sheet The amounts of the assets and liabilities of Glacier Travel Service as of September 30, 20Y6, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $150000 and the common stock was $50000 as of October 1, 20Y5, the beginning of the current year. Dividends of $10000 were paid during the year. Instructios Prepare a statement of stockholders’ equity for the current year ended September 30. 20Y6.Income statement, retained earnings statement, and balance sheet The amounts of the assets and liabilities of Glacier Travel Service as of September 30, 20Y6, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $150000 and the common stock was $50000 as of October 1, 20Y5, the beginning of the current year. Dividends of $10000 were paid during the year. Instructions Prepare a balance sheet as of September 30, 20Y6.1.2.1P Missing amounts from financial statements Obj.4 The financial statements at the end of Paradise Reaky’s first month of operations are shown 2. By analyzing the interrelationships among the financial statements, determine the proper amounts for (a) through (o).Income statement, retained earnings statement, and balance sheet The following financial data were adapted from a recent annual report of Target Corporation (GT) for the year ending January 31. Instructions Prepare Target’s income statement for the year ending January 31.Income statement, retained earnings statement, and balance sheet The following financial data were adapted from a recent annual report of Ta get Corporation (TGT) for the year ending January 31. Instructions Prepare Target’s statement of stockholders’ equity for the year ending January 31. Use the following additional information for the year:Income statement, retained earnings statement, and balance sheet The following financial data were adapted from a recent annual report of Target Corporation (GT) for the year ending January 31. Instructions Prepare a ba1anc sheet as of January 31 Statement of cash flows The following cash data for the year ended December 31 were adapted from a recent annual report of Alphabet (GOOG), formerly known as Google. The ca.sh balance as of January 1 was $ 18.347 (in millions). Instructions Prepare Alphabet’s statement of cash flows for the year ended December 31.Financial statements, including statement of cash flows Pendray Systems Corporation began operations on January 1, 20Y5 as an online retailer of computer software and hardware. The following financial statement data were taken from Pcndrays records at the end of its first year of operations. December 31, 20Y5. Instructions Prepare an income statement for the year ended December 31. 20Y5.Financial statements, including statement of cash flows Pendray Systems Corporation began operations on January 1, 20Y5 as an online retailer of computer software and hardware. The following financial statement data were taken from Pcndrays records at the end of its first year of operations. December 31, 20Y5. Instructions Prepare a statement of stockholders’ equity for the year ended December 31. 20Y5.Financial statements, including statement of cash flows Pendray Systems Corporation began operations on January 1, 20Y5 as an online retailer of computer software and hardware. The following financial statement data were taken from Pendrays records at the end of its first year of operations. December 31, 20Y5. Instructions Prepare a balance sheet as of December 31. 20Y5.Financial statements, including statement of cash flows Pendray Systems Corporation began operations on January 1, 20Y5 as an online retailer of computer software and hardware. The following financial statement data were taken from Pcndrays records at the end of its first year of operations. December 31, 20Y5. Instructions Prepare a statement of cash flows for the year ended December 31, 20Y5.Quantitative metrics Interpublic Group of Companies Inc. (IPG) is an advertising and marketing service company that operates throughout the world. In addition, the company provides event planning, public relations, and brand management services. Twitter Inc. (TWTR) operates as a world wide platform for individuals to communicate with each other by sending Tweets using their mobile devices. For each company, go to the Securities and Exchange Commission (SEC) Internet site bup //wu u sec.got/edgar/warcbcdgar/conqxln)cearcb. html. In the search box Fast Search, enter the Central Index Key (stock market ticker symbol) shown next to the company name. Once the EDGAR Search screen appears, type in 10-K for Filing Type. Open the most recent 10-K file and search the file for metric using the Edit and Find functions. List the quantitative metrics that appear in each company’s 10-K.1.1.2MBA Quantitative metrics JetBlue Airways Corporation (JBLU) is a passenger airline with flights to destinations throughout the United States, the Caribbean. and Latin America. Costco (COST) operates membership retail warehouses offering a variety of products including foods, electronics, appliances, and clothing. For each company, go to the Securities and Exchange Commission (SEQ Internet site bitp://u’wu’.sc i/edgar/warcbedgar/companywarcb.birnl. In the search box ‘Fast Search, enter the Central Index Key (stock market ticker symbol) shown next to the company name. Once the EDGAR Search screen appears, type in 10-K for Filing Type. Open the most recent 10-K file and search the file for ‘metric using the ‘Edit and Find’ functions. List the quantitative metrics that appear in each company’s 10-K.1.2.2MBA Return on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. 1. What art Hershey’s sales (in millions)?1.3.2MBA 1.3.3MBA 1.3.4MBA Return on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. The percent that a company adds to its cost of sales to determine the selling price is called a markup. That is Hershey’s markup percent? Round to one decimal place.Return on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. What is the percentage of net income to sales for Hershey? Round to one decimal place.Return on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. Hershey had total assets of $4,412 (million) at the beginning of the year. Compute the return on assets for Hershey for the year shown in Exhibits 6-9.Return on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): What is Tootsie Roll’s percent of the cost of sales to sales? Round to one decimal place.Return on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): The percent a company adds to its cost of sales to determine selling price is called a markup. What is Tootsie Roll’s markup percent? Round to one decimal place.Return on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): What is the percentage of net income to sales for Tootsie Roll? Round to one decimal place.1.4.4MBA Return on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): Using your answers to MBA 1-3, compare the markup percentages and return on assets for Hershey and Tootle Roll.Return on assets Pfizer Inc. (PFE) discovers, produces, and distributes medicines, including Celebrex and Lipitor. Ford (F) Motor Co. develops, markets, and produces automobiles and trucks. Microsoft Corporation (MSFT) develops, produces. and distributes a variety of computer software and hardware products including Windows, Office, Excel, and the Xbox. Without computing thy return on assets, rank from highest to lowest Pfizer, Ford, and Microsoft in terms of their return on assets.Return on assets Pfizer Inc. (PFE) discovers, produces, and distributes medicines, including Celebrex and Lipitor. Ford (F) Motor Co. develops, markets, and produces automobiles and trucks. Microsoft Corporation (MSFT) develops, produces. and distributes a variety of computer software and hardware products including Windows, Office, Excel, and the Xbox. The following data (in millions) were taken from recent financial statements 01 each company: Pfizer Ford Microsoft Compute the return on assets for each company using the preceding data, and rank the companies’ return on assets from highest to lowest. Round the return on assets to one decimal place.1.5.3MBA 1.6.1MBA Return on assets ExxonMobil Corporation (XOM) explores, produces, and distributes oil and natural gas. The Coca-Cola Company (KO) produces and distributes soft drink beverages, including Coke. Wal-Mart Stores, Inc.., (WMT) operates retail stores and supermarkets. The following data (in millions) were taken from recent financial statements of each company: Compute the return on assets for each company using the preceding data, and rank the companies’ return on assets from highest to lowest. Round the return on assets to one decimal place.Return on assets ExxonMobil Corporation (XOM) explores, produces, and distributes oil and natural gas. The Coca-Cola Company (KO) produces and distributes soft drink beverages, including Coke. Wal-Mart Stores, Inc.., (WMT) operates retail stores and supermarkets. Analyze and explain the rankings in (2).Return on assets Tiffany & Co. (TIF) designs and sells jewelry including rings, watches, and necklaces throughout the world. The folk wing data (in millions) n taken from recent financial statements of Tiffany: Compute the return on assets for Tiffany using the preceding data. Round to one decimal place.Return on assets Tiffany & Co. (TIF) designs and sells jewelry including rings, watches, and necklaces throughout the world. The folk wing data (in millions) n taken from recent financial statements of Tiffany: Using your answers to MBA 1, compare the return on assets for Wal-Mart to that of Tiffany.1.1C Ethics and professional conduct in business Loretta Smith, president and owner of Custom Enterprises, applied for a $250000 loan from City National Bank. The bank requested financial statemens from Custom Enterprises as a basis for granting the loan. Lorena has told her accountant to provide the bank with a balance sheet. Lorena has decided to omit the other financial statements because there was a net loss during the past year. In groups of three or four, discuss the following questions: Is Loretta behaving in a professional manner by omitting some of the financial statements?1.2.2C How businesses make money Assume that you are the chief executive officer for a national poultry producer. The company’s operations include hatching chickens through the use of breeder stock and feeding, raising, and processing the mature chicks into finished products. The finished products include breaded chicken nuggets and patties and deboned, skinless, and marinated chicken. The company sells its products o schools, military services, fast-food chains, and grocery stores. In groups of four or five, discuss the following business emphasis and risk issues: In a commodity business like poultry production, what do you think is the dominant business emphasis? What are the implications in this dominant emphasis for how you would run the company?How businesses make money Assume that you are the chief executive officer for a national poultry producer. The company’s operations include hatching chickens through the use of breeder stock and feeding, raising, and processing the mature chicks into finished products. The finished products include breaded chicken nuggets and patties and deboned, skinless, and marinated chicken. The company sells its products o schools, military services, fast-food chains, and grocery stores. In groups of four or five, discuss the following business emphasis and risk issues: Identify at least to major business risks for operating the company.How businesses make money Assume that you are the chief executive officer for a national poultry producer. The company’s operations include hatching chickens through the use of breeder stock and feeding, raising, and processing the mature chicks into finished products. The finished products include breaded chicken nuggets and patties and deboned, skinless, and marinated chicken. The company sells its products o schools, military services, fast-food chains, and grocery stores. In groups of four or five, discuss the following business emphasis and risk issues: How could the company try to differentiate its products?1.4C The accounting equation Review financial statements for three well-known companies, such as Ford Motor Co. (F), General Motors (GM), International Business Machines (IBM), Microsoft (MSFT), or Amazon (AMZ). The financial statements may be found at hup://wvwsec.gov/edgar/searchedgar/ companysearch.html. Enter the company’s stock market symbol in the Fast Search box, enter 10-K in the Filing Type box, and click on the latest 10-K. If you wish, you can save the whole 10-K report to your computer. Examine the balance sheet for each company and determine the total assets, liabilities, and stockholders equity. Verify that total assets equal the total of the liabilities plus stockholders’ equity.1.6C The purchase of land for $50,000 cash was incorrectly recorded as an increase in land and an increase in notes payable. Which of the following statements is correct? A. The accounting equation will not balance because cash is overstated by $50,000. B. The accounting equation will not balance because notes payable are overstated by $50,000. C. 11w accounting equation will not balance because assets will exceed liabilities by $50,000. D. Even though a recording error has been made, the accounting equation will alance.The receipt of $8,000 cash for fees earned was recorded by Langley Consulting as an increase in cash of $8,000 and a decrease in retained earnings (revenues) of $8,000. What is the effect of this error on the accounting equation? A. Total assets will exceed total liabilities and stockholders’ equity by $8,000. B. Total assets will be less than total liabilities and stockholders’ equity by $8,000. C. Total assets will exceed total liabilities and stockholders’ equity by $16,000. D. The error will not affect the accounting equation.If total assets increased $20,000 during a period and total liabilities increased $12,000 during the same period, the amount and direction (increase or decrease) of the change in stockholders’ equity for that period is: A. a $32,000 increase. B. a $32,000 decrease. C. an $8,000 increase. D. an $8,000 decrease.4SEQ Which of the following transactions changes only the mix of assets and does not affect liabilities or stockholders’ equity? A. Borrowed $40,000 from First National Bank B. Purchased land for $50,000 cash C. Received $3,800 for fees earned D. Paid $4,000 for Office salaries 1CDQ 2CDQ Indicate whether the following error would cause the accounting equation to the out of balance and, if so, indicate how it would be out of balance. The payment of utilities of $1,200 was recorded as a decrease in cash of $1,200 and a decrease in retained earnings (utilities expense) of $2,100.4CDQ 5CDQ Capstone Consulting Services acquired land 5 years ago for $200,000. Capstone recently signed an agreement to sell the land for $375,000. In accordance with the sales agreenwnt, the buyer transferred $375,000 to Capstone’s bank account on February 20. How would elements of the accounting equation be affected by the sale?7CDQ Assume that Esquire Consulting erroneously recorded the payment of $30,000 of dividends as salary expense. (a) How Would this error affect t equality of the accounting equation? (h) How would this error affect the income statement, statement of stockholders’ equity, balance sheet, and statement of cash flows?9CDQ Assume that as of January 1, 20Y8, Sylvester Con- suiting has total assets of $500,000 and total assets of $150,000. As of December 31, 20Y8, Sylvester has total liabilities of $200,000 and total stockholders’ equity of $400,000. (a) What was Sylvester’s stockholders’ equity as of January 1, 20Y8? (b) Assume that Sylvester did not pay any dividends during 20Y8. What was the amount of net income for 20Y8?Using the January 1 and December 31, 20Y8, data given in Question 10, answer the following question: If Sylvester Consulting paid $18,000 of dividends during 20Y8, what was the amount of net income for 20Y8?Accounting equation Determine the missing amount for each of the following:Accounting equation The Walt Disney Company (DIS) had the following assets and liabilities (in millions) at the end of Year 1. a. Determine the stockholders equity of alt Disney at the end of Year 1. h. If assets increased by $4041 million and stockholders’ equity decreased by $433 million, what was the increase or decrease in liabilities for the Year 2? c. What were the total assets, liabilities, and stockholders’ equity at the end of Year 2? d. Based upon your answer to (c), does the accounting equation balance?Accounting equation Campbell Soup Co. (CPB) had the following assets and liabilities (in millions) at the end of Year 1. a. Determine the stockholders equity of Campbell Soup at the end of Year 1. h. If assets decreased by $24 million and liabilities increased by $211 million, what was the increase or decrease in stockholders equity for the Year 2? c. What were the total assets, liabilities, and stockholders’ equity at the end of Year 2? d. Based upon your answer to (c), does the Accounting equation balance?Accounting equation The following are recent year summaries of balance sheet and income statement data (in millions) for Apple Inc. (AAPL) and Verizon Communications (VZ). Determine the amounts of the missing items (a) through (i).2.5E Effects of transactions on stockholders’ equity For Target Corporation (TGT), indicate whether the following transactions would (1) increase, (2) decrease, or (3) have no effect on stockholders’ equity. a. Borrowed money front the bank. b. Paid creditors. c. Made cash sales to customers. d. Purchased store equipment. e. Paid dividends. f. Paid store rent. g. Paid interest expense. h. Sold store equipment at a gain. i. Received interest revenue. j. Paid taxes.Effects of transactions on Accounting equation Describe how the following business transactions affect the three elements of the account- ins equation. a. Received cash for services performed. b. Paid for utilities used in the business. c. Borrowed cash at local hank. d. Issued common stock for cash. e. Purchased land for cash.Effects of transactions on Accounting equation A vacant lot acquirid for S500,000, on which there is a balance owed of $300,000, is sold for $660,000 in cash. The seller pays the $300000 owed. What is the effeci of these transactions on the total amount of the seller’s (1) assets, (2) liabilities, and (3) skxkholders’ equity?Effects of transactions on stockholders’ equity Indicate whether each of the following types of transactions will (a) increase stockholders’ equity or (b) decrease stockholders’ equity. a. Issued common stock for cash. l. Received cash for fees earned. c. Paid cash for utilities expense. d. Paid cash for rent expense. e. Paid cash dividends.Effects of transactions on Accounting equation On Time Delivery Service had the following selected transactions during November: 1. Received cash from issuance of common stock, $75,000. 2. Paid rent for November, $5000. 3. Paid advertising expense, $3,000. 4. Received cash for providing delivery services, $34,500. 5. Borrowed $10,000 from Second National Bank to finance its operations. 6. Purchased a delivery van for cash, $25,000. 7. Paid interest on note from Second National Bank, $75. 8. Paid salaries and wages for November, $10,000. 9. Paid dividends, $2,000. Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (9), in a vertical column, and inserting at the right of each number the appropriate letter from he following list: a. Increase in an asset, decrease in another asset. h. Increase in an asset, increase in a liability. c. Increase in an asset, increase in stockholders’ equity. d. Decrease in an asset, decrease in a liability. e. Decrease in an asset, decrease in stockholders equity.Nature of transactions Cheryl Alder operates her own catering service. Summary financial data for March are presented in the following equation form. Each line, designated by a number, indicates the effect of a transaction on the balance sheet. Each increase and decrease in retained earnings, except transaction (4), affects net income. a. Describe each transaction. h. What is the net decrease in cash during the month? c. What is the net increase in retained earnings during the month? d. What is the net income for the month? e. How much of the net income for the month was retained in the business? f. What are the net cash flows from operating activities? g. ‘1iat arc the net cash flows fn)m investing activities? h. What are the net cash flows from financing activities?Net income and dividends The income statement of a corporation for the month of February indicates a net income of $32,000. During the same period, $40,000 in cash dividends were paid. Would it be correct to say that the business Incurred a net loss of $8000 during the month? Discuss.Net income and stockholders’ equity for four businesses I-our different companies. Sierra, Tango. Yankee, and Zulu, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders’ equity, are summarized as follows: On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. (Suggeslion: First determine the amount of increase or decrease in stockholders’ equity during the year.)2.14E 2.15E Balance sheet, net income, and cash flows Financial information related to Abby’s Interiors for October and November of 20Y6 is as follows: a. Prepare balance sheets for Abby’s Interiors as of (ktober 31 and November 30. 20Y6. h. Determine the amount of net Income for November, assuming that dividends of $12,000 were paid. c. Determine the net cash flows from operating activities for November. d. Determine the net cash flows from investing activities for November. e. Determine the net cash flows from financing activities for November. 1. Determine the net increase or decrease in cash for November.Income statement After its first month of operations, the following amounts were taken from the accounting records of Big Mountain Realty Inc. as of June 30. 20Y9. Prepare an income statement for the month ending June 30, 20Y9.Statement of stockholders’ equity Using the financial data shown in Exercise 2-17 for Big Mountain Realty Inc., prepare a statement of stockholders’ equity for the month ending June 30. 20Y9.2.19E Statement of cash flows Using the financial data shown in Exercise 2-17 for Big Mountain Realty Inc., prepare a statement of cash flows for the month ending June 30. 20Y9.Effects of transactions on Accounting equation Describe how the following transactions of McDonald’s Corp. (MCD), would affect the three elements of (he accounting equation. a. Paid research and development expenses for the current year. b. Purchased machinery and equipment for cash. c. Received cash from issuing stock. d. Received cash from the issuance of long-term debt. c. Made cash sales. f. Paid selling expenses. g. Paid employee pension expenses for the current year. h. Received cash from selling manufacturing equipment for a gain on the sale. i. Paid officer salaries. j. Paid taxes. k. Paid off long-term debt. I. Paid dividends.2.22E Transactions and Financial statements Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: a. Opened a business hank account in the name of Stanley Insurance Inc., with a deposit of $60000 in exchange for common stock. h. Borrowed $100,000 by issuing a note payable. c. Received cash from fees earned. $30000. d. Paid rent on office and equipnwnt for the month, $5,000. e. Paid automobile expense for the month, $2,500, and miscellaneous expense, $1,000. f. Paid office salaries, $6,500. g. Paid interest on the note payable, $500. h. Purchased land as a future building site, paying cash of $120,000. i. Paid dividends, $3,000. Instuction Indicate the effect of each transaction and the balances after each transaction, using the integrated financial statement framework.Transactions and Financial statements Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: a. Opened a business hank account in the name of Stanley Insurance Inc., with a deposit of $60000 in exchange for common stock. h. Borrowed $100,000 by issuing a note payable. c. Received cash from fees earned. $30000. d. Paid rent on office and equipnwnt for the month, $5,000. e. Paid automobile expense for the month, $2,500, and miscellaneous expense, $1,000. f. Paid office salaries, $6,500. g. Paid interest on the note payable, $500. h. Purchased land as a future building site, paying cash of $120,000. i. Paid dividends, $3,000. Instuction Briefly explain why the stockholders investments and revenues increased stockholders’ equity, while dividends and expenses decreased stockholders’ equity.Transactions and Financial statements Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: a. Opened a business hank account in the name of Stanley Insurance Inc., with a deposit of $60000 in exchange for common stock. h. Borrowed $100,000 by issuing a note payable. c. Received cash from fees earned. $30000. d. Paid rent on office and equipnwnt for the month, $5,000. e. Paid automobile expense for the month, $2,500, and miscellaneous expense, $1,000. f. Paid office salaries, $6,500. g. Paid interest on the note payable, $500. h. Purchased land as a future building site, paying cash of $120,000. i. Paid dividends, $3,000. Instuction Prepare an income staement and statement of stockholders’ equity for July.Transactions and Financial statements Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: a. Opened a business hank account in the name of Stanley Insurance Inc., with a deposit of $60000 in exchange for common stock. b. Borrowed $100,000 by issuing a note payable. c. Received cash from fees earned. $30000. d. Paid rent on office and equipment for the month, $5,000. e. Paid automobile expense for the month, $2,500, and miscellaneous expense, $1,000. f. Paid office salaries, $6,500. g. Paid interest on the note payable, $500. h. Purchased land as a future building site, paying cash of $120,000. i. Paid dividends, $3,000. Instrustions Prepare a balance sheet as of July 31, 20Y5.Transactions and Financial statements Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: a. Opened a business hank account in the name of Stanley Insurance Inc., with a deposit of $60000 in exchange for common stock. b. Borrowed $100,000 by issuing a note payable. c. Received cash from fees earned. $30000. d. Paid rent on office and equipment for the month, $5,000. e. Paid automobile expense for the month, $2,500, and miscellaneous expense, $1,000. f. Paid office salaries, $6,500. g. Paid interest on the note payable, $500. h. Purchased land as a future building site, paying cash of $120,000. i. Paid dividends, $3,000. Instrustions Prepare a statement of cash flows for July.Transactions and Financial statements James Nesbitt established Up-Date Computer Services on August 1, 20Y4. The effect of each transaction and the balances after each transaction for August are shown below in the integrated financial statement framework. Instructions Prepare an income statement for the month ended August 31, 20Y4.Transactions and Financial statements James Nesbitt established Up-Date Computer Services on August 1, 20Y4. The effect of each transaction and the balances after each transaction for August are shown below in the integrated financial statement framework. Instructions Prepare a statement of stockholders’ equity for the month ended August 31, 20Y4.Transactions and Financial statements James Nesbitt established Up-Date Computer Services on August 1, 20Y4. The effect of each transaction and the balances after each transaction for August are shown below in the integrated financial statement framework. Instructions Prepare a balance sheet as of August 31, 20Y4.Transactions and Financial statements James Nesbitt established Up-Date Computer Services on August 1, 20Y4. The effect of each transaction and the balances after each transaction for August are shown below in the integrated financial statement framework. Instructions 4. Prepare a statement of cash flows for the month ended August 31, 20Y4.P2-3 Financial statements The following amounts were taken from the accounting records of Padget Home Services, Inc.. as of December 31, 20Y7. Padget Home Services began its operations on January 1, 20Y7. Instructions Prepare an income statement for the year ending December 31. 2017. Prepare a statement of stockholdessrs equity for the year ending December 31, 2017. Prepare a balance sheet as of December 31, 2017. Prepare a statement of cash flows for the year ending December 31, 2017.Financial statements Padget Home Services began its operations on January 1, 20Y7 (see Problem 2-3). After its second year of operations. the following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y8. Instructions Prepare an income statement for the year ending December 31, 20Y8.Financial statements Padget Home Services began its operations on January 1, 20Y7 (see Problem 2-3). After its second year of operations. the following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y8. Instrustions Prepare a statement of stockholders’ equity for the year ending December 31, 20Y8. (Nole: The retained earnings at January 1, 20Y8. was $1 20.000.)Financial statements Padget Home Services began its operations on January 1, 20Y7 (see Problem 2-3). After its second year of operations, the following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y8. Instuctions Prepare a balance sheet as of December 31, 20Y8.Financial statements Padget Home Services began its operations on January 1, 20Y7 (see Problem 2-3). After its second year of operations. the following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y8. Instructions Prepare a statement of cash flows for the year ending December 31, 20Y8. (Hint: You should compare the asset and liability amounts of December 31. 20Y8, with those of December 31, 20Y7, to determine cash used in investing and financing activities. See Problem 2-3 for the December 31, 20Y7, balance sheet amounts.)Missing amounts from Financial statements The financial statements at the end of Network Realty, Inc.’s first month of operations are shown below. 11y analyzing the interrelationships among the financial statements, fill in the proper amounts for (a) through (s).Financial statements Alpine Realty. Inc., organized July 1. 20Y8, is operated by Angela Griffin. How many errors can you find in the following financial statements far Alpine Realty, Inc. prepared after its first month of operations?2.1MBA 2.2MBA MBA 2-3 Common-sized income statements Delta Air Lines. Inc. (DAL) provides cargo and passenger services throughout the world. The following operating data (in millions) were adapted from recent financial statements of Delta. Prepare common-sized income statements for Years 1 and 2. Round to one decimal place. Using your answer to (1), analyze and comment on the performance of Delta in Year 2.MBA 2-4 Common-sized income statements Southwest Airlines Co. (LUV) provides passenger services throughout the United Sates, Mexico, Jamaica, The Bahamas. Aruba. and the Dominican Republic. The following operating data (in millions) were adapted from recent financial statements of Southwest. Prepare common-sized income statements for Years 1 and 2. Round to one decimal place. Using your answer to (1), analyze and comment on the performance of Southwest in Year 2.2.5MBA MBA 2-6 Common-sized income statements Kellogg Company (K) produces. markets, and distributes cereal and food products including Cheez-lt, Coco Pops. Rice Krispies. and Pringles. The following partial income statements (in millions) were adapted from recent financial statements. Prepare common-sized income statements for Years 1 and 2. Round to one decimal place. Using your answer to (1), analyze the performance of Kellogg in Year 2.MBA 2-7 Common-sized income statements General Mills Inc. (GIS) produces. markets, and distributes cereal and food products including Cheerios. Wheaties, Cocoa Puffs. Yoplait, and Pillsbury branded products. The following part income statements (in millions) were adapted from recent financial statements. Prepare common-sized income statements for Years 1 and 2. Round to one decimal place. Using your answer to (1), analyze the performance of General Mills in Year 2.Common-sized income statements Using your answers to MBA 2-6 and MBA 2-7, compare and analyze Year 2 common-sized income statements of Keilogy (K) to those of General Milles (GIS).2.9.1MBA 2.9.2MBA Business emphasis Assume that you are considering developing a nationwide chain of women’s clothing stores. You have contacted a Seattle-based firm that specializes in financing new business ventures and enterprises. Such firms, called venture capital firms, finance new businesses in exchange for a percentage of the ownership. In groups of four or five, discuss the different business emphases that you might use in your venture.Business emphasis Assume that you are considering developing a nationwide chain of women’s clothing stores. You have contacted a Seattle-based firm that specializes in financing new business ventures and enterprises. Such firms, called venture capital firms, finance new businesses in exchange for a percentage of the ownership. For each emphasis you listed in (1), provide an example of a real-world business using the same emphasis.Business emphasis Assume that you are considering developing a nationwide chain of women’s clothing stores. You have contacted a Seattle-based firm that specializes in financing new business ventures and enterprises. Such firms, called venture capital firms, finance new businesses in exchange for a percentage of the ownership. What percentage of 11w ownership would you be willing to give the venture capital firm in exchange for its financing’2.2C 2.3C 2.4.1C 2.4.2C Financial information Yahoo.com’s (YHOO) finance Internet site provides summary financial information about pubI ic companies, such as stock quotes, recent financial filings with the Securities and Exchange Commission, and recent news stories. Go to Yahoo.coms financial Web site (http://finance. yahoo.com/) and enter Apple. Inc’s (AAPL) Answer the following questions concerning Apple, Inc. by clicking on the various items under the tab More On AAPL When s the last time Apple’s stock hit a 52-week high?2.4.4C 2.4.6C 2.4.7C 2.4.8C 2.4.9C Financial information Yahoo.com’s (YHOO) finance Internet site provides summary financial information about pubi ic companies, such as stock quotes, recent financial filings with the Securities and Exchange CommLsson, and recent news stories. Go to Yahoo.coms financial Web site (http://finance. yahoo.com/) and enter Apple. Incs (AAPL c Ansrr the following questions concerning Apple, Inc. by clicking on the various items under the tab More On AAPL What is the operating margin for this year?Assume that a lawyer bills her clients $15000 on June 30, for services rendered during June. The lawyer collects $8500 of the billings during July and the remainder in August. Under the accrual basis of accounting, when would the lawyer record the revenue for the fees? A. June, $15,000; July, $0; and August, $0 B. June, $0; July, $6,500; and August, $8,500 C. June, $8,500; July, $6,500; and August, $0 D. June, $0; July, $8,500; and August, $6,500 On January 24, 20Y8, Niche Consulting collected $5,700 it had hilled its clients for services rendered on December 31, 20Y7. How would you record the January 24 transaction, using the accrual basis? A. Increase Cash, $5,700; decrease Fees Earned, $5,700 B. Increase Accounts Receivable, $5,700; increase Fees Earned, $5,700 C. Increase Cash, $5,700; decrease Accounts Receivable, $5,700 D. Increase Cash, $5,700; increase Fees Earned, $5,700 3SEQ If the supplies account indicated a balance of $2,250 before adjustment on May 31 and supplies on hand at May 31 totaled $950. the adjustment Would be: A. Increase Supplies, $950; decrease Supplies Expense, $950. B. Increase Supplies, $1,300; decrease Supplies Expense, $1,300. C. Increase Supplies Expense, $950; decrease Supplies, $950. [). Increase Supplies Expense, $1,300; decrease Supplies, $1,300.The balance in the unearned rent account for Jones Co. as of December 31 is $1 ,20(). If Jones Co. failed to record the adjusting entry for $600 of rent earned during December, the effect on the balance sheet and income statement for December would 1w: A. Assets understated by $600; net income overstated by $600. B. Liabilities understated by $600; net income understated by $600. C. Liabilities overstated by $600; net income understated by $600. D. Liabilities overstated by $600; net income overstated by $600.Would AT&T and Microsoft Use the cash basis or the accrual basis of accounting? Explain.How are revenues and expenses reported on the income statement under (a) the cash basis of accounting and (b) the accrual basis of accounting?Fees for services provided are billed to a customer during 20Y6. The customer remits the amount owed in 20Y7. During which year would the revenues 1w reported on the income statement under (a) the cash basis? (b) the accrual basis?Employees performed services in 20Y8, but the wages were not paid until 20Y9. During which year would the wages expense be reported on the income statement under (a) the cash basis? (b) the accrual basis?5CDQ Is the Land balance before the accounts have been adjusted the amount that should normally be reported on the balance sheet? Explain.Is the Supplies balance before the accounts have been adjusted the amount that should normally be reported on the balance sheet? Explain.8CDQ 9CDQ 10CDQ If the effect of an adjustment is to increase the balance of an asset account, which of the following statements describes the effect of the adjustment on the other account? a. Increases the balance of a revenue account b. Increases the balance of a liability account C. Increases the balance of an expense account 12CDQ (a) Explain the purpose of the accounts Depreciation Expense and Accumulated Depreciation. (b) Is it customary for the balances of the two accounts to be equal? (c) In what financial statements, if any, will each account appear?14CDQ Transactions using accrual accounting Terry Mason organized The Fifth Season at the beginning of February 20Y4. During February, The Fifth Season entered into the following transactions: a. Terry Mason invested $15000 in The Fifth Season in exchange for common stock. h. Paid $2,700 on February 1 for an insurance premium on a 1-year policy. c. Purchased supplies on account. $900. d. Received fees of $28500 during February. e. Paid expenses as follows: wages. $10,800; rent, $3,200; utilities, $1,400; and miscellaneous, $1,600. f. Paid dividends of $4,000. Record the preceding transactions using the integrated financial statement framework. Alt er each transaction, you should enter a balance for each item.Adjustment process Using the data from Exercise 3-1, record the adjusting entries at the end of February to record the insurance expense and supplies expense. There was $150 of supplies on hand as of February 28. Identify the adjusting entry for insurance as (al) and supplies as (a2).Financial statements Using the data from Exercises 3-1 and 3-2, prepare financial statements for February, including income statement, statement of stockholders’ equity, balance sheet, and statement of cash flows.3.4E Accrual basis of accounting Margie Van Epps established Health Services, P.C., a professional corporation, in March of the current year, Health Services offers healthy living advice to its clients. The effect of each transaction on the balance sheet and the balances after each transaction for March are as follows. Each increase or decrease in stockholders’ equity, except transaction (h), affects net income. a. Describe each transaction. b. What is the amount of the net income for March?Classify accruals and deferrals Classify the following items as (a) deferred expense (prepaid expense), (b) deferred revenue (unearned revenue), (c) accrued expense (accrued liability), or (d) accrued revenue (accrued asset). I. Subscriptions received in advance by a magazine publisher. 2. A three-year premium paid on a fire insurance policy. 3. Fees received but not yet earned. 4. Fees earned hut not yet received. 5. Utilities owed hut not yet paid. 6. Supplies on hand. 7. Salary owed hut no yet paid. 8. Taxes owed hut payable in the following period.Classify adjustments The following accounts were taken from the unadjusted trial balance of Inter Circle Co., a congressional lobbying firm. Indicate whether or not each account would normally require an adjusting entry. If the account normally requires an adjusting entry, use the following flotations To illustrate, the answer for the first account is as follows.Adjustment for supplies Answer each of the following independent questions concerning supplies and the adjustment for supplies. a. The balance in the supplies account, before adjustment at the end of the year, is $3,500. What is the amount of the adjustment if the amount of supplies on hand at the end of the year is $1,100? b. The supplies account has a balance of $650. and the supplies expense account has a balance of $1,950 at the end of the first year of operations. What was the amount of supp lies purchased during the year?Adjustment for prepaid insurance The prepaid insurance account had a balance of $9,600 at the beginning of the year. The account was increased for $28800 for premiums on policies purchased during the year. What is the adjustment required at the end of the year for each of the following independent situations? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease. a. The amount of unexpired insurance applicable to future periods is $12,000. b. The amount of insurance expired during the year is $31,200.Adjustment for unearned fees The balance in the unearned fees account, before adjustment at the end of the year, is $1,375,000. What is the adjustment if the amount of unearned fees at the end of the year is $1,100,000? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.Adjustment for unearned revenue For a recent year. Microsoft Corporation (MSFT) reported Short-term unearned revenue of $23223 million. For the same year, Microsoft also reported total revenues of $93,580 million. a. Assume that Microsoft recognized $2000 million of unearned revenue as revenue during the year, what entry for unearned revenue did Microsoft make during the year? Indicate each account affected, whether the account is increased of the amount of the increase or decrease. b. What percentage of total revenues is the short-term unearned revenue? Round to one decimal place.Effect of omitting adjustment At the end of August, the first month of the business year, the usual adjustment transferring rent earned of $,750 to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated because of the error on (a) the income statement for August and (h) the balance sheet as of August 31. Also indicate whether the items in error will be overstated or understated.Adjustment for accrued salaries Laguna Realty Co. pays weekly salaries of $8,000 on Friday for a five-day seek ending on that day. What is the adjustment at the end of the accounting period, assuming that the period ends (a) on Monday or (b) on Wednesday? Indicate each account affected, whether the account is increased or decreased, and the amount of (he increase or decrease.Determine wages paid The balances of the two accounts related to wages at October 31, after adjustments at the end of the first year of operations, are Wages Payable, $11,900, and Wages Expense, $825,000. Determine the amount of wages paid during the year.Effect of omitting adjustment Accrued salaries of $6,750 owed to employees for December 30 and 31 were not considered when preparing the financial statements for the year ended December 31, 20Y6. Indicate which items will be erroneously stated because of the error on (a) the income statement for December 20Y6 and (b) the balance sheet as of December 31, 20Y6. Also indicate whether the items in error will be overstated or understated.Effect of omitting adjustment Assume that the error in Exercise 3-15 was not corrected and that the $6750 of accrued salaries was included in the first salary payment in January 20Y7. Indicate which items will he erroneously stated LWC1LL%C of failure to correct the initial error on (a) the income statement for January 20Y7 and (h) the balance sheet as of January 31, 20Y7.Effects of errors on financial statements For a recent year, the balance sheet for The Campbell Soup Company (CPB) includes accrued expenses of $553 million. The income before taxes for the year was $1,073 million. a. Assume the accruals apply to the current year and were not recorded at the end of the year. By how much would income before taxes have been misstated? h. What is the percentage of the misstatement in (a) to the reported income of $1,073 million? Round to one decimal place.Effects of errors on financial statements The accountant for Healthy Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($175,000) and (b) accrued wages ($12,300). Indicate the effect of each error, considered individually, on the income statement for the current year ended August 31. Also indicate the effect of each error on the August 31 balance sheet. Set up a table similar to the following, and record your answers by inserting the dollar amount in the appropriate spaces. Insert a zero if the error does not affect the item.Effects of errors on financial statements If the net income for the current year had been $2224600 in Exercise 3-18, what would have been the correct net income if the proper adjustments had been made?Adjustment for accrued fees At the end of the current year, $47,700 of fees have been earned hut not billed to clients. a. What is the adjustment to record the accrued fees? Indicate each account affected, whether the account 15 increased or decreased, and the amount of the increase or decrease. h. If the cash basis rather than the accrual basis had been used, would an adjustment have been necessary? Explain.Adjustments for unearned and accrued fees The balance in the unearned fees account, before adjustment at the end of the year, is $900,000. Of these fees, $775,000 have been earned. In addition, $289,500 of fees have been earned hut not hilled to clients. What are the adjustments (a) to adjust the unearned fees account and (h) to record the accrued fees? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.Effect on financial statements of omitting adjustment The adjustment for accrued fees of $13400 was omitted at July 31, the end of the current year. Indicate which items will 1w in error because of the omission on (a) the income statement for the current year and (h) the balance sheet as of July 31. Also indicate whether the items in error will be overstated or understated.Adjustment for depreciation The estimated amount of depredation on equipment for the current year is $133,000. a. How is the adjustment recorded? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease. b. If the adjustment in (a) was omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?Adjustments Clean Air Company is a consulting firm specializing in pollution control. The following adjustments were made for Clean Air Company: Identify each of the six pairs of adjustments. For each adjustment, indicate the account, whether the account is increased or decreased, and the amount of the adjustment. No account is affected by more than one adjustment. Use the following format. The first adjustment is shown as an example.Book value of fixed assets For a recent year. Barnes & Noble Inc. (BKS) reported (in thousands) Property and Equipment? of $3,076,299 and Accumulated Depreciation of $2,627,007. a. What was the book value of the fixed assets? h. Would the book values of Barnes & Nobles fixed assets normally approximate their fair market values?Classify assets Identify each of the following as (a) a current asset or (b) property, plant, and equipment: 1. Accounts Receivable 2. Building 3. Cash 4. Office Equipment 5. Prepaid Insurance 6. Supplies Balance sheet classification At the balance sheet date, a business owes a five-year mortgage note payable of $480,000, the terms of which provide for monthly payments of $8,000. Explain how the liability should be classified on the balance sheet.Classified balance sheet Pounds-Away Services Co. offers personal weight reduction consulting services to individuals. On November 30, 20Y9, the balances of selected accounts of Pounds-Away Services Co. are as follows: Prepare a classified balance sheet that includes the correct balance for Cash.3.29E Balance sheet List any errors you can find in the following balance sheet. Prepare a corrected balance sheet.Accrual basis accounting San Mateo Health Care Inc. is owned and operated by Rachel Fields, the sole stockholder. During January 20Y6. San Mateo Health Care entered into the following transactions: Jan. 1 Received $27.000 from Hillard Company as rent for the use of a vacant office in San Mateo Health Cares building. Hillard paid the rent nine months in advance. 1 Paid $6,000 for a one-year general insurance business policy. 6 Purchased supplies of $1,800 on account 9 Collected $32,000 for services provided to customers on account. 11 Paid creditors $5,000 on account. 18 Invested an additional $10000 in the business in exchange for common stock. 20 Billed patients $52,000 for services provided on account. 25 Received $15,000 for services provided to customers who paid cash. 30 l’aid expenses as follows: wages. $31,000; utilities, $8500; rent on medical equipi iicnt, $5,300; interest, $200; and miscellaneous. $3,000. 30 Paid dividends of $8000 to stockholder (Dr. Fields). Instructions Analyze and record the January transactions for San Mateo Health Care Inc., using the integrated financial statement framework. Record each transaction by date, and show the balance for each item after each transaction. The January 1, 20Y6, balances for the balance sheet are shown below.3.2P Financial statements Data for San Mateo Health Care for January are provided in Problems 3-1 and 3-2. Instructions Prepare an income statement, statement of stockholders’ equity, and a classified balance sheet for January. The note payable is due in ten years.Statement of cash flows Data for San Mateo Health Care for January are provided in Problems 3-1, 3-2, and 3-3. Instructions Prepare a statement of cash flows for January.Statement of cash flows Data for San Mateo Health Care for January are provided in Problems 3-1, 3-2, and 3-3. Instructions Reconcile the net cash flows from operating activities with the net income for January. (Hint: See the appendix to this chapter and use adjusted balances in computing increases and decreases in accounts.)Adjustments and errors At the end of May, the first month of operations, the following selected data were taken from the financial statements of Julie Mortenson, Attorney at Law, PC.: In preparing the financial statements, adjustments for the following data were overlooked: a. Unbilled fees earned at May 31, $9.700 h. Depreciation of equipment for May, $8,000 c. Accrued wages at May 31. $1,150 d. Supplies used during May, $975 Instructions Determine the correct amount of net income for May and the total assets, liabilities, and stockholders’ equity at May 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the one shown below. Adjustment (a) is presented as an example.Adjustment process and financial statements Adjustment data for Ms. Ellen’s Laundry Inc. for the year ended December 31, 20Y8. are as follows: a. Wages accrued but not paid at December 31. $2150 h. Depreciation of equipment during the year. $12500 c. Laundry supplies on hand at December 31. $1,500 d. Insurance premiums expired. $4600 Instructions 1. Using the following integrated financial statement framework, record each adjustment to the appropriate accounts, identifying each adjustment by its letter. After all adjustments are recorded, determine the balances.Adjustment process and financial statements Adjustment data for Ms. Ellen’s Laundry Inc. for the year ended December 31, 20Y8. are as follows: a. Wages accrued but not paid at December 31. $2150 b. Depreciation of equipment during the year. $12500 c. Laundry supplies on hand at December 31. $1,500 d. Insurance premiums expired. $4600 Instructions 2. Prepare an income statement and statement of stockholders equity for the year ended December 31. 20Y8. The common stock balance as of January 1. 20Y8. was $25000. The retained earnings balance as of January 1, 20Y8, was $101,500.Adjustment process and financial statements Adjustment data for Ms. Ellen’s Laundry Inc. for the year ended December 31, 20Y8, are as follows: a. Wages accrued but not paid at December 31. $2150 b. Depreciation of equipment during the year. $12500 c. Laundry supplies on hand at December 31. $1,500 d. Insurance premiums expired. $4600 Instructions Prepare a classified balance sheet as of December 31, 20Y8.Adjustment process and financial statements Adjustment data for Ms. Ellen’s Laundry Inc. for the year ended December 31, 20Y8, are as follows: a. Wages accrued but not paid at December 31. $2150 b. Depreciation of equipment during the year. $12500 c. Laundry supplies on hand at December 31. $1,500 d. Insurance premiums expired. $4600 Instructions Prepare a statement of cash flows for the year ended December 31. 20Y8.3.1MBA 3.2MBA 3.3MBA 3.4MBA 3.5.1MBA 3.5.2MBA 3.5.3MBA 3.5.4MBA Quick ratio The Gap Inc. (GPS)operates specialty retail stores under such brand names as GAP, Old Navy, and Banana Republic. The following asset and liability data (in millions) were adapted from recent financial statements. Compute quick assets for Years 2 and 1.3.6.2MBA Quick ratio The Gap Inc. (GPs)operates specialty retail stores under such brand names as GAP, Old Navy, and Banana Republic. The following asset and liability data (in millions) were adapted from recent financial statements. Analyze and assess any change in liquidity for Years 2 and 1.Quick ratio American Eagle Outfitters Inc. (AEO) operates specialty retail stores, selling clothing such as denim, sweaters, t-shins, and fleece outerwear that targets 15 to 25 year old men and women, that targets 15 to 25 year old men and women. The following asset and liability data (in millions) were adapted from recent financial statements. Compute quick assets for Years 2 and 1.Quick ratio American Eagle Outfitters Inc. (AEO) operates specialty retail stores, selling clothing such as denim, sweaters, t-shins, and fleece outerwear that targets 15 to 25 year old men and women, that targets 15 to 25 year old men and women. The following asset and liability data (in millions) were adapted from recent financial statements. Compute the quick ratio for Years 2 and 1. Round to two decimal places.3.7.3MBA 3.8MBA 3.9.1MBA 3.9.2MBA 3.9.3MBA 3.1C Adjustments for financial statements Several years ago. your brother opened Ready Appliance Repairs. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular intervals. As the business grew, he hired an assistant. He is now considering adding more employees, purchasing additional service trucks, and purchasing the building he now rents. To secure funds for the expansion, your brother submitted a loan application to the bank and included the most recent financial statements (shown below) prepared from accounts maintained by a part-time bookkeeper. After reviewing the financial statements, the loan officer at the bank asked your brother ii he used the accrual basis of accounting for revenues and expenses. Your brother responded that he did and that is why he included an account for Amounts Due from Customers. The loan officer then asked whether or not the accounts were adjusted prior to the preparation of the statements. Your brother answered that they had not been adjusted. a. Why do you think the loan officer suspected that the accounts had not been adjusted prior to the preparation of the statements? b. Indicate possible accounts that might need to be adjusted before an accurate set of financial statements could be prepared.3.3.1C 3.3.2C 3.4.1C 3.4.2C Accrual versus cash net income. Cigna Corp. (CI) provides insurance services, and Deere & Company (DE) manufactures and sells farm and construction equipment. The following data (in millions) were adapted from recent financial statements of each company. Which company’s accrual based net income is closer to what would be reported if the company used the cash basis? Why?3.5.1C 3.5.2C If merchandise purchased on account is returned, the buyer can inform the seller of the details by issuing: A. A debit memorandum B. A credit memorandum C. An invoice D. A bill 2SEQ 3SEQ On a multiple-step income statement, the excess of sales over the cost of goods sold is called: A.Operating income B.Income from operations C.Gross profit D.Net income As of December 31, 20Y4, Ames Corporation's physical inventory was $275,000, and its book inventory was $290,000. The effect of the inventory shrinkage on the accounts is: A.To increase Cost of Goods Sold and Inventory by $15,000 B.To increase Cost of Goods Sold and decrease Inventory by $15,000 C.To decrease Cost of Goods Sold and increase Inventory by $15,000 D.To decrease Cost of Goods Sold and Inventory by $15,000 What distinguishes a retail business from a service business?2CDQ 3CDQ 4CDQ 5CDQ When you purchase a new car, the “sticker price” includes a “destination charge. Are you purchasing the car FOB shipping point or FOB destination? Explain.7CDQ Differentiate between the multiple and single-step forms of the income statement.9CDQ Can a business earn a gross profit but incur a net loss? Explain.11CDQ 12CDQ Determining gross profit During the current year, merchandise is sold for $6.400.000. The cost of the goods sold is $5,376,000. a. What is the amount of the gross profit? h. Compute the gross profit percent. c. Will the income statement necessarily report a net income? Explain.Determining cost of goods sold For a recent year, Target Corporation (TGT) reported revenue of $72,618 million. Its gross profit was $21,340 million. What was the amount of Targets cost of goods sold ?Purchase-related transaction Burr Company purchased merchandise on account from a supplier for $18000, terms 2/10, n/30. Burr Company returned $3000 of the merchandise before payment was made and received full credit. a. 11 Burr Company pays the invoice within the discount period, what is the amount of cash required for the payment b. What account is decrva.sed by Burr Company to record the return?Purchase-related transactions A retailer Is considering the purchase of 100 units of a specific item from either of two suppliers. Their offers are as follows: A: $390 a unit, total of $39,000, 1/10, n/30. plus freight of $750. B: $400 a unit, total of $40,000. 2/10, n/30, no charge for freight. Which of the two offers, A or B. yields the lower price?4.5E 4.6E Determining amounts to be paid on invoices Determine the amount to be paid in full settlement of each of the following invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.4.8E Sales-related transactions After the amount due on a sale of $16,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller Consents to the return of the entire shipment. The cost of the merchandise returned was $10,000. (a) What is the amount of the refund owed to the customer? (b) Illustrate the effects on the accounts and financial statements of the return and the refund.Sales-related transactions Merchandise is sold on account to a customer for $8.000, terms FOB shipping point, 1/10, n/30. The seller paid the freight of $300. Determine the following: (a) amount of the sale, (b) amount debited to Accounts Receivable, (c) amount of the discount for early payment. and (d) amount due within the discount period.4.11E 4.12E 4.13E 4.14E Adjustment for merchandise inventory shrinkage Intrax lnc.’s perpetual inventory records indicate that $815400 of merchandise should he on hand on December 31, 20Y4. The physical inventory Indicates that $798300 of merchandise is actually on hand. Illustrate the effects on the accounts and financial statements of the inventory shrinkage for Intrax Inc. for the year ended December 31, 20Y4.Adjustment for Customer Refunds and Returns Assume the following data for Alpine Technologies for the year ending July 31. 20Y2. Illustrate the effects of the adjustments for customer refunds and returns on the accounts and financial statements of Alpine Technologies for the year ended July 31. 20Y2.4.17E Multiple-step income statement On March 31, 20Y5, the balances of the accounts appearing in the ledger of Lange Daughters Inc. are as follows: a. Prepare a multiple-step income Statement for the year ended March 31, 20Y5. b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.Single-step income statement Summary operating data for Lorna Company during the current year ended April 30, 20Y6, are as follows: cost of goods sold, $7,500,000; administrative expenses. $750,000; interest expense, $100,000; rent revenue, $120,000; sates, $13,580,000 and selling expenses, $1,250,000. Prepare a single-step income statement.Multiple-step income statement Identify the enurs in the following income statement and prepare a corrected income statement:Purchase-related transactions The following selected transactions were completed by Epic Co. during August of the curr ent year: Aug. 3. Purchased merchandise on account for $33400, terms FOB destination. 2/10. n/30. 9. Issued debit memorandum for $2500 ($2450 net of 2% discount) for merchandise from the August 3 purchase that was damaged in shipment. 10. Purchased merchandise on account, $25,000, terms FOB shipping point, n/com. Paid $600 cash to the freight company for delivery of the merchandise. 13. Paid for invoice of August 3, less debit memorandum of August 9 31. Paid for invoice of August 10. Instructions Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Epic Co. Identify each transaction by date.Sales-related transactions The- following selected transactions were completed by Affordable Supplies Co., which sells supplies primarily to wholesalers and occasionally to retail customers. Jan. 6. Sold merchandise on account, $14,000. terms FOB shipping point, n/com. The cost of merchandise sold was $8,400. 8. Sold merchandise on account. $20,000. terms FOB destination. 1/10. n/30. The cost of merchandise sold was $14,000. 16. Sold merchandise on account, $19-500. terms FOB shipping point, n/30. The cost of merchandise sold was $11,700. 18. Received check for amount due for sale on January 8. 19. Issued credit memorandum for $4,500 for merchandise returned from sale on January 16. The cost of the merchandise returned was $2,700. 26. Received check for amount due for sale on January 16 less credit memorandum of January 19. 31. Paid Cashell Delivery Service $3,000 for merchandise delivered during January to customers under shipping terms of FOB destination. 31. Received cheek for amount due for sale of January 6. Instructions Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Affordable Supplies Co. Identify each transaction by date.4.3P Multiple-step income statement and report form of balance sheet The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September 30. 20Y8: Instructions Prepare a multiple-step income statement.Multiple-step income statement and report form of balance sheet The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September 30. 20Y8: Instructions Prepare a statement of stockholders’ equity. No common stock was issued during the year.

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