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All Textbook Solutions for Using Financial Accounting Information
1.1E1.2E1.3E1.4.1E1.4.2E1.4.3E1.4.4E1.5.1E1.5.2E1.5.3EChanges in Owners’ Equity The following amounts are available from the records of Coaches and Carriages Inc. at the end of the years indicated: Required Compute the changes in Coaches and Carriages owners’ equity during 2016 and 2017.1.6.2E1.6.3E1.7E1.8E1.9E1.10.1E1.10.2E1.10.3E1.10.4E1.10.5E1.10.6E1.11E1.12E1.13E1.14E1.15MCE1.16MCE1.1P1.2P1.3P1.4.1P1.4.2P1.5.1P1.5.2P1.5.3P1.5.4P1.6.1P1.6.2PIncome Statement and Balance Sheet Green Bay Corporation began business in July 2017 as a commercial fishing operation and a passenger service between islands. Shares of stock were issued to the owners in exchange for cash. Boats were purchased by making a down payment in cash and signing a note payable for the balance. Fish are sold to local restaurants on open account, and customers are given 15 days to pay their account. Cash fares are collected for all passenger traffic. Rent for the dock facilities is paid at the beginning of each month. Salaries and wages are paid at the end of the month. The following amounts are from the records of Green Bay Corporation at the end of its first month of operations: Required What information would you need about Notes Payable to fully assess Green Bay’s long-term viability? Explain your answer.1.7.1P1.7.2P1.7.3P1.7.4P1.8.1P1.8.2P1.9P1.10MCP1.1AAP1.2AAP1.3AAP1.4AAP1.5AAP1.5.1AAP1.5.2AAP1.5.3AAP1.5.4AAP1.6.1AAP1.6.2AAP1.6.3AAP1.7.1AAP1.7.2AAP1.7.3AAP1.7.4AAP1.8.1AAP1.8.2AAP1.9AAP1.10AAMCP2.1E2.2.1E2.2.2EClassification of Financial Statement Items Regal Entertainment Group operates the largest chain of movie theaters in the U.S. Classify each of the following items found on the company’s balance sheet included in the Form 10-K for the fiscal year ended December 31, 2015 as a current asset (CA), noncurrent asset (NCA), current liability (CL), long-term liability (LTL), or stockholders’ equity (SE) item. ______ 1. Trade and other receivables, net ______ 2. Class A common stock ______ 3. Land ______ 4. Inventories ______ 5. Interest payable ______ 6. Equipment ______ 7. Accounts payable ______ 8. Retained earnings ______ 9. Cash and cash equivalents ______ 10. Long-term debt, less current portion2.4.1E2.4.2E2.4.3E2.5E2.6E2.7E2.8EStatement of Retained Earnings Landon Corporation was organized on January 2, 2015, with the investment of $100,000 by each of its two stockholders. Net income for its first year of business was $85,200. Net income increased during 2016 to $125,320 and to $145,480 during 2017. Landon paid $20,000 in dividends to each of the two stockholders in each of the three years. Required Prepare a statement of retained earnings for the year ended December 31, 2017.2.10E2.11E2.12MCE2.13MCE2.14MCE2.1.1P2.1.2P2.2P2.3.1P2.3.2P2.3.3P2.4.1P2.4.2P2.5.1P2.5.2P2.5.3P2.6.1P2.6.2P2.7.1P2.7.2P2.7.3PMultiple-Step Income Statement and Profit Margin Refer to the list of income statement items in Problem 2-6. Assume that Shaw Corporation classifies all operating expenses into two categories: (1) selling and (2) general and administrative. Required Comment on Shaw’s profitability. What other factors need to be taken into account to assess Shaw’s profitability?2.8P2.9P2.10MCP2.11MCP2.12MCP2.1.1AAP2.1.2AAP2.2AAP2.3.1AAP2.3.2AAP2.3.3AAP2.4.1AAP2.4.2AAP2.5.1AAP2.5.2AAP2.5.3AAP2.6.1AAP2.6.2AAP2.7.1AAP2.7.2AAP2.7.3AAPMultiple-Step Income Statement and Profit Margin Refer to the list of income statement items in Problem 2-6A. Assume that Corbin Enterprises classifies all operating expenses into two categories: (1) selling and (2) general and administrative. Required Comment on Corbin’s profitability. What other factors need to be taken into account to assess Corbin’s profitability?2.8.1AAP2.8.2AAP2.9AAP2.10AAMCP2.11.1AAMCP2.11.2AAMCP2.12AAMCP3.1E3.2E3.3E3.4E3.5E3.6E3.7E3.8E3.9E3.10E3.11MCE3.12MCE3.13MCE3.14MCE3.15MCE3.16MCE3.17MCE3.18MCE3.1P3.2.1P3.2.2P3.2.3P3.2.4PTransaction Analysis and Financial Statements Expert Consulting Services Inc. was organized on March 1 by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $15,000. Interest, along with the $15,000, will be repaid at the end of the two years. March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies. March 19: Billed a client $4,000 for services rendered by Expert in helping to install a new computer system. The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed to the client on March 19. March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer. March 29: Purchased a computer system for $8,000 in cash. March 30: Paid $3,300 of salaries and wages for March. March 31: Received and paid $1,400 in gas, electric, and water bills. Required Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date.3.3.2P3.3.3P3.3.4P3.4P3.5.1MCP3.5.2MCP3.5.3MCP3.6.1MCPTransaction Analysis and Financial Statements Blue Jay Delivery Service is incorporated on January 2 and enters into the following transactions during its first month of operations: January 2: Filed articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of $100,000 is received from the new owners for the shares. January 3: Purchased a warehouse and land for $80,000 in cash. An appraiser values the land at $20,000 and the warehouse at $60,000. January 4: Signed a three-year promissory note at Third State Bank in the amount of $50,000. January 6: Purchased five new delivery trucks for a total of $45,000 in cash. January 31: Performed services on account that amounted to $15,900 during the month. Cash amounting to $7,490 was received from customers on account during the month. January 31: Established an open account at a local service station at the beginning of the month. Purchases of gas and oil during January amounted to $3,230. Blue Jay has until the 10th of the following month to pay its bill. Required Prepare an income statement for the month of January.3.6.3MCP3.6.4MCP3.7.1MCP3.7.2MCPTransaction Analysis and Financial Statements Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business: June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. June 8: Signed a two-year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. June 17: Paid a $900 bill from the local newspaper for advertising for the month of June. June 23: Received the amounts billed to clients for services performed during the first half of the month. June 28: Received and paid gas, electric, and water bills. The total amount is $2,700. June 29: Received the landlord’s bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month. June 30: Paid salaries and wages for June. The total amount is $5,670. June 30: Billed $18,400 to clients for the second half of June. June 30: Declared and paid dividends in the amount of $6,000. Required Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.3.8MCP3.9.1MCPProblem 3-9 Transaction Analysis and Journal Entries Recorded Directly in T Accounts (Appendix) Four brothers organized Beverly Entertainment Enterprises on October 1. The following transactions occurred during the first month of operations: October 1: Received contributions of $10,000 from each of the four principal owners of the new business in exchange for shares of stock. October 2: Purchased the Ace Theater for $125,000. The seller agreed to accept a down payment of $12,500 and a seven-year promissory note for the balance. The Ace property consists of land valued at $35,000, and a building valued at $90,000. October 3: Purchased new seats for the theater at a cost of $5,000, paying $2,500 down and agreeing to pay the remainder in 60 days. October 12: Purchased candy, popcorn, cups, and napkins for $3,700 on an open account. The company has 30 days to pay for the concession supplies. October 13: Sold tickets for the opening-night movie for cash of $1,800 and took in $2,400 at the concession stand. October 17: Rented out the theater to a local community group for $1,500. The community group is to pay one-half of the bill within five working days and has 30 days to pay the remainder. October 23: Received 50% of the amount billed to the community group. October 24: Sold movie tickets for cash of $2,000 and took in $2,800 at the concession stand. October 26: The four brothers, acting on behalf of Beverly Entertainment, paid a dividend of $750 on the shares of stock owned by each of them, or $3,000 in total. October 27: Paid $500 for utilities. October 30: Paid wages and salaries of $2,400 total to the ushers, projectionist, concession stand workers, and maintenance crew. October 31: Sold movie tickets for cash of $1,800 and took in $2,500 at the concession stand. Required Record each transaction directly in T accounts using the dates preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.3.10.1MCP3.10.2MCP3.10.3MCP3.10.4MCP3.11MCP3.12.1MCP3.12.2MCP3.13.1MCP3.13.2MCP3.14.1MCP3.14.2MCP3.14.3MCP3.14.4MCP3.14.5MCP3.15.1MCP3.15.2MCP3.15.3MCP3.15.4MCP3.1AAP3.2.1AAPTransaction Analysis and Financial Statements Beachway Enterprises was organized on June 1 by two college students who recognized an opportunity to make money while spending their days at a beach in Florida. The two entrepreneurs plan to rent beach umbrellas. The following transactions occurred during the first month of operations: June 1: Received contributions of $2,000 from each of the two principal owners of the new business in exchange for shares of stock. June 1: Purchased 25 beach umbrellas for $250 each on account. The company has 30 days to pay for the beach umbrellas. June 5: Registered as a vendor with the city and paid the $35 monthly fee. June 10: Purchased $50 in miscellaneous supplies on an open account. The company has 30 days to pay for the supplies. June 15: Paid $70 bill from a local radio station for advertising for the last two weeks of June. June 17: Customers rented beach umbrellas for cash of $1,000. June 24: Billed a local hotel $2,000 for beach umbrellas provided for use during a convention being held at the hotel. The hotel is to pay one-half of the bill in five days and the rest within 30 days. June 29: Received 50% of the amount billed to the hotel. June 30: Customers rented beach umbrellas for cash of $1,500. June 30: Paid wages of $90 to a friend who helped over the weekend. June 30: Paid the balance due on the beach umbrellas. Required Prepare an income statement for the month of June.Transaction Analysis and Financial Statements Beachway Enterprises was organized on June 1 by two college students who recognized an opportunity to make money while spending their days at a beach in Florida. The two entrepreneurs plan to rent beach umbrellas. The following transactions occurred during the first month of operations: June 1: Received contributions of $2,000 from each of the two principal owners of the new business in exchange for shares of stock. June 1: Purchased 25 beach umbrellas for $250 each on account. The company has 30 days to pay for the beach umbrellas. June 5: Registered as a vendor with the city and paid the $35 monthly fee. June 10: Purchased $50 in miscellaneous supplies on an open account. The company has 30 days to pay for the supplies. June 15: Paid $70 bill from a local radio station for advertising for the last two weeks of June. June 17: Customers rented beach umbrellas for cash of $1,000. June 24: Billed a local hotel $2,000 for beach umbrellas provided for use during a convention being held at the hotel. The hotel is to pay one-half of the bill in five days and the rest within 30 days. June 29: Received 50% of the amount billed to the hotel. June 30: Customers rented beach umbrellas for cash of $1,500. June 30: Paid wages of $90 to a friend who helped over the weekend. June 30: Paid the balance due on the beach umbrellas. Required Prepare a classified balance sheet at June 30.3.3.1AAPTransaction Analysis and Financial Statements Dynamic Services Inc. was organized on March 1 by two former college roommates. The corporation will provide computer tax services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $10,000 from each of the two principal owners in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $7,500. Interest, along with the $7,500, will be repaid at the end of the two years. March 12: Purchased miscellaneous supplies on account for $350, payment due in 30 days. March 19: Billed a client $2,000 for tax preparation services. According to an agreement between the two companies, the client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid a $650 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed the client on March 19. March 26: Received cash of $1,400 for services provided in assisting a client in preparing its tax return. March 29: Purchased a computer system for $4,000 in cash. March 30: Paid $1,650 in salaries and wages for March. March 31: Received and paid $700 of gas, electric, and water bills. Required Prepare an income statement for the month of March.Transaction Analysis and Financial Statements Dynamic Services Inc. was organized on March 1 by two former college roommates. The corporation will provide computer tax services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $10,000 from each of the two principal owners in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $7,500. Interest, along with the $7,500, will be repaid at the end of the two years. March 12: Purchased miscellaneous supplies on account for $350, payment due in 30 days. March 19: Billed a client $2,000 for tax preparation services. According to an agreement between the two companies, the client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid a $650 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed the client on March 19. March 26: Received cash of $1,400 for services provided in assisting a client in preparing its tax return. March 29: Purchased a computer system for $4,000 in cash. March 30: Paid $1,650 in salaries and wages for March. March 31: Received and paid $700 of gas, electric, and water bills. Required Prepare a classified balance sheet at March 31.3.3.4AAP3.4AAP3.5.1AAMCP3.5.2AAMCP3.5.3AAMCP3.6.1AAMCP3.6.2AAMCP3.7.1AAMCP3.7.2AAMCP3.8AAMCP3.9.1AAMCP3.9.2AAMCP3.10.1AAMCP3.10.2AAMCP3.10.3AAMCP3.10.4AAMCP3.11AAMCP3.12.1AAMCP3.12.2AAMCP3.13.1AAMCP3.13.2AAMCP3.14.1AAMCP3.14.2AAMCP3.15.1AAMCP3.15.2AAMCPRevenue Recognition The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.4.2.1E4.2.2E4.2.3E4.3E4.4E4.5E4.6.1E4.6.2E4.6.3E4.6.4E4.7.1E4.7.2E4.8.1E4.8.2E4.8.3E4.8.4E4.8.5E4.9.1EWorking Backward: Depreciation Polk Corp. purchased new store fixtures for $55,000 on January 31, 2015. Polk depreciates assets using the straight-line method and estimated a salvage value for the machine of $5,000. On its December 31, 2017, balance sheet, Polk reported the following: Required What is the estimated useful life in years for the store fixtures? Explain your answer.4.10.1E4.10.2E4.10.3E4.10.4E4.11.1E4.11.2E4.11.3E4.12.1E4.12.2E4.12.3E4.13.1E4.13.2E4.13.3E4.14E4.15.1E4.15.2E4.15.3E4.15.4E4.15.5E4.16.1E4.16.2E4.16.3E4.17.1E4.17.2E4.18.1E4.18.2E4.18.3E4.19.1E4.19.2E4.20.1E4.20.2E4.20.3E4.21.1E4.21.2E4.22EThe Effect of Ignoring Adjustments on Net Income For each of the following independent situations, determine whether the effect of ignoring the required adjustment will result in an understatement (U), will result in an overstatement (O), or will have no effect (NE) on net income for the period.4.24E4.25E4.26.1MCE4.26.2MCEDepreciation Expense During 2017, Carter Company acquired three assets with the following costs, estimated useful lives, and estimated salvage values: The company uses the straight-line method to depreciate all assets and computes depreciation to the nearest month. For example, the computer system will be depreciated for six months in 2017. Required Compute the depreciation expense that Carter will record on each of the three assets for 2017.Depreciation Expense During 2017, Carter Company acquired three assets with the following costs, estimated useful lives, and estimated salvage values: The company uses the straight-line method to depreciate all assets and computes depreciation to the nearest month. For example, the computer system will be depreciated for six months in 2017. Required Comment on the following statement: Accountants could save time and money by simply expensing the cost of long-term assets when they are purchased. In addition, this would be more accurate because depreciation requires estimates of useful life and salvage value.4.28.1MCE4.28.2MCE4.1.1P4.1.2P4.2.1P4.2.2P4.3P4.4.1P4.4.2P4.5.1P4.5.2P4.5.3P4.6.1P4.6.2P4.6.3P4.6.4P