Skip to main content

Bartleby Sitemap - Textbook Solutions

All Textbook Solutions for Cornerstones of Financial Accounting

Define accounting. How does accounting differ from bookkeeping?2DQ What is accounting entity?4DQ 5DQ 6DQ Define the terms revenue and expense. How are these terms related?Name and briefly describe the purpose of the four financial statements.What types of questions are answered by the financial statements?10DQ Write the fundamental accounting equation. Why is it significant?What information is included in the heading of each of the four financial statements?Define current assets and current liabilities. Why are current assets and current liabilities separated from noncurrent assets and long-term liabilities on the balance sheet?14DQ Name the two main components of stockholders; equity. Describe the main sources of change in each component.16DQ How does the multiple-step income statement differ from the single-step income statement?Explain the items reported on a retained earnings statement.Name and describe the three categories of the statement of cash flows.20DQ 21DQ 22DQ 1MCQ 2MCQ At December 31, Pitt Inc. has assets of $12,900 and liabilities of $6,300. What is the stock-holders equity for Pitt at December 31? 6,600 6,300 18,100 19,200 4MCQ 5MCQ 6MCQ Use the following information for Multiple-Choice Questions 1-7 and 1-8: At December 31, Marker reported the following items: cash, 7,500; inventory, 3,900; accounts payable, 5,900; accounts receivable, 3,100; common stock, 6,000; property, plant, and equipment, 10,500; interest payable, 1,600; retained earnings, 11,500. Refer to the information for Marker above. What is the total of Markers current assets? 12,100 14,500 14,500 25,000 Use the following information for Multiple-Choice Questions 1-7 and 1-8: At December 31, Marker reported the following items: cash, 7,500 ; inventory, 3,900 ; accounts payable, 5,900 ; accounts receivable, 3,100 ; common stock, 6,000 ; property, plant, and equipment, 10,500 ; interest payable, 1,600 ; retained earnings, 11,500. Refer to the information for Marker above. What is Markers stockholders' equity? a. 7,500 b. 17,500 c. 19,100 d. 25,000 Which of the following statements regarding the income statement is true? The income statement provides information about the profitability and growth of a company. The income statement shows the results of a companys operations at a specific point in time. The income statement consists of assets, expenses, liabilities, and revenues. Typical income statement accounts include sales revenue, unearned revenue, and cost of goods sold.10MCQ Which of the following statements concerning retained earnings is true? Retained earnings is the difference between revenues and expenses. Retained earnings is increased by dividends and decreased by net income. Retained earnings represents accumulation of the income that has not been distributed as dividends. Retained earnings is reported as a liability on the balance sheet.Which of the following sentences regarding the statement of cash flows is false? The statement of cash flows describes the companys cash receipts and cash payments for a period of time. The statement of cash flows reconciles the beginning and ending cash balances shown on the balance sheet. The statement of cash flows reports cash flows in three categories: cash flows from business activities, cash flows from investing activities, and cash flows from financing activities. The statement of cash flows may be used by creditors to asses the creditworthiness of a company.13MCQ 14CE Cornerstone Exercise 1-15 Using the Accounting Equation At the beginning of the year, Morgan Company had total assets of 425,000 and total liabilities of 260,000. Required: Use the fundamental accounting equation to answer the following independent questions: What is total stockholders' equity at the beginning of the year? If, during the year, total assets increased by $73,000 and total liabilities increased by $32,000, what is the amount of total stockholders' equity at the end of the year? If, during the year, total assets decreased by $52,000 and total stockholders' equity increased by $35,000, what is the amount of total liabilities at the end of the year? If, during the year, total liabilities increased by $85,000 and total stockholders' equity decreased by $73,000, what is the amount of total assets at the end of the year?Cornerstone Exercise 1-16 Financial Statements Listed below are elements of the financial statements. a. Liabilities b. Net change in cash c. Assets d. Revenue Required: e. Cash flow from operating activities f. Expenses g. Stockholders' equity h. Dividends Match each financial statement item with its financial statement: balance sheet (B), income statement (I), retained earnings statement (RE), or statement of cash flows (CF).17CE Cornerstone Exercise 1-18 Balance Sheet An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31, 2019: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, 9,800. Required: Prepare a balance sheet for Cavernous Homes Inc. at December 31 , 2019.Cornerstone Exercise 1-19 Income Statement An analysis of the transactions of Canary Cola Inc. yields the following information: revenue, $78,000; supplies expense, $33,200; rent expense, $20,500; and dividends, $7,000. Required: What is the amount of net income reported by Canary Cola?Cornerstone Exercise 1-20 Retained Earnings Statement Parker Company has a balance of $3S,000 in retained earnings on January 1. During the year, parker reported revenues of $82,000 and expenses of $55,000. Parker also paid a dividend of $8,000. Required: What is the amount of retained earnings on December 31?21BE 22BE Brief Exercise 1-23 Business Activities Marni Restaurant Company engaged in the following transactions during March, its first month of operations. Received $100,000 cash from the sale of stock. Purchased of $20,000 inventory from J&J Wholesale Company. Purchased $30,000 of kitchen equipment for its restaurants. Obtained a $25,000 loan from First State Bank. Sold $18,000 of food to customers. paid employee weekly salaries of $8,500. Repaid S 10,000 of principal relating to the loan in Item d. Required: For each of the above business activities, indicate whether it is an operating, investing, or financing activity.Brief Exercise 1-24 The Accounting Equation Financial information for three independent cases is as follows: The liabilities of Dent Company are $82,000, and its stockholders' equity is $120,000. What is the amount of Dents total assets? The total assets of Wayne Inc. are $55,000, and its stockholders' equity is $22,500. What is the amount of Waynes total liabilities? Gordon Companys total assets increased by $60,000 during the year, and its liabilities decreased by $35,000. Did Gordons stockholders' equity increase or decrease? By how much? Required: Determine the missing amount for each case.25BE Brief Exercise 1-26 Income Statement An analysis of the transactions of Rutherford Company for the year ended December 31, yields the following information: sales revenue, $65,000; insurance expense, $4,300; interest income, $3,900; cost of goods sold, $28,800; and loss on disposal of property, plant, and equipment, $1,200. Required: Prepare a single income statement.Retained Earnings Statement Listed below are events that affect stockholders equity. Reported net income of $85,000. Paid a cash dividend of $10,000. Reported sales revenue of $120,000. Issued common stock of $50,000 Reported a net loss of $20,000. Reported of S35,000. Required: For each of the events, indicate whether it increases retained earnings (I), decreases retained earnings (D), or has no effect on retained earnings (NE).Brief 1-28 Statement of Cash Flows Listed are items that would on a Statement of cash flows. Cash received from customers Cash paid for dividends Cash received from a bank loan Cash paid to suppliers Cash paid to purchase Required: Indicate in which part of the statement of cash flows each of the items would appear: operating activities (O), investing activities (I), or financing activities (F).29BE 30BE Exercise 1-31 Decisions Based on Accounting Information Decision-makers use accounting information in a wide variety Of decisions including the following: 1. Deciding whether or not to lend money to a business 2. Deciding whether or not an individual has paid enough in taxes 3. Deciding whether or not to place merchandise on sale in order to reduce inventory 4. Deciding whether Or not to invest in a business 5. Deciding whether or not to demand additional benefits for employees Required: Match each decision with one of the following decision-makers who is primarily responsible for the decision: a government (G), an investor (I), a labor union (U), business managers (M), or a bank (B).32E 33E Exercise 1-34 Business Activities Bill and Steve recently formed a company that manufactures and sells high-end kitchen appliances. The following is a list of activities that occurred during the year. Bill and Steve each contributed cash in exchange for common stock in the company Land and a building to be used as a factory to make the appliances were purchased for cash. Machines used to make the appliances were purchased for cash. Various materials used in the production of the appliances were purchased for cash. Three employees were paid cash to operate the machines and make the appliances. Running low on money, the company borrowed money from a local bank. The money from the bank loan was used to buy advertising on local radio and television stations. The company sold the appliances to local homeowners for cash. Due to extremely high popularity of its products, Bill and Steve bum another factory building on its land for cash. The company paid a cash dividend to Bill and Steve Required: Classify each of the business activities listed as either an operating activity (0). an investing activity (I), or a financing activity (F).Exercise 1-35 Accounting Concepts OBJECTIVE 06Â° A list of accounting concepts and related definitions is presented below. Concept Definition 1. Revenue a. Owners claim on the resources of a company 2, Expense b. The difference between revenues and expenses 3. Net income (1055) c. Increase in assets from the sale of goods or services 4, Dividend d. Economic resumes of a company 5. Asset e. Cost of assets consumed in the operation of a business 6, Liability f. Creditors' claims on the resources of a company 7. Stock holders, equity g. Distribution of earnings to stockholders Required: Match each of the concepts with its corresponding definition Exercise 1-36 The Fundamental Accounting Equation Financial information for three independent cases is given below Required: Compute the missing numbers in each case.Exercise 1-37 Balance Sheet Structure The following accounts exist in the ledger of Higgins Company: accounts payable, accounts receivable, accumulated depreciation, bonds payable, building, common stock, cash, equipment, income taxes payable, inventory, notes payable (due in 5 years), prepaid insurance, retained earnings, trademarks, and wages payable. Required: Organize the above items into a properly prepared classified balance sheet. CONCEPTUAL CONNECTION Which information might be helpful to assess liquidity?Exercise 1-38 Identifying Current Assets and Liabilities Dunn Sporting Goods sells athletic clothing and footwear 10 retail customers. Dunns accountant indicates that the firms operating cycle averages 6 months. At December 31, 2019, Dunn has the following assets and liabilities: Prepaid rent in the amount of 58,500. Dunns rent is $500 per month. A $9,700 account payable due in 45 days. Inventory in the amount of $46,230. Dunn expects to sell $38,000 of the inventory within 3 months. The remainder will be placed in storage until September 2020. The items placed in storage should be sold by November 2020. An investment in marketable securities in the amount of $1,900. Dunn expects to sell $700 of the marketable securities in 6 months. The remainder are not expected to be sold until 2022. Cash in the amount of $1,050. An equipment loan in the amount of $60,000 due in March 2024. Interest of $4,500 is due in March 2020 ($3,750 of the interest relates to 2019. with the remainder relating to the first 3 months of 2020). An account receivable from a local university in the amount of $2,850. The university has promised to pay the full amount in 3 months. Store equipment at a cost of $9,200. Accumulated depreciation has been recorded on the store equipment in the amount of 51,250. Required: Prepare the current asset and current liability portions of Dunns December 31, 20191 balance-sheet. Compute Dunns working capital and current ratio at December 31, 2019. CONCEPTUAL CONNECTION As in investor or creditor. what do these ratios tell you about Dunns liquidity?Exercise 1-39 Current Assets and Current Liabilities Hanson Construction has an operating cycle of '5' months. On December 31. 2019, Hanson has the following assets and liabilities: A note receivable in the amount of $1500 10 be collected in 6 months Cash totaling $1,380 Accounts payable totaling $2,100, all of which will be paid within 2 months Accounts receivable totaling $12,000, including an account for $7,000 that will be paid in 2 months and an account for $5,000 that will be paid in 18 months Construction supplies coming $6,200, all of which will be used in construction within the next 12 months Construction equipment costing $60,000 on which depreciation of $22,400 has accumulated A note payable to the bank in the amount of $6,800 is to be paid within the next year Required: Calculate the amounts of current assets and current liabilities reported on Hansons balance sheet at December 31, 2019. CONCEPTUAL CONNECTION Comment on Hansons liquidity.Exercise 1-40 Depreciation OBJECTIVE 0Â° Swanson Products was organized as a new business on January 1, 2019. On that date. Swanson acquired equipment at a cost of $425,000. which is depreciated at a rate of $40,000 per year. Required: Describe how the equipment and its related depreciation will be reported on the balance sheet at December 31, 2019, and on the 2019 income statement.Exercise 1-41 Stockholders Equity OBJECTIVE o On January 11 2019, Mulcahy Manufacturing Inc., a newly formed corporation, issued 1,000 shares of common stock in exchange for $150,000 cash. No other shares were issued during 2019, and no shares were repurchased by the corporation. On November 1, 2019, the corporations major stockholder sold 300 shares to another stockholder for $50000. The corporation reported net income of $37,500 for 2019. Required: Prepare the stockholders equity section of Mulcahys balance sheet at December 31, 2019.42E 43E 44E 45E OBJECTIVE 6 Exercise 1-46 Income Statement ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019. Required: 1. Prepare a single-step income statement for ERS for 2019. 2. CONCEPTUAL CONNECTION Compute net profit margin for ERS. If ERS is able to increase its service revenue by $100,000, what should be the effect on future income? 3. CONCEPTUAL CONNECTION Assume that ERS net profit margin was 8.5% for 2018. As an investor, what conclusions might you draw about ERS future profitability?Exercise 1-47 Multiple-Step Income Statement The following information is available for Bergin Pastry Shop. Required: Prepare a multiple-step income statement for Bergin.Exercise 1-48 Income Statement The following information is available for Wright Auto Supply at December 31, 2019. Required: 1. Prepare a single-step income statement for the year ended December 31, 2019. 2. Prepare a multiple-step income statement for the year ended December 31, 2,019. 3. CONCEPTUAL CONNECTION Comment on the differences between the single-step and the multiple-step income statements.49E Exercise 1-50 Statement of Cash Flows OBJECTIVE o Walters Inc. began operations on January I. 2019. The following information relates to Walters cash flows during 2019. Required: 1. Calculate the cash provided/fused for each cash flow category. 2. CONCEPTUAL CONNECTION Comment on Walters creditworthiness.Exercise 1-51 Relationships Among the Financial Statements Zachary Corporations December 31, 2018 balance sheet included the following amounts: Required: Calculate the amount of cash and retained earnings at the end of 2019.Exercise 1-52 Relationships Among the Financial Statements The following information for Kellman Inc. is available at the end of 2019. Required: Calculate the amount of dividends reported on the retained earnings statement for 2019.Exercise 1-53 Relationships Among the Financial Statements During 2019, Moore Corporation paid $20,000 of dividends. Moores assets, liabilities, and common stock at the end 012018 and 2019 were: Required: Using the information provided. compute Moores net income for 2019.54E 55E Problem 1-56A Applying the Fundamental Accounting Equation At the beginning of 2019 Huffer Corporation had total assets of $232,400 total liabilities of $94,200 common stock of 5501000. and retained earnings of $88,200. During 2019, Huffer had net income of $51,1501 paid dividends of 510,000. and issued additional common stock for $15,000. Huffers total assets at the end 01'2019 were $285,500. Required: Calculate the amount of liabilities that Huffer must have at the end of 2019 m order for the balance sheet equation to balance.Problem 1-57A Accounting Relationships Information for Beethoven Music Company is given below. Required: Use the relationships in the balance sheet. income statement. and retained earnings statement to determine the missing values.58APSA 59APSA Problem 1-60A Income Statement and Balance Sheet The following information for Rogers Enterprises is available at December 31, 2019 and includes all of Rogers financial statement amounts except retained earnings: Required: Prepare a single-step income statement and a c1assified balance sheet for the year ending December 31, 2019, for Rogers.Problem 1-61A Retained Earnings Statement Dittman Expositions has the following data available: Required: Prepare retained earnings statements for 2019 and 2020.Problem 1-62A Retained Earnings Statements The table below presents the retained earnings statements for Bass Corporation for 3 successive years. Certain numbers are missing. Required: Use your understanding of the relationship between successive retained earnings statements to calculate the missing values (a-g).Problem 1-63A Income Statement, Retained Earnings Statement. and Balance Sheet The following information relates to Ashton Appliances for 2019. Required: 1. Prepare a single-step income statement for 2019, a retained earnings statement for 2019, and a properly classified balance sheet as of December 31, 2019. 2. CONCEPTUAL CONNECTION How would a multiple-step income statement be different from the single-step income statement you prepared for Ashton?Problem 1-64A Stockholders' Equity Relationships Data from the financial statements of four different companies are presented in separate columns in the table below. Each column has one or more data items missing. Required: Use your understanding of the relationships among the financial statement items to determine the missing values (a-o).Problem 1-65A Relationships Among Financial Statements Carson Corporation reported the following amounts for assets and liabilities at the beginning and end of a recent year. Required: Calculate Carsons net income or net loss for the year in each of the following independent situations: Carson declared no dividends. and its common stock remained unchanged. Carson declared no dividends and issued additional common stock for $40,000 cash. Carson declared dividends totaling $5000 and its common stack remained unchanged. Carson declared dividends totaling $20,000 and issued additional common stock for $35,000.Problem 1-563 Applying the Fundamental Accounting Equation At the beginning of 2019, KJ Corporation had total assets of $525,100, total liabilities of $290,800. common stock of $100000. and retained earnings of $134,900. During 2019. KJ had net income of $205,500. paid dividends of $70,000. and 1ssued additional common stock for $36,000 KJs total assets at the end of 2019 were $10,100. Required: Calculate the amount of Liabilities that KJ must have at the end of 2019 in order for the balance sheet equation to balance.Problem 1-57B The Fundamental Accounting Equation Information for TTL Inc. is given below. Required: Use the relationships in the balance sheep income statement, and retained earnings statement to determine the missing values.Problem 1-583 Arrangement of the Income Statement Parker Renovation Inc. renovates historical buildings for commercial use. During 2019. Parker had $763,400 of revenue from renovation services and $5,475 of interest income from miscellaneous investments. Parker incurred $222,900 of wages expense $135,000 of depreciation expense, $65,850 of insurance expense, $109,300 of utilities expense, $31,000 of miscellaneous expense, and $61,400 of income taxes expense. Required: Prepare a single-step income statement for Parker for 2019.59BPSB Problem 1-60B Income Statement and Balance Sheet Ross Airport Auto Service provides parking and minor repair service at the local airport while customers are away on business or pleasure trips, The following account balances (except for retained earnings) are available for R055 Airport Auto Service at December 31, 2019. Required: Prepare a single-step income statement and a classified balance sheet for the year ended December 31, 2019.Problem 1-61B Retained Earnings Statement Magical Experiences Vacation Company has the following data available: Required: Prepare retained earnings statements for 2019 and 2020.Problem 1-62B Retained Earnings Statements The table below presents the retained earnings statements for Dillsboro Corporation for 3 successive years. Certain number are missing. Required: Use your understanding of the relationship between successive retained earnings statements to calculate the missing values (a-g).Problem1-63B Income Statement, Retained Earnings Statement. and Balance Sheet McDonald Marina provides decking and cleaning services for pleasure boats at its marina in southern Florida. The following account balances are available: Required: 1. Prepare a single-step income statement. a retained earnings statement and a classified balance sheet for the year ended December 31, 2019. 2. CONCEPTUAL CONNECTION How would a multiple-step income statement be different from the single-step income statement you prepared for McDonald Marina?64BPSB Problem 1-65B Relationships Among Financial Statements Leno Corporation reported the following amounts for assets and liabilities at the beginning and end of a recent year. Required: Calculate Lenos net income or net loss for the year in each of the following independent situations: Leno declared no dividends, and its common stock remained unchanged. Leno declared no dividends and issued additional common stock for $15,000 cash. Leno declared dividends totaling $10,000 and its common slack remained unchanged. Leno declared dividends totaling $12,000 and issued additional common stock for $20,000.66C 67.1C 67.2C 68.1C 68.2C 69.1C 69.2C Case 1-70 Financial Statement Analysis Reproduced below are portions of the presidents letter to stockholders and selected income statement and balance sheet data for the Wright Brothers Aviation Company. Wright Brothers is a national airline that provides both passenger service and package delivery service. Required: What trends do you detect in revenues, operating income. and net income for the period 2015-2019?70.2C Case 1-70 Financial Statement Analysis Reproduced below are portions of the presidents letter to stockholders and selected income statement and balance sheet data for the Wright Brothers Aviation Company. Wright Brothers is a national airline that provides both passenger service and package delivery service. Required: The price of Wright Brothers stock declined steadily throughout the 2015-2019 period. Do you consider this decline to be a reasonable reaction to the financial results reported? Why or why not?71C 72C 73.1C 73.2C 73.3C Case 1-73 Research and Analysis Using the Annual Report Obtain Apple Inc.s 2016 annual report either through the Investor Relations portion of their website (do a web search for Apple investor relations) or go to www.sac.gov and click Company Filings Search under Filings. Required: Answer the following questions: 4. With regard to the income statement: a. What amounts did Apple report as revenues, expenses. and net income for 2016? b. Do you detect any trends with regard to revenues. expenses, or net income?73.5C 73.6C 73.7C 74.1C Case 1-74 Comparative Analysis: Under Armour, lnc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: Answer the following questions: What is the fiscal year-end of Under Armour? Of Columbia? Why would you expect these to be similar?74.3C Case 1-74 Comparative Analysis: Under Armour, lnc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: Answer the following questions: With regard to the income statement: What amounts did Under Armour report as revenues, expenses, and net income for the year ended December 3 l, 2016? What amounts did Columbia report as revenues, expenses, and net income for the fiscal year ended December 31, 2016? Compare any trends that you detect with regard to revenues expenses. and net income.Case 1-74 Comparative Analysis: Under Armour, lnc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: Answer the following questions: What were the major sources and uses of cash for each company?Case 1-74 Comparative Analysis: Under Armour, lnc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: Answer the following questions: What is managements assessment of each companys past performance and future prospects? Where did you find this information?75.1C 75.2C Case 1-75 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT Cam and Anna met during their freshman year of college as they were standing in line to buy tickets to a concert. While waiting in line, the two shared various aspects of their lives) Cam, whose father was an executive at a major record label. was raised in New York Some of his favorite memories were meeting popular musical artists-from the Rolling Stones to the Black Eyed Peas-as he accompanied his father on business trips. Anna. on the other hand. was born and raised in a small. rural town in southern Georgia. Her fondest childhood memories involved singing with her family. who often performed at county fairs and other small events, Even though they had different backgrounds, they felt an instant bond through their shared passion for music. Over the next couple of years, this friendship strengthened as they attended numerous concerts and other events together. While on a road trip to see a new hand during their senior year, Cam and Anna started discussing their future career plans. Both had an entrepreneurial spirit and were seeking a way to combine their majors in business with their passion for music. Cam had recently overheard his father discussing how many artists were unhappy with the current concert promoters. Anna had heard similar complaints from her cousin. whose band recently had their first top 25 hit. When Cam suggested that he and Anna form a concert promotion business. they both knew they had found the perfect careers. Concert promoters sign artists, usually through the artists agents. to contracts in which the promoter is responsible for organizing live concert tours. Typically. this includes booking the venue, pricing the tour. advertising the tour. and negotiating other services from local vendors. In general. the barriers to entry in the concert promotion industry are relatively low. with one of the more important items being forming a relationship with the various artists. Through their industry contacts (Cams father. Annas cousin]. they felt that they could develop a client list relatively easily. A second major barrier would be to obtain the up-front cash necessary to promote the tour properly. Since their friendship had started many years ago as they were trying to get front row seats. they decided to name their business Front Row Entertainment. With their first big decision made, it was time to get to work. Required: Cam and Anna will need to prepare financial statements to report company performance. What type of information does each financial statement provide? Be sure to describe the insights that each financial statement provides to users.What is the conceptual framework of accounting?2DQ 3DQ 4DQ Describe the constraint on providing useful information.6DQ 7DQ 8DQ Of all the events that occur each day, how would you describe those that are recorded in a firms accounting records?10DQ 11DQ In analyzing a transaction, can a transaction only affect one side of the accounting equation? If so, give an example.How do revenues and expenses affect the accounting equation?14DQ 15DQ The words debit and credit are used in two ways in accounting: to debit an account and a debit balance. Explain both usages of the terms debit and credit.17DQ 18DQ 19DQ 20DQ 21DQ 22DQ 1MCQ 2MCQ 3MCQ 4MCQ 5MCQ Which principle requires that expenses be recorded and reported in the same period as the revenue that it helped generate? Historical cost Revenue recognition Conservatism Expense recognition Taylor Company recently purchased a piece of equipment for $2,000 which will be paid within 30 days after delivery. At what point would the event be recorded in Taylors accounting system? When Taylor signs the agreement with the seller When Taylor receives an invoice (a bill) from the setter When Taylor receives the asset from the seller When Taylor pays $2.000 cash to the seller 8MCQ The effects of paying salaries for the current period are to: increase assets and increase stock- holders equity. increase assets and increase liabilities. decrease assets and decrease liabilities. decrease assets and decrease stock- holders equity.Which of the following statements is false? The left side of a T-account is called the credit side. All T-accounts have both a debit and a credit side. Transactions are frequently analyzed using a T-account. The amount in an account at any time is called the balance of the account.Which of the following statements are true? Debits represent decreases. and credits represent increases. Debits must always equal credits. Assets have normal debit balances while liabilities and stockholders equity have normal credit balances. I I and II II and III All of these are true.Debits will: increase assets. expenses, and dividends. decrease liabilities, revenues, and dividends. increase assets, liabilities, revenues, expenses, and dividends. decrease assets, liabilities, revenues, expenses, and dividends.Which of the following statements are true? A journal provides a chronological record of a transaction. A journal entry contains the complete effect of a transaction. The first step in preparing a journal entry involves analyzing the transaction. I and II I and III II and III All of these are true.Posting: involves transferring the information in journal entries to the general ledger. is an optional step in the accounting cycle. is performed after a trial balance is prepared. involves transferring information to the trial balance.A trial balance: lists only revenue and expense accounts; lists all accounts and their balances. will help detect omitted journal entries. detects all errors that could be made during the journalizing or posting steps of the accounting cycle.CORNERSTONE 2.1 Cornerstone Exercise 2-16 Qualitative Characteristics Three statements are given below. When financial information is free from error or bias, the information is said to possess this characteristic. Griffin Company uses the same depreciation method from period to period. A trash can that is purchased for $10 is expensed even though it will be used for many years. Required: Give the qualitative characteristic or constraint that is most applicable to each of the statements.17CE CORNERSTONE 2.1 Four statements are given below. Pewterschmidt Company values its inventory reported in the financial statements in terms of dollars instead of units Property, plant, and equipment is recorded at cost (minus any accumulated depreciation) instead of liquidation value. The accounting records of a company are kept separate from its owners. The accountant assigns revenues and expenses to specific years before preparing the financial statements. Required: Give the accounting assumption that is most applicable to each of the statements.19CE Cornerstone Exercise 2-20 Transaction Analysis Four transactions are listed below. CORNERSTONE 2.2 Sold goods to customers on credit. Collected amounts due from customers. Purchased supplies on account. Used supplies in operations of the business. Required: Prepare three columns labeled assets, liabilities, and stockholders equity. For each of the transactions, indicate whether the transaction increased (+). decreased (-). or had no effect (NE) on Assets, liabilities, or stockholders equity.Cornerstone Exercise 2-21 Transaction Analysis Morgan Inc. entered into the following transactions: Issued common stock to investors in exchange for $30,000 cash; Borrowed $104000 dish from First State Bank. Purchased $3,000 of supplies on credit. Paid for the purchase in Transaction c. Required: Show the effect of each transaction using the following model.Cornerstone Exercise 2-22 Transaction Analysis The Mendholm Company entered into the following transactions: Performed services on account, 521,500. Collected $9,500 from client related to services performed in Item a. Find $500 dividend to stockholders. Paid salaries of $4,000 for the current month. (Continued) Required: Show the effect of each transaction using the following model:Cornerstone Exercise 2-23 Debit and Credit Procedures Refer ID the accounts listed below. a. Accounts Payable e. Equipment b. Accounts Receivable f. Common Stock c. Retained Earnings g. Salary Expense d. Sales h. Repair Expense Required: For each of the acmums1 complete the following table by entering the normal balance of the account (debit or credit) and the word increase or decrease in the debit and credit columns.Cornerstone Exercise 2-24 Journalize Transactions Four transactions that occurred during June are listed below. June 1: Issued common stock to several investors for $100,000. June 8: Purchased equipment for $16300 cash. June 15: Made cash sales of $23,200 to customers. June 29: Paid a $4,500 dividend to stockholders. Required: Prepare journal entries for the transactions.Cornerstone Exercise 2-25 Journalize Transactions Four transactions that occurred during May are listed below. May 5: Borrowed cash of $40,000 from Middle State Bank. May 10: Made cash sales of $28,500 to customers. May 19: Paid salaries of $15,600 to employees for services performed. May 22: Purchased and used $7,100 of supplies in operations of the business. Required: Prepare journal entries for the transactions.Cornerstone Exercise 2-26 Preparing a Trial Balance Listed below are the ledger accounts for Borges Inc. at December 31, 2019. All accounts have normal balances. Required: Prepare a trial balance for Borges at December 31. 2019.27BE Brief Exercise 2-28 Assumptions and Principles Five common accounting practices are listed below: A customer pays $20 to mail a package on December 30. The delivery company recognizes revenue when the package is delivered in January. Jim Trotter owns C**S Heating Company. In preparing the financial statements, Trotter makes sure that the purchase of a new truck for personal use is not included in C&S’s financial statements. Moseley Inc. recorded land at its purchase price of $50,000. In future periods, the land is reflected in the financial statements at $50,000. Mack Company purchases inventory in March. However, it does not expense that inventory until it is sold in April. Mueller Inc. prepares quarterly and annual financial statements. Required: Identify the amounting principle or assumption that best describes each practice Brief Exercise 2-2? Events and Transactions Several events are listed below. Paid $30,000 for land. Purchased office supplies for cash. Perfumed consulting services for a client with the amount to be collected in 30 days. Signed a contract to perform consulting services over the next 6 months. Required: For each of the events, identify which ones qualify for recognition in the financial statements. If an event does not qualify for recognition, explain why.Brief Exercise 2-30 Transaction Analysis Galle Inc. entered into the following transactions during January. Borrowed $50,000 from First Street Bank by signing a new payable. Purchased $25,000 of equipment for cash. (Continued) Paid $500 to landlord for rent for January. Performed services for customers on account, $10,000. Collected $31000 from customers for services performed in Transaction d. Paid salaries of $2,500 for the current month. Required: Show the effect of each transaction using the following model.Brief Exercise 2-31 Debit and Credit Procedures Refer to the accounts listed below. Accounts Receivable Accounts Payable Cash Equipment Notes Payable Rent Expense Salaries Expense Service Revenue Required: For each of the accounts, indicate the normal balance of the account and the effect of a debit or a credit on the account.Brief Exercise 2-32 Journalize Transactions Galle Inc. entered into the following transactions during January. January, 1: Borrowed $50,000 from First Street Bank by signing a note payable. January, 4: Purchased $25,000 of equipment for cash. January, 6: Paid $500 to landlord for rent for January. January, 15: Performed services for customers on account. $10,000. January, 25: Collected $3,000 from customers for services performed in Transaction d. January, 30: Paid salaries of $2,500 for the current month. Required: Prepare journal entries for the transactions.Brief Exercise 2-33 Posting Journal Entries Listed below are selected T-accounts and their beginning balances for Galle Inc. Required: Post the journal entries from Brief Exercise 2-32 to these accounts and compute the ending balance for each account.Brief Exercise 2-34 Preparing a Trial Balance The following trial balance that was prepared by {he bookkeeper of Mason Company does not balance. Required: Prepare a correct trial balance. Assume all accounts have normal balances.35E 36E Exercise 2-37 Events and Transactions Several events are listed below Common stock is issued to investors. An agreement is signed with a janitorial service to provide cleaning services over the next 12 months. Inventory is purchased. Inventory is sold to customers. Two investors sell their common stock to another investor. A 2-year insurance policy is purchased Required: CONCEPTUAL CONNECTION For each of the events1 identify which ones qualify for recognition in the financial statements. CONCEPTUAL CONNECTION For events that do not qualify for recognition, explain your reasoning.Exercise 2-38 Events and Transactions The following economic events related to K the bill need not be paid until March 1, 2019. On February, 15, Kqualify and does not qualify. indicate whether each of the above events would qualify as a transaction and be recognized and recorded in the accounting system on the date indicated. 2. CONCEPTUAL CONNECTION For any events that did not qualify as a transaction to be recognized and recorded, explain why it does not qualify.Exercise 2-39 Transaction Analysis OBJECTIVE e The following events occurred for Parker Company. Performed consulting services for a client in exchange for $3,200 cash. Performed consulting services for a client on amount. $1,700. Paid $30,000 cash for land. Purchased office supplies on accounts $900. Paid a $2,500 cash dividend to stockholders. Paid $550 on account for supplies purchased in Transaction d. Paid $800 cash for the current months rent. Collected $1,500 from client in Transaction b. Stockholders invested $20,000 cash in the business. Required: 1. Analyze the effect of each transaction on the accounting equation. For example, if salaries of $500 were paid. the answer would be Decrease in stockholders equity (expense) $500 and decrease in assets (cash) $500. 2. CONCEPTUAL CONNECTION For Event 6, what accounting principle did you use to determine the amount to be recorded for supplies?Exercise 2-40 Transaction Analysis Amanda Webb opened a home health care business under the name Home Care Inc. During its first month of operations. the business had the following transactions: Issued common stock to Ms. Webb and other stockholders in exchange for $30,000 cash. Paid $18,500 cash for a parcel of land on which the business will eventually build an office building. Purchased supplies for $2350 on credit. Used the supplies purchased in Transaction c. Paid rent for the month on office space and equipment. $800 cash. Performed services for clients in exchange for $3,910 cash. Paid salaries for the month. $1,100. Paid $650 cash for advertising in the current month. Paid $1,900 on account for supplies purchased in Transaction c. Performed services for clients on credit in the amount of 51,050. Paid a $600 dividend to stockholders Required: Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below.Exercise 2-41 Transaction Analysis and Business Activities The accountant for Compton Inc. has collected the following information: Compton purchased a tract of land from Jacobsen Real Estate for $875,000 cash. Compton issued 2,000 shares of its common stock to George Micros in exchange for $125,000 cash. Compton purchased a John Deere tractor for $86,000 on credit. Michael Romano paid Compton $10,400 cash for services performed. The services had been performed by Compton several month ago for a [ma] price of $12,000 of which Rotunno had previously paid $1,600. Compton paid its monthly payroll by issuing checks totaling $36,250. Compton declared and paid its annual dividend of $5,000 cash Required: 1. Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below. 2. Indicate whether the transaction is a financing, investing, or operating activity.Exercise 2-42 Inferring Transactions from Balance Sheet Changes Each of the following balance sheet changes is associated with a particular transaction: Cash decreases by $32,000 and land increases by $22,000. Cash decreases by $9,000 and retained earnings decreases by $9,000. Cash increases by $100,000 and common stock increases by $100,000. Cash increases by $15,000 and notes payable increases by $15,000. Required: CONCEPTUAL CONNECTION Describe each transaction listed above.Exercise 2-43 Transaction Analysis Goal Systems, a business consulting firm, engaged in the following transactions: Issued common stock for $75,000 cash. Borrowed $35,000 from a bank. Purchased equipment for $12,000 cash. Prepaid rent on office space for 6 months in the amount of $7.800. Performed consulting services in exchange for $6,300 cash. Perfumed consulting services on credit in the amount of $18,750. Incurred and paid wage expense of $9,500. Collected $10,200 of the receivable arising from Transaction f. Purchased supplies for $1,800 on credit. Used $1,200 of the supplies purchased in Transaction i. Paid for all of the supplies purchased in Transaction i. Required: For each transaction described above. indicate the effects on assets, liabilities, and stockholders equity using the format below.Exercise 2-44 Transaction Analysis OBJECTIVE 9 During December, Cynthiana Refrigeration Service engaged in the following transactions: On December 3, Cynthiana sold a 1-year service contract to Cub Foods for $12,000 cash. On December 10, Cynthiana repaired equipment of the A liabilities, and stockholders equity using the formal below.45E Exercise 2-46 Normal Balances and Financial Statements The following accounts are available for Haubstadt Shoe Works: Required; Using a table like the one below, indicate whether each account normally has a debit or credit balance and indicate on which of the financial statements (income statement. retained earnings statement. or balance sheet) each account appears.OBJECTIVE 9 Exercise 2-47 Debit and Credit Effects of Transactions Lincoln Corporation was involved in the following transactions during the current year: Lincoln borrowed cash from the local bank on a note payable. Lincoln purchased operating assets on credit. Lincoln paid dividends in cash. Lincoln purchased supplies inventory on credit. Lincoln used a portion of the supplies purchased in Transaction d. Lincoln provided services in exchange for cash from the customer. A customer received services from Lincoln on credit. The owners invested cash in the business in exchange for common stock. The payable from Transaction d was paid in full. The receivable from Transaction g was collected in full. Lincoln paid wages in cash. Required: Prepare a table like the one shown below and indicate the effect on assets, liabilities, and stock-holders, equity. Be sure to enter debits and credits in the appropriate columns for each of the transactions. Transaction a is entered as an example:48E Exercise 2-49 Journalizing Transactions Kauai Adventures rams and sells surfboards, snorkeling, and scuba equipment. During March, Kauai engaged in the following transactions: March 2 Received $51,500 cash from customers for rental, 3 Purchased on credit ten new surfboards (which Kauai classifies as inventory) for $180 each. 6 Paid wages to employees in the amount of $9,200. 9 Paid office rem for the month in L1]: amount of$l,000. 12 Purchased a new Ford truck for 340.800: paid 51,000 down in cash and secured a loan from Princeville Bank for the $39,800 balance. March 13 Collected a $1,050 account receivable. 16 Paid an account payable in the amount of $950. 23 Borrowed $10,000 on a 6-month, 8% note payable. 27 Paid the monthly telephone hill of $185. 30 Paid a monthly advertising bill of $1,550. Required: Prepare a journal entry for each of these transactions.Exercise 2-50 Journalizing Transactions Remington Communications has been providing cellular phone service for several years. During November and December. the following transactions occurred: Nov. 2 Remington received S2,400 for November phone service from Enrico Company. 10 6 Remington purchased S4,750 of supplies from Technology Associates on 10 Remington paid S5,250 to its hourly employees for their weekly wages. 15 Remington paid S4, 750 to Technology Associates in full settlement Of its payable. 28 Remington paid S2, 150 for utilities used during November. 30 Remington received a bill from Monticello Construction for Sl,230 for repairs made to Remingtons loading dock on November I S. Remington plans to pay the bill in early December. Dec. 10 Remington paid S I ,230 to Monticello Construction to settle the repair bill received on Exercise 2-51 Transaction Analysis and Journal Entries Pasta House Inc. was organized in January 2019. During the year, the transactions below occurred: On January 14, Pasta House sold Martin Halter, the firms founder and sole owner, 10,000 shares of its common stock for S8 per share. On the same day, Bank One loaned Pasta House $45,000 on a ID-year note payable. On February 22, Pasta House purchased a building and the land on which it stands from Frank Jakubek for $34,000 cash and a 5-year, $56,000 note payable. The land and building had appraised values Of $30,000 and $60,000, respectively. On March 1, Pasta House signed an $15,000 contract with Cosby Renovations to remodel the inside of the building. Pasta House paid $4,000 down and agreed to pay the remainder when Cosby completed its work. On May 3, Cosby completed its work and submitted a bill to Pasta House for the remaining $11,000. On May 20, Pasta House paid $11,000 to Cosby Renovations. On June 4, Pasta House purchased restaurant supplies from Glidden Supply for $650 cash. Required: Prepare a journal entry for each of these transactions.Exercise 2-52 Accounting Cycle Rosenthal Decorating Inc. is a commercial painting and decorating contractor that began operations in January 2019. The following transactions occurred during the year: On January 15, Rosenthal sold shares Of its common stock to William Hensley for $10,000 On January 24, Rosenthal purchased S720 of painting supplies from Westwood Builders' Supply Company on account. On February 20, Rosenthal paid S720 cash to Westwood Builders' Supply Company for the painting supplies purchased on January 24. On April 25, Rosenthal billed Bultman Condominiums $12,500 for painting and decorating services performed in April. On May 12, Rosenthal received $12,500 from Bultman Condominiums for the painting and decorating work billed in April. On June 5, Rosenthal sent Arlington Builders a $9,500 bill for a painting job completed on that day. On June 24, Rosenthal paid wages for work performed during the preceding week in the amount of $6,700. Required: Prepare a journal entry for each of the transactions. Post the transactions to T-accounts. Prepare a trial balance at June 30, 2019.Exercise 2-53 Preparing a Trial Balance Preparation The fo1lowing accounts and account balances are available for Badger Auto Parts at December 31, 2019: Required: Prepare a trial balance. Assume that all accounts have normal balances.Exercise 2-54 Effect of Errors on a Trial Balance The bookkeeper for Riley Inc. made the following errors: A cash purchase of supplies of $348 was recorded as a debit to Supplies for $384 and a credit to Cash of $384. A cash sale 0133.128 was recorded as a debit to Cash of $3,128 and a credit to Sales of $53,182. A purchase of equipment was recorded once in the journal and posted twice to the ledger. Cash paid for salaries of $5,270 was recorded as a debit to Salaries Expense of $5,270 and a credit to Accounts Payable of $5,210. A credit sale of $1600 was recorded as a credit In Sales Revenue of $1,1500; however the debit posting to Accounts Receivable was unfilled. Required: Indicate whether or not the trial balance will balance after the error. If the trial balance will not Balance indicate the direction of the misstatement for any effected account (such as Cash will be overstated by $50).Problem 2-55A Events and Transactions The accountant for Boatsman Products Inc. received the following information: Boatsman sent its customers a new price list. Prices were increased an average of 3% on all items. Boatsman accepted an offer of 5150.000 for land that it had purchased 2 years ago for 130,000. Cash and the deed for the property are to be exchanged in 5 days. Boatsman accepted $150,000 cash and gave the purchaser the deed for the property described in Item b. Boatmens president purchased 600 shares of the firms common stock from another stock-holder; The president paid $15 per share. The former stockholder had purchased the stock from Boatsman for $4 per share. Boatsman leases its delivery trucks from a local dealer. The dealer also performs maintenance on the trucks for boats man. Boats man received a $1.254 bill for maintenance from the dealer. Required: l. CONCEPTUAL CONNECTION Indicate whether or not each item qualifies as a transaction and should be recorded in the amounting system. Explain your reasoning. 2. CONCEPTUAL CONNECTION What accounting concept is illustrated by Item d?Problem 2-56A Analyzing Transactions Luis Madero, after working for several years with a large public accounting firm decided to open his own accounting service. The business is operated as a corporation under the name Madero Accounting Services. The following captions and amounts summarize Maderos balance sheet at July 31, 2019. The following events occurred during August 2019. Issued common stock to Ms. Garriz in exchange for $15,000 cash. Paid $850 for first months rent on office space. Purchased supplies of $2,250 on credit. Borrowed $8,000 from the bank. Paid $1,080 on account for supplies purchased earlier on credit. Paid secretarys salary for August of $2,150. Performed amounting services for clients who paid cash upon completion of the service in the total amount of $4,700. Used $3,180 of the supplies on hand. Perfumed accounting services for clients on credit in the total amount of $1,920. Purchased $500 in supplies for cash. Collected $1,290 cash from clients for whom services were performed on credit. Paid $1,000 dividend to stockholders. Required: Record the effects of the transactions listed above on the accounting equation. Use the format given in the problem, starting with the totals at July 31, 20l9. Prepare the trial balance at August 31, 2019.Problem 2-57A Inferring Transactions from T-Accounts The following T-accounts summarize the operations of Chen Construction Company for July, 2019. Required: CONCEPTUAL CONNECTION Assuming that only one transaction occurred on each day (beginning on July 2) and that no dividends were paid, describe the transactions that most liker took place. Prepare a trial balance at July 31, 2019.58APSA Problem 2-59A Journalizing Transactions Monroe Company rents and sells electronic equipment. During September, Monroe engaged in the transactions described below. Sept. 5 Purchased a Chevrolet truck for $38,900 cash. 8 Purchased inventory for $4200 on account. 10 Purchased $1,250 of office supplies on credit. 11 Rented sound equipment to a traveling stage play for $13,600. The producer of the play paid for the service at the time it was provided. Sept 12 Rented sound equipment and lights to a local student organization for a school dance for $2,400. The student organization will pay for services within 30 days. 18 Paid employee wages of $4,750. What have been earned during September. 22 Collected the receivable from the September 12 transaction. 23 Borrowed $20000 cash from a bank on a 3-year note payable. 28 Issued common stock to new stockholders for $35,000. 30 Paid a $3,250 cash dividend to stock-holders Required: Prepare a journal entry for each transaction.Problem 2-60A Journalizing and Posting Transactions Cincinnati Painting Service Inc. specializes in painting houses. During June, its first month of operations, Cincinnati Painting engaged in the following transactions: June 1 Issued common stock for $25,000. 3 Purchased painting supplies from River City Supply for $1,675 on credit, 8 Purchased a used truck from Hamilton Used Car Sales for 513300. paying 31,500 down and agreeing to pay the balance in 6 months. 14 Paid $4230 to hourly employers for work performed in June. 22 Billed various customers a total of $10,340 for June painting jobs. 26 Received $6.100 cash from James Elton for a house painting job completed and previously billed. 29 Collected $52.0 from Albert Montgomery on completion of a 1-day painting job. This amount is not included in the June 22 bills. Required: 1. Prepare a journal entry for each transaction. 2. Post the journal entries to the appropriate T-accounts.Problem 2-61A The Accounting Cycle Karleens Catering Service provides catered meals to individuals and businesses. Karleens purchases its food ready to serve from Mels Restaurant. In order to prepare a realistic trial balance, the events described below are aggregations of many individual events during 2019. a. Common stock was issued for $22,000. b. During the year, Karleens paid office rent of $13,500. c. Utilities expenses incurred and paid were $5,320 d. Wages of $58,800 were earned by employees and paid during the year. e. During the year, Karleens provided catering services: On credit $128,200 For cash 18,650 f. Karleens paid $59,110 for supplies purchased and used during the year. g. Karleens paid dividends in the amount of $3,500. h. Karleens collected accounts receivable in the amount of $109,400. Required: 1. Analyze the events for their effect on the amounting equation. 2. Prepare journal entries. (Note- Ignore the date because these events are aggregations of individual events.) 3. Post the journal entries to the appropriate T-accounts. 4. Prepare a trial balance at December 31, 2019. Assume that all beginning account balances at January 1, 2019, are zero.Problem 2-62B Comprehensive Problem Mulberry Services sells electronic data processing services to firms too Email to own their own computing equipment. Mulberry had the following amounts and amount balances as of January 1, 2019: During 2019, the following transactions occurred (the events described below are aggregations of many individual events): During 2019, Mulberry sold $690,000 of computing services, all on credit. Mulberry collected $570,000 from the credit sales in Transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year. Mulberry paid the interest payable of $8,000. A Wages of $379,000 were paid in cash. Repairs and maintenance of $9,000 were incurred and paid. The prepaid rent at the beginning of the year was used in 2019. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year-end. Mulberry purchased computer paper for $13,000 cash in late December. None of the paper was used by year-end. Advertising expense of $26,000 was incurred and paid. Income tax of $10,300 was incurred and paid in 2019. Interest of $5,000 was paid on the long-term loan. (Continued) Required: Establish a T-account for the accounts listed above and enter the beginning balances. Use a chart of accounts to order the T-accounts. Analyze each transaction; Journalize as appropriate. (Note: Ignore the date because these events are aggregations of individual events.) Post your journal entries to the T-accounts. Add additional T-accounts when needed. Use the ending balances in the T-accounts to prepare a trial balance.55BPSB 56BPSB 57BPSB Problem 2-58B Debit and Credit Procedures A list of accounts for Montgomery Inc. appears below. Required: Complete the table below for these accounts. The information for the first account has been entered as an example.Problem 2-593 Journalizing Transactions Monilast Chemicals engaged in the following transactions during December 2019: Dec 2 Paid rent on office furniture, $1,200. 3 Borrowed $25,030 on a 9-month, 3% note. 7 Provided services on credit. $42,600. 10 Purchased supplies on credit, $2,850. 13 Collected accounts receivable, $20,150. 19 Issued common stock, $50000. 22 Paid employee wages for December. $13,825. 23 Paid accounts payable, $1,280. 25 Provided services for cash, $13,500. 30 Paid utility bills for December, $1,975. Required: Prepare a journal entry for each transaction.Problem 2-603 Journalizing and Posting Transactions Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pool. During September the following transactions occurred: Sept. 1 Issued common stock for $20,000. 2 Purchased chemical supplies for $1,880 cash. 5 Paid office rent for October, November, and December; the rent is $800 per month. 8 Purchased $12.90 of advertising for September on account. 13 Billed the city of Bellefontaine $2,100 for testing the water in the citys outdoor pools during September, 18 Received $3250 from Alexander Blanchard upon completion of overhaul of his swimming pool water circulation system. Since the job was completed and collected for on the same day, no bill was sent, to Blanchard. Sept. 25 Received $835 from the city of Bellefontaine for water testing that was previously billed. 30 Recorded and paid September salaries of $3,970. Required: 1. Prepare a journal entry for each transaction. 2. Post the journal entries to the appropriate T-accounts.Problem 2-6B The Accounting Cycle Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year. Sweetwater engaged in the activities described below. So that a realistic trial balance can be prepared, the events described below are aggregations of many individual events. Sold 10,000 shares of common stock for $4.50 per share. Purchased office equipment from Furniture Max Inc. for $18,110 cash. Received $112,880 from clients for services provided. Paid wages $87,300. Borrowed $20,000 from the Bank of America on a 3-year note payable. Paid office rent of $10,200 Purchased office supplies on credit for $2,120 from Office Supply Inc. Paid $1,200 toward the payable established in Transaction g. Paid utility charges incurred during the year of $3,250. Required: 1. Analyze the events for their effect on the accounting equation. 2. Prepare journal entries. (Note: Ignore the date because these events are aggregations of individual events) 3. Post the journal entries to T-accounts. 4. Prepare a trial balance at December 31, 2019.Problem 2-62B Comprehensive Problem Mulberry Services sells electronic data processing services to firms too Email to own their own computing equipment. Mulberry had the following amounts and amount balances as of January 1, 2019: During 2019, the following transactions occurred (the events described below are aggregations of many individual events): During 2019, Mulberry sold $690,000 of computing services, all on credit. Mulberry collected $570,000 from the credit sales in Transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year. Mulberry paid the interest payable of $8,000. A Wages of $379,000 were paid in cash. Repairs and maintenance of $9,000 were incurred and paid. The prepaid rent at the beginning of the year was used in 2019. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year-end. Mulberry purchased computer paper for $13,000 cash in late December. None of the paper was used by year-end. Advertising expense of $26,000 was incurred and paid. Income tax of $10,300 was incurred and paid in 2019. Interest of $5,000 was paid on the long-term loan. (Continued) Required: 1. Establish a ledger for the accounts listed above and enter the beginning balances. Use a chart of accounts to order the ledger accounts. 2. Analyze each transaction, Journalize as appropriate. (Note: Ignore the date because these events are aggregations of individual events.) 3. Post your journal entries to T-accounts, Add additional T-accounts when needed. 4. Use the ending balances in the T-accounts to prepare a trial balance 63.1C 63.2C 63.3C 64.1C 64.2C Case 2-64 Analysis of the Effects of Current Asset and Current Liability Changes on Cash Flows You have the following data for Cable Companys accounts receivable and accounts payable for 2019: Required: 3. How much cash did Cable pay for wages during 26-19?64.4C 65.1C 65.2C 66.1C 66.2C 66.3C Case 2-67 Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: l. Determine the amounts in the accounting equation for the year ending December 31, 2016, for each company. Does the accounting equation balance?67.2C Case 2-67 Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com Required: 3. Prepare the journal entry to record the following two events for Under Armour and Columbia. For simplicity, assume the event was recorded in a single journal entry. a. What journal entry is necessary to record net sales for the year ending December 31, 2016? Assume that all sales were made on account. b. What journal entry is necessary to record cash collections from customers during the year ending December 31, 2016?Case 2-68 Accounting for Partially Completed Events: 3 Prelude to Chapter 3 Ehrlich Smith. the owner of The Shoe Bone has asked you to help him understand the proper way to account for certain accounting items as he prepares his 2019 financial statements. Smith has provided the following information and observations: (Continued) a. A 3-year fire insurance policy was purchased on 2019, for $2,400. Smith believes that a part of the cost of the insurance policy should be allocated to each period that benefits from its coverage. b. The store building was purchased for 580,000 in January 2011. Smith expected then (as he does now) that the building will be serviceable as a shoe store for 20 years from the date of purchase. In 2011, Smith estimated that he could sell the property for $6,000 at the end of its serviceable life. He feels that each period should bear some portion of the cost of this long-lived asset that is slowly being consumed. c. The Shoe Box borrowed 520300 on a 1-year, 8% note that is due on September 1 next year) Smith notes that $21,600 cash will be required to repay the note at maturity. The $1,600 difference is, he feels, a cost of using the loaned funds and should be spread over the periods that benefit from the use of' the loan funds; Required: Explain what Smith is trying to accomplish with the three items. Are his objectives supported by the concepts that underlie accounting?68.2C 69.1C Case 2-69 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After much consideration, Cam and Anna decide to organize their company as a corporation. On January 11 2019, Front Row Entertainment Inc begins operations. Due to Cams family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile. Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January: Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock. 1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9% each January I, starting in 202.0. It will repeat the amount borrowed in 5 years. 1 The company paid $1,200 in legal fees associated with incorporation. 1 Office equipment was purchased with $1000 in cash. 1 The company pays $800 to rent office space for January. 3 A 1-year insurance policy was purchased for $3,600. 3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply Services agreed to accept $1,000 in 15 days with the remainder due in 30 days. 5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15. 8 Venues for all four Charm City concerts were reserved by paying $10,000 cash. 12 Advertising costs of $4,500 were paid to promote the concert tour. 18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3. 25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for Charm Citys appearance. Of this total amount. $400 was received immediate with the remainder due in 15 days. The festive] took place on January 23. 25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records the fees paid to the artist in an operating expense account called Artist Fee Expense. 23 Due to the success of the marketing efforts, Front Row Entertainment received $3300 in advance ticket sales for the upcoming tour. 30 The company collected $200 of the amount due from the January 25 festival. 30 Paid salaries of S1,200 each to Cam and Anna for the month of January. Required: 2. Post the transactions to the general ledger.Case 2-69 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After much consideration, Cam and Anna decide to organize their company as a corporation. On January 11 2019, Front Row Entertainment Inc begins operations. Due to Cams family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile. Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January: Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock. 1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9% each January I, starting in 202.0. It will repeat the amount borrowed in 5 years. 1 The company paid $1,200 in legal fees associated with incorporation. 1 Office equipment was purchased with $1000 in cash. 1 The company pays $800 to rent office space for January. 3 A 1-year insurance policy was purchased for $3,600. 3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply Services agreed to accept $1,000 in 15 days with the remainder due in 30 days. 5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15. 8 Venues for all four Charm City concerts were reserved by paying $10,000 cash. 12 Advertising costs of $4,500 were paid to promote the concert tour. 18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3. 25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for Charm Citys appearance. Of this total amount. $400 was received immediate with the remainder due in 15 days. The festive] took place on January 23. 25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records the fees paid to the artist in an operating expense account called Artist Fee Expense. 23 Due to the success of the marketing efforts, Front Row Entertainment received $3300 in advance ticket sales for the upcoming tour. 30 The company collected $200 of the amount due from the January 25 festival. 30 Paid salaries of S1,200 each to Cam and Anna for the month of January. Required: Prepare a trial balance at January 31, 2019.How does accural-basis net income differ from cash-basis net income?Explain when revenue may be recognized and give an example.What happens during the accounting cycle?4DQ Why are adjusting entries needed?What accounting concepts require that adjusting entries be employed?7DQ 8DQ What is the difference between an accural and a deferral?10DQ 11DQ Describe the effect on the financial statements when an adjustment is prepared that records (a) unrecorded revenue and (b) unrecorded expense.13DQ 14DQ 15DQ 16DQ 17DQ 18DQ ( Appendix 3A) What is the relationship between the accounting cycle and the worksheet?20DQ Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of S4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for S600 but does not pay this bill until 2020. For 2019, under the accrual basis of accounting, Swanstrom would recognize: a. $8,000 of revenue and $600 of expense. b. $8,000 of revenue and $0 of expense. c. $3,500 of revenue and $600 of expense. d. $3,500 Of revenue and $0 of expense.Which transaction would require adjustment at December 31? a. The sale of merchandise for cash on December 30. b. Common stock was issued on November 30. c. Salaries were paid to employees on December 31 for work performed in December. d. A I-year insurance policy (which took effect immediately) was purchased on December 1.Which of the following statements is false? Adjusting entries are necessary because timing differences exist between when a revenue or expense is recognized and cash is received or paid. Adjusting entries always affect at least one revenue or expense account and one asset or liability account. The cash account will always be affected by adjusting journal entries. Adjusting entries can be classified as either accruals or deferrals.Dallas Company loaned to Ewing Company on December 1, 2019. Ewing will pay Dallas $720 of interest ($60 per month) on November 30, 2020. Dallass adjusting entry at December 31, 2019, is: a. Interest Expense ........... 60 c. Interest Receivable ....... 60 Cash ......................... 60 Interest Income ........ 60 b. Cash ............................ 60 d. No adjusting entry is required. Interest Income ........ 60 Rons Diner received the following bills for December 2019 utilities: â€¢ Electricity: $625 on December 29, 2019 â€¢ Telephone: $150 on January 5, 2020 Both bills were paid on January 10, 2020. On the December 31, 2019, balance sheet, Rons Diner will report accrued expenses of: a. $0 b. $150. c. $625. d. $775.In September 2019, GolfWorld Magazine obtained $15,000 of subscriptions for 1 year of magazines and credited Unearned Sales Revenue. The magazines will begin to be delivered in October 2019. At December 31, 2019, GolfWorld should make the following adjustment: Debit Sales Revenue by $3,750 and credit Unearned Sales Revenue by $3,750. Debit Unearned Sales Revenue by $3,750 and credit Sales Revenue by $3,750. Debit Sales Revenue by $11,250 and credit Unearned Sales Revenue by $11,250. Debit Unearned Sales Revenue by $11,250 and credit Sales Revenue by $11,250.Hurd Inc. prepays rent every 3 months on March 1, June 1, September 1, and December 1. Rent for the 3 months totals S3,600. On December 31, 2019, Hurd will report Prepaid Rent of: a. $0 b. $1,200 c. $2,400 d. $3,600 Which of the following statements is incorrect regarding preparing financial statements? The adjusted trial balance lists only the balance sheet accounts in a debit and credit format. The adjusted trial balance is the primary source of information needed to prepare the financial statements. The financial statements are prepared in the following order: (1) the income statement, (2) the retained earnings statement, and (3) the balance sheet. The income statement and the balance sheet are related through the retained earnings account.Reinhardt Company reported revenues of $122,000 and expenses of $83,000 on its 2019 income statement. In addition, Reinhardt paid of dividends during 2019. On December 31, 2019, Reinhardt prepared closing entries. The net effect of the closing entries on retained earnings was a(n): a. decrease of $4,000. b. increase of $35,000. c. increase of $39,000. d. decrease of $87,000.11MCQ Cornerstone Exercise 3-12 Accrual- and Cash-Basis Revenue McDonald Music sells used CDs for S4.00 each. During the month of April, McDonald sold 7,650 CDs for cash and 13,220 CDs on credit. McDonalds cash collections in April included $30,600 for the CDs sold for cash, $12,800 for CDs sold on credit during the previous month, and $29,850 for CDs sold on credit during April. Required: Calculate the amount of revenue recognized in April under (1) cash-basis accounting and (2) accrual-basis accounting.Cornerstone Exercise 3-13 Accrual- and Cash-Basis Expenses Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel. Required: Calculate the amount of expense recognized in May under (1) cash-basis accounting and (2) accrual-basis accounting.14CE 15CE Cornerstone Exercise 3-16 Identification of Adjusting Entries Singleton Inc. the accrual basis of accounting and had the following transactions during the year. Merchandise was sold to customers on credit. Purchased equipment to be used in the operation of its business. A 2-year insurance contract was purchased. Received cash for services to be performed over the next year. Paid weekly employee salaries. Borrowed money from First Bank by signing a note payable due in 5 years. Required: Identify and explain why each transaction may or may not require adjustment.Cornerstone Exercise 3-17 Accrued Revenue Adjusting Entries Powers Rental Service had the following items that require adjustment at year end. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. Interest of S650 on a note receivable has been earned but not yet received. Required: Prepare the adjusting entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made?Cornerstone Exercise 3-18 Accrued Expense Adjusting Entries Manning Manufacturing Inc. had the following items that require adjustment at year end. Salaries of $5,320 that were earned in December are unrecorded and unpaid. Used $1,970 Of utilities in December, which are unrecorded and unpaid. Interest of $925 on a note payable has not been or paid. Required: Prepare the adjusting entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made?Cornerstone Exercise 3-19 Deferred Revenue Adjusting Entries Olney Cleaning Company had the following items that require adjustment at year end. For one cleaning contract, $14,520 cash was received in advance. The was credited to Unearned Service Revenue upon receipt. At year end, $1,210 of the service revenue was still unearned. For another cleaning contract, $9,S40 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year end, $3,280 of the services had been provided. Required: Prepare the adjusting journal entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made? What is the balance in Unearned Revenue at December 31 related to the two cleaning contracts?Cornerstone Exercise 3-20 Deferred Expense Adjusting Entries Best Company had the following items that require adjustment at year end. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent When paid. At year end, $2,950 Of the prepaid rent had expired. Cash for insurance in the amount of $8,200 was paid in advance. The $8,200 was debited to prepaid insurance when paid. At year end, $1,8SO of the prepaid insurance was still unused. Required: Prepare the adjusting journal entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made? What is the balance in prepaid equipment rent and insurance expense at December 31?Cornerstone Exercise 3-21 Adjustment for Supplies Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: Prepare the adjusting entry needed at the end of the year. What is the amount of supplies reported on Pain-Frees sheet at the end of the year?Cornerstone Exercise 3-22 Adjustment for Depreciation LaGarde Company has a machine that it purchased for $125,000 on January 1. Annual depreciation on the machine is estimated to be $14,500. Required: Prepare the adjusting entry needed at the end of the year. What is the book value of the machine reported on LaGardes balance sheet at the end of the year?23CE Cornerstone Exercise 3-24 Preparing an Income Statement Refer to the information for Sparrow Company on the previous page. Required: Prepare a single-step income statement for Sparrow for 2019.Cornerstone Exercise 3-25 Preparing a Retained Earnings Statement Refer to the information for Sparrow Company on the previous page. Required: Prepare a retained earnings statement for Sparrow for 2019.Cornerstone Exercise 3-26 Preparing a Balance Sheet Refer to the information for Sparrow Company on the previous page. Required: prepare a classified balance sheet for Sparrow at December 31, 2019.Cornerstone Exercise 3-27 Preparing and Analyzing Closing Entries Refer to the information for Sparrow Company on the previous page. Required: Prepare the closing entries for Sparrow at December 31, 2019. How does the closing process affect retained earnings?Brief Exercise 3-28 Accrual- and Cash-Basis Accounting The following are several transactions for Halpin Advertising Company. Purchased $1,000 of supplies. 0Sold $5,000 of advertising services, on account, to customers. Used $250 of supplies. Collected $3,000 from customers in payment of their accounts. Purchased equipment for $10,000 cash. Recorded $500 depreciation on the equipment for the current period. Required: Identify the effect, if any, that each of the above transactions would have on net income under cash-basis accounting and accrual-basis accounting.Brief Exercise 3-29 Revenue and Expense Recognition Lauhl Corporation provides janitorial services to several Office buildings. During April, Lauhl engaged in the following transactions: On April 1, Lauhl received from Metro Corporation to provide cleaning services over the next 6 months. On April 5, Lauhl purchased and received S8,500 of supplies on credit from Eagle Supply Company. During the month, Lauhl paid $5,000 to Eagle and used Sl,300 of the supplies. On April 20, Lauhl performed one-time cleaning services of $2,500 for Jones Company. Jones paid Lauhl the full amount on May 10. On April 30, Lauhl paid employees wages of $3,400. An additional $850 was owed to employees for work performed in April. Required: Calculate the amount of net income that Lauhl should recognize in April under (1) cash-basis accounting and (2) accrual-basis accounting.Brief Exercise 3-30 Identification of Adjusting Entries Examine the following accounts. Prepaid Insurance Inventory Interest Payable Unearned Service Revenue Accumulated Depreciation Required: CONCEPTUAL CONNECTION Identify and explain why each account may or may not require adjustment.Brief Exercise 3-31 Adjusting Entries-Accruals Nichols Company had the following items that required adjustment at 31, 2019. Electricity used during December was estimated to $320. This amount will paid in January. Owed wages to employees of $3,250 that were earned in December but unrecorded and unpaid as of the end of the year. Services of $4,900 were performed in December but unbilled and unpaid as of year end. Required: Prepare the adjusting entries needed at December 31. CONCEPTUAL CONNECTION What is the effect on the financial statements if these adjusting entries were not made?Brief Exercise 3-32 Adjusting Entries-Deferrals Tyndal Company had the following items that required adjustment at December 31, 2019. Purchased equipment for $40,000 on January 1, 2019. Tyndal estimates annual depreciation to be $3,100. Paid $2,400 for a 2-year insurance policy on July 1, 2019. The amount was debited to Pre-paid Insurance when paid. Collected $1,200 rent for the period December 1, 2019 to March 30, 2020. The amount was credited to Unearned Service Revenue when received. Required: Prepare the adjusting entries needed at December 31. CONCEPTUAL CONNECTION What is the effect on the financial statements if these adjusting entries were not made?Brief Exercise 3-33 Preparing an Income Statement The adjusted trial balance of Pelton Company at December 31, 2019, includes the following accounts: Wages Expense, $22,400; Service Revenue. Rent Expense, $3,200; Dividends, $4,000; Retained Earnings, $12,200; and Prepaid Rent, $1,000. Required: Prepare a single-step income Statement for Pelton for 2019.Brief Exercise 3-34 Preparing a Retained Earnings Statement Refer to the information presented in Brief Exercise 3-33 for Pelton Company. The balance in Retained Earnings of $12,200 represents the balance as of January 1, 2019. Required: Prepare a retained earnings statement for Pelton for 2019.35BE Brief Exercise 3-36 Preparing and Analyzing Closing Entries At December 31, 2019, the ledger of Aulani Company includes the following accounts, all having normal balances: Sales Revenue, cost of Goods sold, $31,000; Retained $20,000; Interest Expense, $3,200; Dividends, $5,000, Wages Expense $5,000, and Interest Payable, $2,100. Required: Prepare the closing entries for Aulani at December 31, 2019. How does the closing process affect Aulanis retained earnings?37BE Exercise 3-38 Accrual- and Cash-Basis Expense Recognition The following information is taken from the accrual accounting records of Kroger Sales Company: During January, Kroger paid $9,150 for supplies to in sales to customers during the next 2 months (February and March). The supplies will be used evenly over the next 2 months. Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively. Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April. Required: Under cash-basis accounting, how much exvxn.se should Kroger report for February and March? Under accrual-basis accounting, how much expense should Kroger report for February and March? CONCEPTUAL CONNECTION Which basis of accounting provides the most useful information for decision-makers? Why?Exercise 3-39 Revenue Recognition Each of the following situations relates to the recognition of revenue: A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January. A furniture store sells and delivers furniture to a customer in June with no payments and no interest for 6 months. An airline sells an airline ticket and collects the fare in February for a flight in March to a spring break destination. A theme park sells a season pass and collects the cash in January which allows entrance into the park for an entire year. A package delivery service delivers a package in October but doesnt bill the customer and receive payment until November. Required: CONCEPTUAL CONNECTION For each situation, indicate when the company should recognize revenue on an accrual basis.Exercise 3-40 Revenue and Expense Recognition Electronic Repair Company repaired a high-definition television for Sarah Merrifield in December 2019. Sarah paid $80 at the time of the repair and agreed to pay Electronic Repair $80 each month for 5 months beginning on January 15, 2020. Electronic Repair used $120 of supplies, which were purchased in November 2020, to repair the television. Assume that Electronic Repair uses accrual-basis accounting. Required: In what month or months should revenue from this service be recorded by Electronic Repaid? In what month or months should the expense related to the repair of the television be recorded by Electronic Repair? CONCEPTUAL CONNECTION Describe the accounting principles used to answer the above questions.Exercise 3-41 Cash-Basis and Accrual-Basis Accounting The records of Summers Building Company reveal the following information for 2019. Cash receipts during 2019 (including $50,000 paid by stockholders in exchange for common stock) were $273,500. Cash payments during 2019 (including $8,000 of dividends paid to stockholders) were $164,850. Total selling price of services billed to customers during 2019 was $201,700. Salaries earned by employees during 2019 were $114,250. Cost of supplies used during 2019 in operation of the business was $47,325. Required: Calculate Summers Buildings net income for 2019 on an accrual basis. Calculate Summers Buildings net income for 2019 on a cash basis. CONCEPTUAL CONNECTION Explain how cash-basis accounting allows for the manipulation Of income.Exercise 3-42 Revenue and Expense Recognition Omega Transportation Inc., headquartered in Atlanta, Georgia, uses accrual-basis accounting and engaged in the following transactions: â€¢ billed customers $3,580,000 for transportation services â€¢ collected cash from customers in the amount of $2,479,000 â€¢ purchased fuel supplies for $1,655.000 cash â€¢ used fuel supplies that cost $1,598,240 â€¢ employees earned salaries of $425,160 â€¢ paid employees $413,380 cash for salaries Required: Determine the amount of sales revenue and total expenses for Omegas income statement.Exercise 3-43 Recognizing Expenses Treadway Dental Services gives each of its patients a toothbrush with the name and phone number of the dentist office and a logo imprinted on the brush. Treadway purchased 15,000 of the toothbrushes in October 2019 for $3,130. The toothbrushes were delivered in November and paid for in December 2019. Treadway began to give the patients the toothbrushes in February 2020. By the end of 2020, 4,500 of the toothbrushes remained in the supplies account. Required: How much expense should be recorded for the toothbrushes in 2019 and 2020 to properly match expenses with revenues? Describe how the 4,500 toothbrushes that remain in the supplies account will handled in 2021.

Page: [1][2][3][4][5][6]