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All Textbook Solutions for Intermediate Accounting: Reporting And Analysis

1GI 2GI 3GI 4GI 5GI 6GI 7GI What are the two primary forces determining the supply of accounting information?9GI 10GI 11GI 12GI 13GI 14GI 15GI 16GI 17GI 18GI 19GI 20GI 21GI 22GI 23GI Why do accountants have to be ethical in their duties and responsibilities?25GI 1E 1C 2C 3C 4C One of your friends remarks, I understand that before voting on an Update to Accounting Standards, the FASB allows written comments and oral presentations in which interested parties can lobby for a particular ruling. Do you think this is a good idea? Required: Prepare a written response that discusses the advantages and disadvantages of the FASBs allowing interested parties to provide input to its deliberative process.6C 7C 8C 9C 12C 13C Codification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.1GI 2GI How do accounting concepts, principles, standards, and rules differ?4GI 5GI 6GI What is the Objective: Useful Information about Net Cash Inflows to the Company, and why is it important?8GI 9GI Define (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e) operating capability.11GI 12GI 13GI 14GI 15GI 16GI What is the cost constraint, and how does it affect financial reporting?18GI 19GI 20GI 21GI 22GI 23GI Describe accrual accounting. What are the objectives of accrual accounting?What drives the timing of revenue recognition? When should revenue be recognized?26GI 27GI 28GI 29GI The information provided by financial reporting pertains to: a. individual companies, rather than toindustries or the economy as a whole or to members of society as consumers b. individual companies and industries, ratherthan to the economy as a whole or to members of society as consumers c. individual companies and the economyas a whole, rather than to industries or to members of society as consumers d. individual companies, industries, and theeconomy as a whole, rather than to members of society as consumers Which of the following is considered a constraint on useful information by Statement of Financial Accounting Concepts No. 8? a. benefits costs b. conservatism c. timeliness d. verifiability According to Statement of Financial Accounting Concepts No. 8, to be relevant an earnings report is expected to have which of the following?4MC 5MC 6MC Accruing net losses on obsolete inventory is an example of the accounting concept of: a. conservatism b. historical cost c. consistency d. materiality 8MC An accrued expense is an expense: a. incurred but not paid b. incurred and paid c. paid but not incurred d. not reasonably estimable 10MC 1E 2E 1C 2C 3C 4C An accountant must be familiar with the concepts involved in determining earnings of a company. The amount of earnings reported for a company is dependent on the proper recognition, in general, of revenue and expense for a given time period. In some situations, costs are recognized as expenses at the time of product sale; in other situations, costs are recognized as expenses or losses based on other criteria. Required: 1. Explain the rationale for recognizing costs as expenses at the time of product sale. 2. What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. 3. Sonic expenses are assigned to specific accounting periods on the basis of systematic and rational allocation of asset cost. Explain the underlying rationale for recognizing expenses on this basis.6C 7C 8C 9C Accruals and Deferrals Generally accepted accounting principles require the use of accruals and deferrals in the determination of income. Required: How does accrual accounting affect the determination of income? Include in your discussion what constitutes an accrual and a deferral and giveappropriate examples of each.11C 12C You have been hired as an accounting consultant by Watson Company to evaluate its financial reporting policies. Watson is a small corporation with a few shareholders owning stock that is not publicly traded. In a discussion with you, Chris Watson, the company president, says, For Watson Companys annual income statement, it is our policy to always record and report revenues when we collect the cash and to record and report expenses when we pay the cash. I like this approach, and I think our shareholders and creditors do too. This policy results in income that is reliable and conservative, which is the way accounting should be. Besides, it is easy to keep track of our income. All I need are the receipts and payments recorded in the companys checkbook. Required: From financial reporting and ethical perspectives, how would you reply to Chris?14C What is the primary purpose of an accounting system?What is the relationship between the accounting equation and the double-entry system of recording journal entries?Show the expanded accounting equation using the 10 elements of financial accounting.Explain and distinguish between a transaction; an event, and an arrangement.Explain how the accounting equation organizes financial information using T-accounts and debits and credits.What is the difference between a permanent and a temporary account? Give examples of each.7GI Why is it advantageous to a company to initially record each of its transactions in a journal?What is a perpetual inventory accounting system? What journal entries are involved?Give examples of transactions that: a. Increase an asset and a liability b. Increase an asset and shareholders equity c. Increase an asset and decrease a different asset d. Decrease an asset and a liability e. Decrease an asset and shareholders equity Give examples of transactions that: a. Increase inventory and a liability b. Decrease inventory and a liability c. Increase inventory and decrease an asset d. Decrease inventory and increase an asset 12GI 13GI 14GI 15GI Explain and provide examples of deferrals, accruals, and estimates.17GI 18GI 19GI 20GI 21GI What are the major financial statements of a company, and what information does each summarize?23GI 24GI 25GI 26GI 27GI 28GI 29GI What is cash-basis accounting? What must a company do to convert its cash-basis accounting records to an accrual-based income statement?On May 1, Johnson Corporation purchased inventory for 40,000 on credit. On May 15, Johnson sold inventory with a cost of 10,000 for 25,000 on credit. Prepare journal entries to record these transactions.On January 1, Tolson Company purchased a building by paying 85,000. The building has an estimated life of 40 years and an estimated residual value of 5,000. Prepare journal entries to record the purchase and the relatedyear-end adjusting entry.On July 1, Friler Company purchased a 1-year insurance policy by paying 5,400. Prepare journal entries to record the purchase and the related year-end adjusting entry.4RE Garcia Company rents out a portion of its building to Jerry Company for 1,000 per month. On August 1, Jerry paid Garcia 12,000 for 1 year of rent in advance. Prepare journal entries for Garcia to record the collection ofrent and the related year-end adjusting entry on December 31.6RE Goldfinger Corporation had account balances at the end of the current year as follows: sales revenue, 29,000; cost of goods sold, 12,000; operating expenses, 6,200; and income tax expense, 4,320. Assume shareholders owned 4,000 shares of Gold fingers common stock during the year. Prepare Goldfingers income statement for the current year.8RE For the current year, Vidalia Company reported revenues of 250,000 and expenses of 225,000. At the beginning of the year, its retained earnings had a balance of 95,000. During the year, Vidalia paid 11,000 dividends to shareholders. Its contributed capital was 56,000 at the beginning of the year, and it did not issue any new stock during the year. Vidalias assets total 237,500 on December 31 of the current year. What are Vidalias total liabilities on December 31 of the current year?Use the information in RE3-6, (a) assuming Ringo Company makes reversing entries, prepare the reversing entry on January 1, and the journal entry to record the payment of the note on April 1; and (b) assuming Ringo does not make reversing entries, prepare the journal entry to record the payment of the note on April 1.(Appendix 3.1) Vickelly Company uses cash-basis accounting. At the end of the current year, Vickellys checkbook shows cash receipts from customers of 112,000 and cash payments for operating expenses of 48,000 for the year. At the end of the year. Vickelly determined that customers owed it 12,000, and it owed creditors 1 0,000. Compute Vickellys sales revenue, operating expenses, and net income on an accrual basis.Financial Statement Interrelationship Draw a diagram that shows the interrelationship between the beginning balance sheet, income statement, retained earnings statement, and the ending balance sheet.Journal Entries Mead Company uses a perpetual inventory system and engaged in the following transactions during the month of May: Required: Record the preceding transactions in a general journal.Journal Entries The following are selected accounts and account balances of Sawyer Company on May 31: Sawyer entered into the following transactions during June: Required: 1. Record the preceding transactions in a general journal. 2. Post to general ledger T-accounts.Adjusting Entries Your examination of Sullivan Company’s records provides the following information for the December 31, year-end adjustments: Bad debts are to be recorded at 2% of sales. Sales made on credit totaled $25,000 for the year. Salaries at year-end that have accumulated but have not been paid total $1,400. Annual straight-line depreciation for the company’s equipment is based on a cost of $30,000, an estimated life of 8 years, and an estimated residual value of $2,000. Prepaid insurance in the amount of $800 has expired. Interest that has been earned but not collected totals $500. The company has satisfied performance obligations entitling it to rent m the amount of $1,000. Interest on a note payable that has accumulated but has not been paid totals $600. The income tax rate is 30% on current income and is payable in the first quarter of the next year. The pretax income before the preceding adjusting entries is $6,800. Required: Prepare the adjusting entries to record the preceding information. Adjusting Entries The following are several transactions of Ardery Company that occurred during the current year and were recorded in permanent (that is, balance sheet) accounts unless indicated otherwise. The following information also is available: 1. On January 1, the Office Supplies account had a 250 balance. On December 31, an inventory count showed 190 of office supplies on hand. 2. The weekly (5 day) payroll of Ardery Company amounts to 2,000. All employees are paid at the close of business each Wednesday. A 2-day accrual is required for the current year. 3. Sales personnel travel cost reports indicate that 490 of advances had been used to pay travel expenses. 4. The income tax rate is 30% on current income and is payable in the first quarter of next year. The pretaxincome before the adjusting entries is 8,655. Required: On the basis of the above information, prepare journal entries to record whatever adjustments are necessary to bring the accounts up to date on December 31. Each journal entry explanation should show any related computations.Adjusting Entries The following partial list of accounts and account balances has been taken from the trial balance and the adjusted trial balance of Baye Company: Required: Next Level Prepare the adjusting entry that caused the change in each account balance.Basic Income Statement The following are selected account balances of Rule Corporation at the end of the current year: Rule is subject to a 30% income tax rate, and shareholders own 800 shares of its capital stock. Required: Prepare the income statement for Rule.Periodic Inventory System Raynolde Company uses a periodic inventory system. At the end of the year, the following information is available: Required: Prepare a schedule to compute Raynoldes cost of goods sold.Closing Entries Lloyd Bookstore shows the following dividends, revenue, and expense account balances before closing: Required: Prepare closing entries.Financial Statements Turtle Company has prepared the following adjusted Trial balance for the year ended December 31, 2019: Required: For 2019, prepare in proper form: (1) an income statement, (2) a retained earnings statement, (3) an ending balance sheet, and (4) closing entries.Worksheet for Service Company Whitaker Consulting Company has prepared a trial balance on the following partially completed worksheet for the year ended December 31, 2019: Additional information: (a) On January 1, 2019, the company had paid 2 years rent in advance at 100 a month for office space, (b) the office equipment is being depreciated on a straight-line basis over a 10-year life, and no residua! value is expected, (c) interest of 150 has accrued on the note payable but has not been paid, and (d) the income tax rate is 30% on current income and will be paid in the first quarter of 2020. Required: 1. Complete the worksheet. 2. Prepare financial statements for 2019.Worksheet, Including Inventory Surian Motors Company prepared a trial balance on the following partially completed worksheet for the year ended December 31, 2019: Additional information: (a) The equipment is being depreciated on a straight-line basis over a 10-year life, with no residual value; (b) salaries accrued but nor recorded total 500; (c) on January 1, 2019, the company had paid 3 years rent in advance at 100 per month; (d) bad debts are expected to be 1% of total sales; (e) interest of 400 has accrued on the note payable; and (f) the income tax rate is 40% on current income and will be paid in the first quarter of 2020. Required: 1. Complete the worksheet. 2. Prepare financial statements for 2019. 3. Prepare closing entries in the general journal.Reversing Entries On December 31, 2019, Kellams Company made the following adjusting entries for its annual accounting period: Required: Prepare whatever reversing entries are appropriate.Special Journals The following are several transactions of a company that uses special journals: Required: Indicate in which journal the transaction would be recorded using the codes: G for general journal, S for sales journal, P for purchases journal, CR for cash receipts journal, and CP for cash payments journal.(Appendix 3.1) Cash-Basis Accounting Puntarelli Contracting keep its accounting records on a cash basis during the year. At year end, it adjusts its books to the accrual basis for preparing its financial statements. At the end of 2018, Puntarelli reported the following balance sheet items. It is now the end of 2019. The companys checkbook shows a balance of 4,700, which includes cash receipts from customers of 51,300 and cash payments of 49,300. An examination of the cash payments shows that: (1) 30,600 was paid to suppliers, (2) 12,700 was paid for other operating costs (including 7,200 paid on January 1 for 2 years annual rent), and (3) 6,000 was withdrawn by T. Puntarelli. On December 51, 2019, (1) customers owed Puntarelli Contracting 55,900, (2) Puntarelli owed suppliers and employees 7,000 and 900, respectively, and (3) the ending inventory was 6,300. Puntarelli is depreciating the equipment using straight line depreciation over a 10-year life (no residual value). Required: 1. Using accrual based accounting, prepare a 2019 income statement (show supporting calculations). 2. Using accrual-based accounting, prepare a December 31, 2019, balance sheet (show supporting calculations).Adjusting Entries The following information is available for Drake Company, which adjusts and closes its accounts every December 31: 1. Salaries accrued but unpaid total 2,840 on December 31. 2. The 247 December utility bill arrived on December 31 and has not been paid or recorded. 3. Buildings with a cost of 78,000, 25-year life, and 9,000 residual value are to be depreciated; equipment with a cost of 44,000, 8-year life, and 2,000 residual value is also to be depreciated. The straight linemethod is to be used. 4. A count of supplies indicates that the Store Supplies account should be reduced by 128 and the Office Supplies account reduced by 397 for supplies used during the year. 5. The company holds a 6,000, 12% (annual rate), 6 month note receivable dated September 30, from a customer. The interest is to be collected on the maturity date. 6. Bad debts expense is estimated to be 1% of annual sales. Sales total 65,000. 7. An analysis of the company insurance policies indicates that the Prepaid Insurance account is to be reduced for 528 of expired insurance. 8. A review of travel expense reports indicates that 310 has been paid for airfare for a salesperson (and recorded as Travel Expenses), but has not yet been used. 9. The income tax rate is 30% on current income and will be paid in the first quarter of next year. The pretax income of the company before adjustments is 18,270. Required: Journalize the necessary year-end adjusting entries for Drake. Show supporting calculations in your journal entry explanations.2P Adjusting Entries Sarah Companys trial balance on December 31 (the end of its annual accounting period), included the following account balances before adjustments: Reviewing the companys recorded transactions and accounting records, you find the following data pertaining to the December 31 adjustments: 1. On July 2, the company had accepted a 10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid 3,000 for a 2-year insurance policy. 3. The building was acquired 10 years ago and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of 8,000. 4. The delivery equipment was purchased on April 2. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of 2,000. 5. On September 1, the company had received 2 years rent in advance (4,320) for a portion of a building it is renting to Victoria Company. 6. On December 1, the company had issued a 7,200, 3-month, 12% (annual rate) note payable to a supplier.The interest is to be paid when the note is paid. 7. On January 2, the company purchased 1,000 of office supplies. A physical count on December 31 revealed that there are 400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required: Prepare the adjusting entries that are necessary to bring Sarahs accounts up to date on December 31. Each journal entry explanation should summarize your calculations.4P Errors in Financial Statements At the end of the current year, Jodi Corporations controller discovers the following items of information: 1. Salaries are paid every Friday for a 5-day work week. The normal weekly payroll is 40,000. The year-end falls on a Tuesday this year. 2. The company has a 20,000, 9-month, 12% (annual rate) note payable outstanding at the end of the year. The note was issued on October 1; the interest is due when the note is paid. 3. Examining the Rent Expense account, the controller finds that it includes a 4,800 advance payment for 3 months rent. The payment was nude on November 1. 4. The storeroom contains 500 of office supplies. At the beginning of the year, there were no office supplies. During a year, the company purchased 3,500 of office supplies which were debited to the Office Supplies account. 5. The company received a large order in May with a 13,000 advance payment. The advance payment was credited to Unearned Revenue. In November, the order was delivered to the customer. Required: For each of the preceding items, indicate the effect on net income, assets, liabilities, and shareholders equity in the financial statements of the company for the year if the controller fails to make an adjusting entry for the item (ignore income taxes). (Contributed by Paula L. Koch)Journal Entries, Posting, and Trial Balance Luke Unlimited Companys account balances on November 1 are as follows: During the month of November, the following transactions took place: Required: 1. Prepare general journal entries to record the preceding transactions. 2. Post to general ledger T-accounts. 3. Prepare a trial balance on November 30.Effects of Errors: During the current accounting period. Page Company makes the following errors. The company uses a perpetual inventory system. Required: Indicate the effect of each error on the net income, total assets, total liabilities, and total shareholders equity at the end of the accounting period by using the following code: O = overstated, U = understated, N = no effect. Disregard income taxes.Financial Statements Mackenzie Inc. uses a perpetual inventory system and has prepared the following adjusted trial balance on December 31, 2019: Required: Prepare in proper form for 2019 the companys: (1) income statement, (2) retained earnings statement, (3) ending balance sheet, and (4) closing entries in its general journal.9P Worksheet Victoria Company has the following account balances on December 31, 2019, prior to any adjustments: Additional adjustment information: (a) depreciation on buildings, 1,100; on equipment, 600; (b) bad debts expense, 240; (c) interest accumulated but not paid: on note payable, 50; on mortgage payable, 530 (this interest is due during the next accounting period); (d) insurance expired, 175; (e) salaries accrued but not paid 370; (f) rent was collected in advance and the performance obligation is now satisfied, 800; (g) office supplies cm hand at year-end, 230 (expensed when originally purchased earlier in the year); and (h) the income tax rate is 30% on current income and is payable in the first quarter of 2020. Required: 1. Transfer the account balances to a 10-column worksheet and prepare a trial balance. 2. Prepare the adjusting entries in the general journal and complete the worksheet. 3. Prepare the companys income statement, retained earnings statement, and balance sheet. 4. Prepare closing entries in the general journal.Worksheet Devlin Company has prepared the following partially completed worksheet for the year ended December 31, 2019: The following additional information is available: (a) salaries accrued but unpaid total 250; (b) the 80 heat and light bill for December has not been recorded or paid; (c) depreciation expense totals 810 on the buildings and equipment; (d) interest accrued on the note payable totals 380 (this will be paid when the note is repaid); (e) the company leases a portion of its floor space to KT Daniel Specialty Company for 50 per month, and KT Daniel has not yet paid its December rent; (f) interest accrued on the note receivable totals 80; (g) bad debts expense is 70; and (h) the income tax rate is 30% on current income and is payable in the first quarter of 2017. Required: 1. Complete the worksheet. (Round to the nearest dollar.) 2. Prepare the companys financial statements. 3. Prepare (a) adjusting and (b) closing entries in the general journal.Comprehensive On November 30, 2019. Davis Company had the following account balance. During the month of December, Davis entered into the following transactions: Required: 1. Prepare general journal entries to record the preceding transactions. 2. Post to general ledger T accounts. 3. Prepare a year-end trial balance on a worksheet and complete the worksheet using the following information: (a) accrued salaries at year-end total 1,200; (b) for simplicity, the building and equipment are being depreciated using the straight-line method over an estimated life of 20 yean with no residual value; (c) supplies on hand at the end of the year total 630; (d) bad debts expense for the year totals 830; and (e)the income tax rate is 30%; income taxes are payable in the first quarter of 2020. 4. Prepare the companys financial statements for 2019. 5. Prepare the 2019 (a) adjusting and (b) closing entries in the general journal.Reversing Entries Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction. 1. On November 1, it purchased land at a cost of 8,000. It made a 2,000 down payment and signed a note payable agreeing to pay the 6,000 balance in 6 months plus interest at an annual rate of 10%. 2. On December 1, it accepted a 4,200, 3-month, 12% (annual interest rate) note receivable from a customer for the sale of merchandise. On December 31, Thomas made the following related adjustments: Required: 1. Assuming that Thomas uses reversing entries, prepare journal entries to record: a. the January 1, reversing entries b. the March 1, 4,326 collection of the note receivable c. the May 1, 6,300 payment of the note payable 2. Assuming instead that Thomas does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable.Reversing Entries On December 31, 2019, Mason Company nude the following proper year-end adjusting entries: Required: 1. Prepare journal entries to record whatever reversing entries you think are appropriate. 2. Explain your reasoning for each reversing entry.Adjusting Entries At the end of 2019, Richards Company prepared a trial balance, recorded and posted its adjusting entries, and then prepared an adjusted trial balance. Selected accounts and account balances from the trial balance and adjusted trial balance are as follow: Required: 1. Next Level By comparing the partial trial balance to the partial adjusted trill balance, determine the adjusting; entries that the company made on December 31, 2019 Prepare your answer in general journal form. 2. Assuming that the company uses reversing entries, indicate which adjusting entries should be reversed.16P Comprehensive (Appendix 3.1) Dawson OConnor is the owner of Miller Island Sales, a distributor of fishing supplies. The following is the balance sheet of the company as of December 31, 2018: Dawson keeps very few records and has asked you to help him prepare the 2019 financial statements for Miller Island Sales. An analysis of the 2019 cash transactions recorded in the companys checkbook indicates deposits and checks as follows: Other information about the company is as follows: 1. Accounts receivable at December 31, 2019; 9,200. 2. Accounts payable at December 31: 3. Salaries payable at December 31, 2019, 1,800. 4. Equipment is depreciated by the straight-line method over a 10-year life. The equipment purchased in 2019 was acquired on July 1. All of the equipment will have zero salvage value at the end of its useful life. 5. Interest payable at December 31. 2019: 140. 6. The company uses a periodic inventory system Inventory at December 31, 2019: 17,400. Required: 1. Prepare a worksheet to summarize the transactions and adjustments of Miller Island Sales for 2019. (Hint: Include debit and credit columns for both transactions and adjustments.) 2. Prepare a 2019 income statement and a balance sheet as of December 31, 2019. (Contributed by Waller A. Parker)What is the accounting equation? The balance sheet reports financial position from which two perspectives?2GI How does the balance sheet at the end of an accounting period relate to the other four financial statements?What does recognition mean in accounting?5GI 6GI What is equity? How is equity determined?What is a mixed attribute measurement model? Why is it used in accounting?Identify at least five alternatives for measuring assets.Identify at least three alternatives for measuring liabilities.11GI 12GI 13GI 14GI 15GI 16GI Define (a) common stock, (b) additional paid-in capital, (c) treasury stock, (d) retained earnings, and (e) accumulated other comprehensive income.18GI 19GI What are investments by owners? Distributions to owners?What accounting policies are disclosed in the notes accompanying a companys financial statements? Why is this disclosure important?Give several examples of financial instruments and identify the required disclosures for a companys financial instruments.23GI 24GI 25GI 26GI 27GI 28GI 29GI 30GI 31GI 32GI 33GI 34GI A donated fixed asset (from a governmental unit) for which the fair value has been determined should be recorded as a debit to Fixed Assets and a credit to: a. Contributed Capital b. Retained Earnings c. Deferred Income d. Other Income 2MC 3MC On October 2, 2020, a company borrowed cash and signed a 3-year, interest-bearing note on which both the principal and interest are payable on October 2, 2023. At December 31, 2022, the principal and accrued interest should: a. be reported on the balance sheet as current liabilities b. be reported on the balance sheet as concurrent liabilities c. be reported on the balance sheet as long-term notes payable d. not be reported on the balance sheet as liabilities 5MC Rent revenue collected 1 month in advance should be accounted for as: a. revenue in the month collected b. a current liability for deferred revenue c. a separate item in shareholders equity d. an accrued liability 7MC 8MC Which of the following should be disclosed in the Summary of Significant Accounting Policies? a. rent expense amount b. maturity dates of long-term debt c. methods of amortizing intangibles d. composition of plant assets 10MC 1RE Dorothy Corporation had the following accounts in its year-end adjusted trial balance: Inventories, 23,600; Accounts Receivable, 7,600; Accounts Payable, 7,200; Prepaid Rent, 2,400; Marketable Securities, 3,000; Allowance for Doubtful Accounts, 1,100; and Cash, 1,500. Prepare the current assets section of Dorothys year-end balance sheet.Dorothy Corporation had the following accounts in its year-end adjusted trial balance: Accounts Payable. 7,200; Salaries Payable, 5,800; Income Taxes Payable, 4,000; Short-Term Notes Payable, 2,500; Dividends Payable, 750; Investment in Held-to-Maturity Bonds, 2,750; and Allowance for Doubtful Accounts, 1,100. Prepare the current liabilities section of Dorothys balance sheet.Based on the information in RE4-2 and RE4-3, calculate Dorothy Corporations working capital and current ratio. RE4-3. Dorothy Corporation had the following accounts in its year-end adjusted trial balance: Accounts Payable. 7,200; Salaries Payable, 5,800; Income Taxes Payable, 4,000; Short-Term Notes Payable, 2,500; Dividends Payable, 750; Investment in Held-to-Maturity Bonds, 2,750; and Allowance for Doubtful Accounts, 1,100. Prepare the current liabilities section of Dorothys balance sheet. RE4-2. Dorothy Corporation had the following accounts in its year-end adjusted trial balance: Inventories, 23,600; Accounts Receivable, 7,600; Accounts Payable, 7,200; Prepaid Rent, 2,400; Marketable Securities, 3,000; Allowance for Doubtful Accounts, 1,100; and Cash, 1,500. Prepare the current assets section of Dorothys year-end balance sheet.5RE Oz Corporation has the following assets at year-end: Patents (net), 26,000; Land, 50,000; Buildings, 175,000; Accumulated Depreciation: Buildings, 57,500; Investment in Held-to-Maturity Bonds, 12,000; Equipment, 95,000; and Accumulated Depreciation: Equipment, 25,000. Prepare the property, plant, and equipment section of Ozs year-end balance sheet.7RE 8RE Scarecrow Inc. issues 50,000 shares of 2 par value common stock. The shares are sold for 25 per share. Prepare the journal entry to record the issuance of the stock.Tinman Corporation reports the following balances at the end of the current year: Common Stock, 5 par, 50,000; Retained Earnings, 120,000; Additional Paid-in Capital on Common Stock, 200,000; Income Taxes Payable, 9,800; and Accumulated Oilier Comprehensive Income, 24,500. Prepare the shareholders equity section of Tinmans year-end balance sheet.1E Plant and Equipment Your analysis of Moen Corporation's fixed asset accounts at year end reveals the following information: 1. Moen owns two tracts of land. The first, which cost 18,000, is being held as a future building site. It has a current market value of 20,000. The second, which cost 19,000, was purchased 10 years ago. The current office and factory buildings are on this site. The land has a current market value of 56,000. 2. Moen owns two buildings. The office building and the factory building were both built 10 years ago at a cost of 50,000 and 120,000, respectively. At that time, each was expected to have a life of 30 years and a residual value of 10% of original cost. They are being depreciated on a straight-line basis. 3. Moen owns factory machinery with a total cost of 51,000 and accumulated depreciation of 35,300. Included in factory machinery is one machine that cost 7,000 and has accumulated depreciation of 4,200. This machine is being held for resale and is not being used in operations. 4. Moen owns office equipment that cost 14,500 and has a book value of 6,300. It owns office furniture that cost 17,900 and has a book value of 11,400. Required: Prepare the property, plant, and equipment section of Moens year end balance sheet.GRAF CORPORATION Shareholders Equity Section of Balance Sheet December 31,2019 4E Classifications on Balance Sheet The balance sheet contains the following major sections: A. Current assets B. Long-term investments C. Property, plant, and equipment D. Intangible assets E. Other assets F. Current liabilities G. Long-term liabilities H. Contributed capital I. Retained earnings J. Accumulated other comprehensive income Required: The following is a list of several accounts. Using the letters A through J, indicate in which section of the balance sheet each of the accounts would be classified. Also indicate with a check mark () any item that is a contra account. If an account cannot be classified in any of the preceding sections, indicate with an X and explain.Balance Sheet Baggett Companys balance sheet accounts and amounts as of December 31, 2019, are shown in random order as follows: Required: 1. Prepare a December 31, 2019, balance sheet for Baggett. 2. Compute the debt to-assets ratio.7E Balance Sheet Calculations Dawson Companys balance sheet information at the end of 2019 and 2020 is as follows: Additional information: The company did not issue any common stock during 2020. Required: Next Level Fill in the blanks labeled (a) through (l). All the necessary information is provided. (Hint: It is not necessary to calculate your answers in alphabetical order.)9E Correction of Balance Sheet On December 31, 2019, Stevens Companys bookkeeper prepared the following balance sheet with items erroneously classified. Required: Next Level You determine that the account balances listed on the balance sheet are correct but, in certain cases, incorrectly classified. Prepare a properly classified balance sheet for Stevens as of December 31, 2019.11E 12E Classifications on Balance Sheet The current balance sheet of J. J. Arvesen Company contains the following major sections: A. Current assets B. Long term investments C. Properly, plant, and equipment D. Intangible assets E. Other asset F. Current liabilities G. Long term liabilities 1. H Contributed capital H. Retained earnings I. Accumulated other comprehensive income Required: The following is a list of accounts in random order. Using the letters A through J, indicate in which section each account would most likely he classified Also indicate with a check mark () any item that is a contra account. If an account cannot be clarified in any of the preceding sections, indicate with an X and explain.Balance Sheet without Amounts The following is an alphabetical list of all of While Limnology Companys adjusted trial balance accounts as of December 31, 2019: Required: Prepare White Limnologys balance sheet (without amounts) in proper format.3P 4P Balance Sheet Calculations Cornerstone Development Companys balance sheet information at the end of 2019 and 2020 is provided in random order, as follows: Additional information: At the end of 2019, (a) the amount of long-term liabilities is twice the amount of current liabilities and (b) there are 2,900 shares of common stock outstanding. During 2020, the company (a) issued 100 shares of common stock for 25 per share, (b) earned net income of 20,600, and (c) paid dividends of 1 per share on the common stock outstanding at year-end. Required: Next Level Fill in the blanks lettered (a) through (p). All of the necessary information is provided. (Hint: It is not necessary to calculate your answers in alphabetical order.)6P Complex Balance Sheet Presented below is the unaudited balance sheet as of December 31, 2019, prepared by Zeus Manufacturing Corporations bookkeeper. Your company has been engaged to perform an audit, during which you discover the following information: 1. Checks totaling 14,000 in payment of accounts payable were mailed on December 31, 2019, but were not recorded until 2020. Late in December 2019, the bank returned a customers 2,000 check marked NSF, but no entry was made. Cash includes 100,000 restricted for building purposes. 2. Included in accounts receivable is a 30,000 note due on December 31, 2022, from Zeuss president. 3. During 2019, Zeus purchased 500 shares of common stock of a major corporation that supplies Zeus with raw materials. Total cost of this stock was 51,300, and fair value on December 31, 2019, was 51,300. Zeus plans to hold these shares indefinitely. 4. Treasury stock was recorded at cost when Zeus purchased 200 of its own shares for 32 per share in May 2019. This amount is included in investments. 5. On December 31, 2019, Zeus borrowed 500,000 from a bank in exchange for a 10% note payable, manning December 31, 2024. Equal principal payments are due December 31 of each year beginning in 2020. This note is collateralized by a 250,000 tract of land acquired as a potential future building site, which is included in land. 6. The mortgage payable requires 50,000 principal payments, plus interest, at the end of each month. Payments were made on January 31 and February 28, 2020. The balance of this mortgage was due June 30, 2020. On March 1, 2020, prior to issuance of the audited financial statements, Zeus consummated a non-cancelable agreement with the lender to refinance this mortgage. The new terms require 100,000 annual principal payments, plus interest, on February 28 of each year, beginning in 2021. The final payment is due February 28, 2028. 7. The lawsuit liability will be paid in 2020. 8. Of the total deferred tax liability; 5,000 is considered a current liability. 9. The current income tax expense reported in Zeuss 2019 income statement was 61,200. 10. The company was authorized to issue 100,000 shares of 50 par value common stock.Analyzing Starbuckss Balance Sheet Disclosures Review the financial statements and related notes of Starbucks in Appendix A. Required: Answer the following questions pertaining to Starbuckss balance sheet as of October 1, 2017, and related information. (Note: You do not need to make any calculations. All answers may be found in the financial report.) 1. What was the amount of the current assets and current liabilities? 2. What was the single largest current asset and current liability? 3. What was the amount in the allowance for doubtful accounts? 4. What is the par value of the companys common stock? How many shares were issued and outstanding? 5. What was the total amount of inventory? What were the principal categories of inventory? 6. What costing method was used for inventories? 7. What was the total property, plant, and equipment before and after accumulated depreciation? 8. What was the accumulated depreciation? What method does the company use to depreciate its property, plant, and equipment? 9. What was the long-term debt? When is the debt due? 10. What was the retained earnings balance? What caused retained earnings to change in 2017? 11. What was the accumulated other comprehensive income/(loss) balance? 12. What was the noncontrolling interest balance?9P Balance Sheet The following is a list (in random order) of KIP International Products Companys December 31, 2019, balance sheet accounts: Required: 1. Prepare a properly classified balance sheet according to U.S. GAAP for KIP as of December 31, 2019. 2. Assume instead that KIP uses IFRS. Prepare its balance sheet as of December 31, 2019.Balance Sheet The following is an alphabetical list or Lloyds Hudson Dealership Inc.s December 31, 2019, balance sheet accounts and amounts: Required: 1. Prepare a properly classified balance sheet for Lloyds Hudson Dealership as of December 31, 2019. List the additional parenthetical or note disclosures (if any) that should be made for each item. 2. Next Level Compute the current ratio. What does it indicate about Lloyds Hudson Dealership?Balance Sheet from Adjusted Trial Balance The following is the alphabetical adjusted trial balance of Meadows Company on December 31, 2019; Required: 1. Prepare Meadowss December 31, 2019, balance sheet. 2. Next Level Compute the debt-to-assets ratio. What does it indicate about Meadows at the end of 2019?Balance Sheet and Notes Listed here in random order are Wicks Construction Limiteds balance sheet accounts and related ending balances as of December 31, 2019: Additional information: 1. The company reports on the balance sheet the total amount for inventories and the net book value of property, plant, and equipment, with the related details for each account disclosed in notes. 2. The straight line method is used to depreciate buildings, machinery, and equipment, based upon their cost and estimated residual values and lives. A breakdown of property, plant, and equipment shows the following: land at a cost of 32,000, buildings at a cost of 182,400 and a net book value of 120,200, machinery at a cost of 63,900, and related accumulated depreciation of 18,600, and equipment (40% depreciated) at a cost of 53,000. 3. Patents are amortized on a straight line basis directly to the Patent account. 4. Inventories are listed at the lower of cost or market value using an average cost. The inventories include raw-materials, 22,200; work in process, 34,700; and finished goods, 41,600. 5. Common stock has a 10 par value per share, 12,000 shares are authorized, and 6,280 shares have been issued. 6. Preferred stock has a 100 par value per share, 1,000 shares are authorized, and 400 shares have been issued. 7. The investment in bonds is carried at the original cost, which is the face value, and is being held to maturity. 8. Short-term investments in marketable securities were purchased at year-end. 9. The bonds payable mature on December 31, 2024. 10. The company attaches a 1-year warranty on all the products it sells. Required: 1. Prepare Wicks Constructions December 31, 2019, balance sheet (including appropriate parenthetical notations). 2. Prepare notes to accompany the balance sheet that itemize company accounting policies; inventories; and property, plant, and equipment. 3. Next Level Compute the current ratio and the quick ratio. How do these two ratios provide different information about the companys liquidity? Why are these ratios useful?Comprehensive: Balance Sheet, Schedules, and Notes The following is an alphabetical listing of Stone Boat Companys balances sheet accounts and account balances on December 31, 2019: Additional information: 1. The company reports on the balance sheet the net book value of property and equipment and long-term liabilities (known as control accounts). The related details are disclosed in the notes. 2. The straight-line method is used to depreciate property and equipment based upon cost, estimated residual value, and estimated life. The costs of the assets in this account are: land, 29,500; buildings, 164,600; store fixtures, 72,600; and office equipment, 30,000. 3. The accumulated depreciation breakdown is as follows: buildings, 54,600; store fixtures, 37,400; and office equipment, 17,300. 4. The long term debt includes 12%, 36,000 face value bonds that mature on December 31, 2024, and have an unamortized bond discount of 1,000; 11%, 48,000 face value bonds that mature on December 31, 2025, have a premium on bonds payable of 1,800, and whose retirement is being funded by a bond sinking fund; and a 13% note payable that has a face value of 6,200 and matures on January 1, 2022. 5. The non-interest-bearing note receivable matures on June 1, 2023. 6. Inventory is listed at lower of cost or market; cost is determined on the basis of average cost. 7. The investment in affiliate is carried at cost. The company has guaranteed the interest on 12%, 50,000, 15-year bonds issued by this affiliate, Jay Company. 8. Common stock has a 10 par value per share, 10,000 shares are authorized, and 1,000 shares were issued during 2019 at a price of 13 per share, resulting in 8,000 shares issued at year-end. 9. Preferred stock has a 50 par value per share, 2,000 shares are authorized, and 140 shares were issued during 2019 at a price of 55 per share, resulting in 640 shares issued at year-end. 10. On January 15, 2020, before the December 31, 2019, balance sheet was issued, a building with a cost of 20,000 and a book value of 7,000 was totally destroyed. Insurance proceeds will amount to only 5,000. 11. Net income and dividends declared and paid during the year were 50,500 and 21,000, respectively. Required: 1. Prepare Stone Boats December 31, 2019, balance sheet (including appropriate parenthetical notations). 2. Prepare a statement of shareholders equity for 2019. (Hint: Work back from the ending account balances.) 3. Prepare notes that itemize the balance sheet control accounts and those necessary to disclose any company accounting policies, contingent liabilities, and subsequent events. 4. Next Level Compute the debt-to-assets ratio at the cud of 2019. What is your evaluation of this ratio if it was 39% at the end of 2018? Use the following information for P415 and P416: McCormick Company, Inc. is one of the worlds leading producers of spices, herbs, seasonings, condiments, and other flavorings for foods. Its products are sold to consumers, with sonic of the leading brands of spices and seasonings, as well as to industrial producers of foods. McCormicks consolidated balance sheets for 20X2 and 20X3 follow.Use following formation for P4-15 and P4-16: McCormick Company, Inc. is one of the worlds leading producers of spices, herbs, seasonings, condiments, and other flavorings for foods. Its products are sold to consumers, with some of the leading brands of spices and seasonings, as well as to industrial producers of foods. McCormicks consolidated balance sheets for 20X2 and 20X3 follow. Common-Size and Rate of Change Analyses: McCormick Refer to the information for McCormick above. Required: Compute the common size balance sheet for 20X3 and the rate of change balance sheet for 20X3. Which two asset accounts and which two liabilities and shareholders equity accounts are the largest relative to total assets in 20X3? Which two asset accounts and which two liability and shareholders equity accounts grew at the fastest rates in 20X3? (Note: You may find it helpful to enter the data into an Excel spreadsheet for these computations.)Ratios Analyses: McCormick Refer to the information for McCormick above. Additional information for 20X3 it as follows (amounts in millions): Required: Next Level Compute the following for 20X3. Provide a brief description of what each ratio reveals about McCormick 1. return on common equity 2. debt-to-assets 3. debt-toequity 4. current 5. quick (McCormick uses cash and equivalents, short-term securities and receivables in their quick ratio calculation.) 6. inventory turnover days 7. accounts receivable turnover days 8. accounts payable turnover days 9. operating cycle (in days) 10. total asset turnover Use the following information for 14-17 and 14-18: The Hershey Company is one of the worlds leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hersheys consolidated balance sheets for 20X2 and 20X3 follow.17P Use the following information for P417 and P418: The Hershey Company is one of the worlds leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hersheys consolidated balance sheets for 20X2 and 20X3 follow. Ratios Analysis: Hershey Refer to the information for Hershey On the preceding page. Additional information for 20X3 is as follows (amounts in millions): Required: Next Level Compute the following ratios for 20X3. Provide a brief description of what each ratio reveals about Hershey. 1. return on common equity 2. debt-to-assets 3. debt-to-equity 4. current 5. quick (Hershey uses cash and equivalents, short terms securities, and receivables in their quick ratio calculation.) 6. inventory turnover days 7. accounts receivable turnover days 8. accounts payable turnover days 9. operating cycle (in days) 10. total asset turnover 1C It is the end of 2019 and you are an accountant for Stone Company. During 2019, sales of the companys products slumped and the companys earnings are expected to be much less than those of 2018. The president comes to you with an idea. He says, Our companys property, plant, and equipment cost 300,000, and that is the amount we usually report on our balance sheet. However, I just had these assets appraised by an independent appraiser, and she says they are worth 400,000. I think that the company should report the property, plant, and equipment at this amount on its December 31, 2019, balance sheet and should report the 100,000 increase in value as a gain on the 2019 income statement. If we use this approach, it will show how much our company is really worth and increase our earnings. This will make our shareholders happy. What do you think? Required: Prepare a written response to the president.3C Valuation of Assets and Stock A friend has come to you for advice. He states that he owns several shares of stock in a corporation. He has examined the most recent balance sheet of the corporation and has found that the common stock issued and outstanding totals 40,000 shares, and the market price per share is 25 on the balance sheet date. He is sure that the balance sheet must be in error because, in his words, the total assets are 1,100,000 and this current value should be the same as the 1,000,000 total value of the outstanding common stock. Required: Explain to your friend how the values of the various assets of the corporation typically are measured and reported on its balance sheet, and how the value of the 1,100,000 total assets is determined. Continue the discussion by explaining to your friend why the values of the assets and the stock are not the same.It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.You are the accountant for Speedy Company and are preparing the financial statements for 2019. Near the end of 2019, Speedy loaned its president 100,000 (a material amount) because she was having financial difficulties. The note was properly recorded as a note receivable by Speedy. You are unsure of how to classify this note on the 2019 ending balance sheet and ask the president when the note is due. She replies, We never really set a due date; I might repay it in 2020 or maybe in a couple of years when I get more financially secure. It would be best to classify this note as a current asset in the usual manner because that will increase our working capital and current ratio, which will make our creditors and shareholders happy. Required: From financial reporting and ethical perspectives, what do you think of the presidents suggestion?7C 8C Situation You are the assistant accountant for Tyler Corporation. It is mid-January 2020 and you are helping to prepare Tylers balance sheet for December 31, 2019. Tyler will publish this balance sheet on March 1, 2020, after the auditors have completed their work. Tyler has a 100,000 note payable that was issued in 2018 and that is due March 6, 2020. On January 5, 2020, Tyler sold 2,000 shares of its 10 par common stock for 80,000. Its intent is to use these proceeds (plus 20,000 cash it already has on hand) to repay the note payable on March 6. The head accountant says Im not sure how to classify the 100,000 note payable on the December 31, 2019, balance sheet. Check this out for me. Directions Research the related generally accepted accounting principles and prepare a short memo to the head accountant that explains how Tyler should report the 100,000 note payable on its December 31, 2019, balance sheet.In general, how does the income statement help satisfy the objectives of financial reporting?2GI Define income under the capital maintenance concept.4GI What is net income?What three things must a company determine to prepare and report an income statement?7GI 8GI Give an example and explanation for each of the following differences between when revenues are recognized and cash flows are received: recognition simultaneous with receipt; recognition prior to receipt; and recognition after receipt.Define expenses. What do expenses measure?11GI Define gains and losses. Give examples of three different types of gains and losses.13GI What items are included in a companys income from continuing operations? How are these categorized if the company uses (a) a single-step format or (b) a multiple-step format?How are unusual or infrequent gains or losses reported on a company's income statement?What is interperiod tax allocation?17GI 18GI 19GI 20GI 21GI 22GI 23GI 24GI 25GI 26GI 27GI 28GI 29GI 30GI What is the rate of return on common equity? What are the three determinants of a companys rate of return on common equity? How do these three determinants affect the rate of return on common equity?32GI 33GI Which of the following is expensed under the principle of systematic and rational allocation? a. salespeoples monthly salaries b. insurance premiums c. transportation to customers d. electricity to light office building The following information is available for Cooke Company for the current year: The gross margin is 40% of net sales. What is the cost of goods available for sale? a. 5840,000 b. 960,000 c. 1,200,000 d. 1,220,000 The following information is available for Wagner Corporation for the current year: How much is the cost of goods sold? a. 200,000 b. 300,000 c. 345,000 d. 440,000 4MC A loss from the sale of a component of a business enterprise is reported separately as a component of income: a. after income from continuing operations b. in income from continuing operations c. after income tax expense d. before income from continuing operations In a statement of cash flows, receipts from sales of property, plant, and equipment generally are classified as: a. investing activities b. selling activities c. operating activities d. financing activities Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of goods sold was 240,000, its operating expenses were 50,000, its interest revenue was 2,000, and its interest expense was 12,000. Brandts income tax rate is 30%. Prepare Brandts multiple-step income statement for the current year.Refer to RE5-1. Prepare a single-step income statement for Brandt Corporation for the current year.

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