Q&A Hero

Q: 2 billion, 8%, 10-year bonds are issued at face value. interest will be paid semi-annually. when calculating the market price of the bond, the present value of a.160,000,000 received for 10 periods must be calculated b.2 billion received in 10 periods must be calculated c.2 billion received in 20 periods must be calculated d.80,000,000 received for 10 periods must be calculated

Q: Wishbone Company maintains two separate accounts payable computer systems. One is known to all the users, and is used to process payments to vendors. Employees enter the vendor code, or the name and address of new vendors, the amount, the account, and so on. The other system is a secret one. It is used to cross-check the vendors against an approved vendor list. If a vendor is not listed as approved, the payment process is halted. Internal audit employees seek to verify the existence of a bona fide claim by the vendor. All inquiries are made at the top management level, and very discreetly. No one but top management, the internal audit staff, and the Board of Directors of the company is even aware of the second system.Required:Is it ethical for a company to have a secret system like the one described? Explain.

Q: One negative effect of carrying too much inventory is risk that customers will change their buying habits. a. True b. False

Q: If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated. a. True b. False

Q: maria gomez is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. what do you think maria is saying?

Q: Beginning inventory, purchases, and sales data for widgets are as follows:Apr. 3 Inventory15 units@$30 11 Purchase12 units@$27 14 Sale18 units 21 Purchase 7 units@$25 25 Sale10 units Complete the subsidiary inventory ledger assuming the business maintains a perpetual inventory system and computes the cost of merchandise sold and ending inventory using LIFO.​​PurchasesCost ofMerchandise Sold ​Inventory​​Date​​Qty.​Unit Cost​Total Cost​​Qty.​Unit Cost​Total Cost​​Qty.​Unit Cost​Total Cost ​​​ ​ Total cost of merchandise sold Ending inventory value

Q: (a)in general, what are the requirements for the financial statement presentation of long-term liabilities? (b)what ratios may be computed to evaluate a company's liquidity and solvency?

Q: bonds may be redeemed (retired) before maturity by the issuing corporation. explain why a company would decide to retire bonds before maturity and the necessary steps to record the redemption.

Q: List the internal control objectives illustrated by the following:a. Keeping the inventory storeroom lockedb. Counting the inventory at the end of the accounting period and comparing it with the inventory ledger clerk's recordsc. Using subsidiary ledgers and a perpetual inventory system

Q: A business using the retail method of inventory costing determines that merchandise inventory at retail is $2,300,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?

Q: bonds are frequently issued at amounts greater or less than face value. describe how the market rate of interest, relative to the contractual rate of interest, affects the selling price of bonds.

Q: when a bond sells at a discount, what is probably true about the market interest rate versus the stated interest rate? discuss.

Q: Beginning inventory, purchases, and sales data for tennis rackets are as follows:Apr. 3 Inventory12 units@$45 11 Purchase13 units@$47 14 Sale18 units 21 Purchase 9 units@$60 25 Sale10 units ​Complete the subsidiary inventory ledger assuming the business maintains a perpetual inventory system and computes the cost of merchandise sold and ending inventory using LIFO. ​PurchasesCost of Merchandise Sold ​Inventory​​Date​​Qty.​Unit Cost​Total Cost​​Qty.​Unit Cost​Total Cost​​Qty.​Unit Cost​Total Cost ​​​ ​ Total cost of merchandise sold Ending inventory value

Q: Determine the total value of the merchandise using net realizable value.ItemQuantitySelling PriceCommissionDoll10$7$2Horse5 9 3

Q: when determining the value of a bond using present value, what are the two components used in the calculation?

Q: (a)what is a convertible bond? (b)discuss the advantages of a convertible bond from the standpoint of the bondholders and of the issuing corporation.

Q: Based on the following information, compute (a) inventory turnover, (b) average daily cost of merchandise sold, and (c) days' sales in inventory for the current year. Use a 365-day year. (d) If an inventory turnover of 12 is average for the industry, how is this company doing?ItemPrior YearCurrent YearCost of merchandise sold$172,900$215,000Inventory18,00012,000

Q: Beginning inventory and purchases and sales data for T-shirts are as follows:Apr. 3 Inventory24 units@$10 11 Purchase26 units@$12 14 Sale36 units 21 Purchase18 units@$15 25 Sale20 units Assuming the business maintains a periodic inventory system, determine the cost of merchandise sold and ending inventory under the following assumptions:a. FIFOb. LIFOc. Weighted average cost (round cost of merchandise sold and ending inventory to the nearest dollar)

Q: Grand Company issued $600,000, 10%, 20-year bonds on January 1, 2012, at 104. Interest is payable annually on January 1. Grand uses the straight-line method of amortization and has a calendar year end.InstructionsPrepare all journal entries made in 2012 related to the bond issue.

Q: the higher the sales tax rate, the more profit a retailer can earn.

Q: The following basic inventory data for April 30 are for a business that employs the lower-of-cost-or-market basis of inventory valuation to each item. TotalCommodityInventory QuantityCost per Unit Market Value per UnitCostMarketLCMA35 $ 52 $ 55 _____________________B20 155 150 _____________________C25 82 85 _____________________D40 58 55 _____________________​a. Complete the table.b. Determine the amount of reduction in the inventory at April 30 attributable to market decline.

Q: unearned revenues should be classified as other revenues and gains on the income statement.

Q: current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Q: Using a LIFO perpetual cost flow and the following data for Beamer Company, determine the value of the ending inventory and the cost of merchandise sold for the month of November.​Nov. 1 Purchase 600 units $80 each 4 Sale 200 units 11 Purchase 350 units $82 each 12 Sale 275 units 22 Purchase 175 units $84 each 23 Sale 155 units​Calculate the following:(a) Inventory valuation at the end of November(b) Cost of merchandise sold for November

Q: The units of Product Green-2 available for sale during the year were as follows:Apr. 1Inventory15 units @$30June 16Purchase29 units @$33Sept. 28Purchase45 units @$35​There are 17 units of the product in the physical inventory at September 30. The periodic inventory system is used. Determine the cost of merchandise sold by the (a) FIFO, (b) LIFO, and (c) weighted average cost methods.

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Q: Beginning inventory, purchases, and sales for an inventory item are as follows: Sept. 1 Beginning inventory24 units @$15 5 Sale17 units 17 Purchase10 units @$20 30 Sale8 units ​Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30.

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Q: Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item, assuming a period of increasing costs. Highest AmountLowest AmountCost of merchandise sold Gross profit Net income Ending merchandise inventory

Q: For each of the following unrelated transactions, (a) determine the amount of the amortization for the current year, and (b) present the adjusting entries required to record amortization at year end.(1) Costs (it was not acquired) of $30,000 were incurred on January 1 to obtain a patent. On January 31, $38,610 was spent in legal costs to successfully defend the patent against competitors. The patent has an estimated legal life of 12 years.(2) A company acquired a copyright for $140,000. The copyright has a useful life of 50 years.

Q: On the basis of the following data, estimate the cost of the merchandise inventory at March 31 by the retail method. Cost Retail March 1Merchandise inventory$250,000$ 350,000 March 1–31Purchases (net)850,0001,650,000 March 1–31Sales 845,000

Q: a. A machine that cost $36,000 and on which $26,000 of depreciation had been recorded was disposed of for $10,200. Indicate whether a gain or loss should be recorded, and for what amount.b. Assume that the machine of Part a, above, was instead discarded. Indicate whether a gain or loss should be recorded, and for what amount.c. Assume that the machine of Part a, above, was instead sold for $9,400. Indicate whether a gain or loss should be recorded, and for what amount.

Q: Describe three inventory cost flow assumptions and how they impact the financial statements.

Q: On January 1, a machine with a useful life of four years and a residual value of $3,000 was purchased for $19,000. What is the depreciation expense for year 2 under straight-line depreciation?a. $2,000.b. $4,000.c. $8,000.d. $4,750.

Q: The following data were taken from the annual reports of Big Bang Inc., a manufacturer of fireworks, and Orange Inc., a manufacturer of computers. Big Bang Inc.Orange Inc.Cost of merchandise sold$830,000$11,540,000Inventory, end of year190,000320,000Inventory, beginning of year240,000290,000​a. Determine the (1) inventory turnover and (2) days' sales in inventory for Big Bang and Orange. Round your answers to two decimal places.b. How would you expect these measures to compare between the companies? Why?

Q: The Old Fix-It is a company specializing in the restoration of old homes. To showcase its work, the company purchased an old Victorian home in downtown Pittsburg, Kansas on January 2, 2008. The original home was purchased for $125,000. A new heating and air-conditioning system was added for $30,000. The house was completely rewired and re-plumbed at a cost of $50,000. Custom cabinets were added, and the floors and trim were refurbished to their original condition, at a cost of $75,000. The project was such a success, that Old Fix-It decided on January 2, 2012, to purchase another very large home, this time in nearby Joplin, Missouri. On January 3, 2012, a realtor offered to purchase the home in Pittsburg for $175,000. He plans to lease it as luxury short-term apartments for visiting dignitaries. Mark Gibson, the president of Old Fix-It, decided that the $50,000 gain over purchase price was appropriate, and so he agreed to sell the showcase house. Only afterward did he learn that Old Fix-It had a loss of almost $30,000 on the sale. Mark does not believe that a loss is possible. "We sold that house for more than we paid for it," he said. "I know we put some money in it, but we had depreciated it for four years. How in the world can we have a loss?" Due to the commercial aspects of the property and its expected traffic flow, the life of the showcase house was established as 15 years. Old Fix-It utilized straight-line depreciation with no salvage or residual value. Old Fix-It took full years’ of depreciation in 2008 through 2011 and none in 2012 due to the sale date of January 3, 2012. Required:Write a short memo to Mr. Gibson explaining how it would be possible to have a loss. Address cost and depreciation as general numbers rather than specific values.

Q: During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

Q: Nichols Company purchased a new machine for $200,000. It is estimated that the machine will have a $20,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used.InstructionsPrepare a depreciation schedule that shows the annual depreciation expense on the machine for its 5-year life.

Q: The following data were taken from Castle, Inc.: ​Cost of merchandise sold$894,000Inventory, end of year 78,000Inventory, beginning of the year92,000 Determine the inventory turnover ratio and the days’ sales in inventory for Castle Inc. Round to two decimal places.

Q: A plant asset acquired on October 1, 2012, at a cost of $600,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life.InstructionsDetermine the depreciation expense for the first two years using the:(a) straight-line method.(b) double-declining-balance method.

Q: The units of an item available for sale during the year were as follows:January 10Inventory27 units @ $90February 27Purchase54 units @ $98July 11Purchase63 units @ $106November 13Purchase36 units @ $115There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the weighted average cost method. Show your work.

Q: The Rowland Clinic purchased a new surgical laser for $74,000. The estimated salvage value is $4,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,100 hours in year 2; 2,400 hours in year 3; 1,900 hours in year 4; 2,000 hours in year 5.Instructions(a) Compute the annual depreciation for each of the five years under each of the following methods:(1) straight-line.(2) units-of-activity.(b) If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer.(c) Which method would result in the lower reported income in the first year? Which method would result in the lower total reported income over the five-year period?

Q: The units of Manganese Plus available for sale during the year were as follows: Mar. 1Inventory16 units@ $30$ 480June 16Purchase30 units@ $351,050Nov. 28Purchase45 units@ $39 1,755 91 units $3,285​There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.

Q: Mideast Airlines purchased a 747 aircraft on January 1, 2010 at a cost of $32,000,000. The estimated useful life of the aircraft is 20 years, with an estimated salvage value of $4,000,000.InstructionsCompute the accumulated depreciation and book value at December 31, 2012 using the straight-line method and the double-declining-balance method.

Q: Railsback Company purchased a machine on January 1, 2012, at a cost of $64,000. The machine is expected to have an estimated salvage value of $4,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2012 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2012, was $55,000 before taxes as the result of depreciating the machine incorrectly.InstructionsUsing the method of depreciation that the company normally follows, prepare the correcting entry and determine the corrected net income for 2012. (Show computations.)

Q: Three identical units of merchandise were purchased during July, as follows:​ UnitsCostJuly 3 Purchase1$ 35 10 Purchase136 24 Purchase1 37Total 3$108 Average cost per unit​$36 ​Assume one unit sells on July 28 for $45.Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using the (a) first-in, first-out, (b) last-in, first-out, and (c) weighted average cost flow methods.

Q: the _______________ price is equal to the fair market value of the asset given up or the fair market value of the asset received.

Q: Fill in the missing amounts from the following chart regarding the determination of Bean Corporation’s estimated inventory using the retail method of estimation. CostRetailMerchandise inventory, October 1$13,687$19,553Purchases for October (net) ? 98,344Merchandise available for sale$82,528$ ?Ratio of cost to retail price: ? Sales for October ?Merchandise at retail, October 31 $25,340 Merchandise at cost, October 31 $ ?

Q: with the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Q: when vacant land is acquired, expenditures for clearing, draining, filling, and grading should be charged to the ______________ account.

Q: List three different security measures taken to safeguard inventory.

Q: Three identical units of merchandise were purchased during March, as shown: UnitsCostMar. 3 Purchase1$ 830 10 Purchase1840 19 Purchase1 880 Total 3$2,550​Assume that one unit is sold on March 23 for $1,125. Determine the gross profit for March and ending inventory on March 31 using (a) FIFO, (b) LIFO, and (c) weighted average cost methods.

Q: the cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

Q: While taking a physical inventory, a company counts its inventory as less than the actual amount on hand. How will this error affect the income statement?

Q: the cost of paving, fencing, and lighting a new company parking lot is charged to a ______________ account.

Q: Based on the following data, determine the estimated cost of the merchandise inventory on March 31 using the retail method. Cost Retail March 1Merchandise inventory$225,000$357,600March 1–31Purchases (net)454,245612,750March 1–31Sales 835,000

Q: ______________ is the process of allocating the cost of a plant asset to expense over its service life in a rational and systematic manner.

Q: equipment with an invoice price of $20,000 was purchased and freight costs were $900. the cost of the equipment would be $______________.

Q: On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order. CostRetailMarch 1 Merchandise inventory$310,000$550,000March 1–31 Purchases (net)307,250515,000March 1–31 Sales 400,000

Q: the book value of a plant asset is obtained by subtracting ______________ from the ______________ of the plant asset.

Q: Beginning inventory, purchases, and sales for an inventory item are as follows:Sept. 1 Beginning inventory24 units @$10 5 Sale17 units 17 Purchase10 units @$1530 Sale8 units ​Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30.

Q: three factors that affect the computation of periodic depreciation expense are (1) _______________, (2) _______________, and (3) _________________.

Q: Based on the following data, estimate the cost of ending merchandise inventory using the gross profit method.Sales$250,000Estimated gross profit rate25% Beginning merchandise inventory$ 9,000Purchases (net) 211,000Merchandise available for sale$220,000

Q: the ________________ method of computing depreciation expense results in an equal amount of periodic depreciation throughout the useful life of the plant asset.

Q: Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you were running a clothing store, name three specific controls you would implement to guard inventory from theft.

Q: the declining-balance method of computing depreciation is known as an _____________ depreciation method.

Q: Three identical units of merchandise were purchased during May, as follows: UnitsCostMay 3 Purchase1$130 10 Purchase1136 19 Purchase1 142Total 3$408​Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) weighted average cost methods.

Q: ordinary repairs that maintain operating efficiency and expected productive life are called _______________.

Q: ​Complete the following subsidiary inventory ledger using the perpetual FIFO method of inventory flow.Inventory Valuation—Perpetual FIFO ​​Date​Purchased Units​UnitCost​UnitsSold​UnitCostInventory Units Balance​UnitCostsInventory DollarBalanceJuly 2600$12 Bal. July 5200 $13 Bal. July 7 300 Bal. July 10325 $14 Bal. July 12 300150 Bal. July 18250$13 Bal. July 22 50205 Bal. July 25 120180 Bal. July 28330$15 Bal. July 31 70 5 Ending Balance FIFO INVENTORY VALUATION: ​

Q: additions and improvements are costs incurred to increase the operating efficiency, productive capacity, or expected useful life and are referred to as _________________.

Q: On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item.​ItemInventoryQuantityCost perUnitMarket value per UnitTotalCostTotalMarketA300$15.00$14.50$4,500$4,350B200 14.00 15.00 2,800 3,000C100 17.00 17.50 1,700 1,750

Q: a _____________ decline in the market value of an asset is referred to as an impairment.

Q: Beginning inventory, purchases, and sales for an inventory item are as follows:Beginning inventory150 units @ $755Sale120 unitsFirst purchase400 units @ $785Sale200 unitsSecond purchase300 units @ $805Sale290 units​The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to FIFO?

Q: if disposal of a plant asset occurs at any time during the year, ___________________ for the fraction of the year to the date of disposal must be recorded.

Q: During the taking of its physical inventory on December 31, Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000. Indicate the effects of the misstatement on Almond Supplies Company’s balance sheet and income statement for the year ended December 31.

Q: a plant asset originally cost $48,000 and was estimated to have a $3,000 salvage value at the end of its 5-year useful life. if at the end of three years, the asset was sold for $12,000, and had accumulated depreciation recorded of $27,000, the company should recognize a ______________ on disposal in the amount of $____________.

Q: Assume that three identical units of merchandise were purchased during October, as follows: UnitsCostOct. 5Purchase1$ 5 12Purchase113 28Purchase1 15Total 3$33Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending inventory under the weighted average cost method.

Q: if the proceeds from the sale of a plant asset exceeds its ______________, a gain on disposal will occur.

Q: the process of allocating to expense the cost of an asset over its useful life is called __________________ for tangible plant assets and __________________ for intangible assets.

Q: Assume that three identical units of merchandise are purchased during October, as follows: UnitsCostOct. 5Purchase1$ 5 12Purchase1 13 28Purchase1 15Total 3$33Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending inventory under the FIFO method.