Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes (A+)

Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 $160,000

Purchases (gross) 640,000

Freight-in 30,000

Sales 1,000,000

Sales returns 70,000

Purchase discounts 12,000

Required:

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

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Larsen Realty Corporation purchased a tract of unimproved land for $55,000 (A+)

Larsen Realty Corporation purchased a tract of unimproved land for $55,000. This land was improved and subdivided into building lots at an additional cost of $30,000. These building lots were all of the same size but owing to differences in location were offered for sale at different prices as follows.

Group No. of Lots Price per Lot

1 9 $3,000

2 15 4,000

3 19 2,000

Operating expenses for the year allocated to this project total $18,200. Lots unsold at the year-end were as follows.

Group 1 5 lots

Group 2 7 lots

Group 3 2 lots

Required:

At the end of the fiscal year Larsen Realty Corporation instructs you to arrive at the net income realized on this operation to date

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2. Grania Company’s income statement contained the condensed information below (A+)

Grania Company’s income statement contained the condensed information below.

GRANIA COMPANY

Income Statement

For the Year Ended December 31, 2008

Revenues $970,000

Operating expenses, excluding depreciation $624,000

Depreciation expense 60,000

Loss on sale of equipment 16,000 700,000

Income before income taxes 270,000

Income tax expense 40,000

Net income $230,000

Grania’s balance sheet contained the comparative data at December 31, shown below.

2008 `2007

Accounts receivable $75,000 $60,000

Accounts payable 41,000 28,000

Income taxes payable 11,000 7,000

Accounts payable pertain to operating expenses.

Required:

Complete the operating activities section of the statement of cash flows using the indirect method.

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Rachael Ray Corporation had the following transactions (A+)

Rachael Ray Corporation had the following transactions.

1. Sold land (cost $12,000) for $15,000.

2. Issued common stock for $20,000.

3. Recorded depreciation of $17,000.

4. Paid salaries of $9,000.

5. Issued 1,000 shares of $1 par value common stock for equipment worth $8,000.

6. Sold equipment (cost $10,000, accumulated depreciation $7,000) for $1,200.

Required:

For each transaction above,

(a) Prepare the journal entry, and

(b) Indicate how it would affect the statement of cash flows.

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On September 1 the balance of the Accounts Receivable control account in the general ledger of Seaver Company was $10,960 (A+)

On September 1 the balance of the Accounts Receivable control account in the general ledger of Seaver Company was $10,960. The customers’ subsidiary ledger contained account balances as follows: Ruiz $1,440, Kingston $2,640, Bannister $2,060, Crampton $4,820. At the end of September the various journals contained the following information.

Sales journal: Sales to Crampton $800; to Ruiz $1,260; to Iman $1,330; to Bannister $1,100.

Cash receipts journal: Cash received from Bannister $1,310; from Crampton $2,300; from Iman $380; from Kingston $1,800; from Ruiz $1,240.

General journal: An allowance is granted to Crampton $220.

Required:

1 Set up control and subsidiary accounts and enter the beginning balances. Post the various journals. Post the items as individual items or as totals, whichever would be the appropriate procedure.

2 Prepare a list of customers and prove the agreement of the controlling account with the subsidiary ledger at September 30, 2010.

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For strategic decisions, scorekeeping is the most prominent role played by management accounting (A+)

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Solution Guide / Answer Key:

ACCOUNTING

True or False

For strategic decisions, scorekeeping is the most prominent role played by management accounting

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Attention-directing activities should focus on cost-reduction opportunities, and not on valued-adding opportunities (A+)

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Solution Guide / Answer Key:

ACCOUNTING

True or False

Attention-directing activities should focus on cost-reduction opportunities, and not on valued-adding opportunities

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Control includes deciding what feedback to provide that will help with future decision making (A+)

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Solution Guide / Answer Key:

ACCOUNTING

True or False

Control includes deciding what feedback to provide that will help with future decision making

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Feedback links planning and control (A+)

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Solution Guide / Answer Key:

ACCOUNTING

True or False

Feedback links planning and control

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Donahue Company uses both special journals and a general journal as described in this chapter (A+)

Donahue Company uses both special journals and a general journal as described in this chapter. On June 30, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $320,000; the Accounts Payable control account had a credit balance of $77,000.

The July transactions recorded in the special journals are summarized below. No entries affecting accounts receivable and accounts payable were recorded in the general journal for July.

Sales Journal Total sales- $161,400

Purchases Journal Total purchases- $56,400

Cash Receipts Journal Accounts receivable column total- $131,000

Cash Payments Journal Accounts payable column total- $47,500

Required:

a. What is the balance of the Accounts Receivable control account after the monthly postings on July 31?

b. What is the balance of the Accounts Payable control account after the monthly postings on July 31?

c. To what account(s) is the column total of $161,400 in the sales journal posted?

d. To what account(s) is the accounts receivable column total of $131,000 in the cash receipts journal posted?

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