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The primary focus for financial accounting information is to provide information useful for:
 

	Investing decisions	Credit decisions
a.	Yes	Yes
b.	Yes	No
c.	No	Yes
d.	No	No

 
Option a.
   
The following information ($ in millions) comes from a recent annual report of Amazon.com, Inc.:
 

Net sales	$	10,837
Total assets		4,402
End of year balance in cash		1,082
Total stockholders' equity		509
Gross profit (Sales − Cost of Sales)		2,488
Net increase in cash for the year		20
Operating expenses		2,053
Net operating cash flow		743
Other income (expense), net		(15	)

 
Compute Amazon's total liabilities at the end of the year.
$3,893
   
For each of the following items, identify the appropriate financial statement element:

   
 
10.05/10.05 points awarded
Item Scored
Item 4
Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows:
Cash collected from customers, $335,000;
Cash paid for rent, $39,000;
Cash paid to employees for services rendered during the year, $119,000;
Cash paid for utilities, $49,000.

In addition, you determine that customers owed the company $59,000 at the end of the year and no bad debts were anticipated.
Also, the company owed the gas and electric company $1,900 at year-end, and the rent payment was for a two-year period.
 
Calculate accrual net income for the year.
 

   
 
Identify the basic assumption or broad accounting principle that was violated in the following situation.
The Klingon Company sells farm machinery. Revenue from a large order of machinery from a new buyer was recorded the day the order was received.

   
Listed below are several terms and phrases associated with basic assumptions, underlying principles, and constraints.
Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.
 


   
Eve's Apples opened its business on January 1, 2021, and paid for two insurance policies effective that date.
The policy for equipment damage was $34,740 for 18 months, and the crop damage policy was $13,800 for a two-year term.
What is the balance in Eve's prepaid insurance as of December 31, 2021?
Multiple Choice
 
    $18,480.
 
   
 
Fink Insurance collected premiums of $17,600,000 from its customers during the current year.
The adjusted balance in the Deferred premiums revenue account increased from $5.0 million to $9.0 million dollars during the year.
What is Fink's revenue from insurance premiums recognized for the current year?
Multiple Choice
    $13,600,000
 
   
The following account balances were taken from the 2021 post-closing trial balance of the Bowler Corporation:
cash, $7,000; accounts receivable, $17,000; inventory, $30,000; equipment, $160,000; accumulated depreciation,
$68,000; accounts payable, $40,000; salaries payable, $26,000; retained earnings, $16,000; and common stock, $64,000.

Prepare a 12/31/2021 balance sheet.
(Amounts to be deducted should be indicated by a minus sign.)
 
        

   
The Righter Shoe Store Company prepares monthly financial statements for its bank.
The November 30 and December 31, 2006, trial balances contained the following account information:

November 30:

Nov. 30
	Dr.	Cr.
Supplies	1,300
Prepaid Insurance	5,400
Wages Payable		12,000
Unearned rent revenue		2,700

December 31:

Dec. 30
	Dr.	Cr.
Supplies	2,600
Prepaid Insurance	4,050
Wages Payable		18,000
Unearned rent revenue		1,350

 

The following information also is known: The December income statement reported $1,733 in supplies expense. No insurance payments were made in December. $12,500 was paid to employees during December for wages. On November 1, 2006, a tenant paid Righter $4,050 in advance rent for the period November through January. Unearned rent revenue was credited. Which of the following is the adjusting entry recorded at the end of December for prepaid insurance?

Insurance Expense    1,350
                  Prepaid Insurance    1,350
   
Listed below are several terms and phrases associated with the accounting processing cycle. Pair each item from the list with the item that is most appropriately associated with it.


   
The Whitlow Manufacturing Corporation's fiscal year-end is December 31.
Below are the unadjusted and adjusted trial balances for December 31, 2006.
 

	Unadjusted		Adjusted
Account Title	Debits	Credits	Debits	Credits
Cash	50,000		50,000
Accounts receivable	35,000		35,000
Allow For uncollected. accts		2,000		5,500

Calculate the amount of Bad Debt expense for the end of the year.
 

 
   
Listed below are several terms and phrases associated with the accounting processing cycle.
Pair each item from the list with the item that is most appropriately associated with it.
 

Which of the following would be an amount computed using horizontal analysis?
The percentage change in the cash balance from last year to this year.
  Management’s Report on Internal Control Over Financial Reporting:
Contains personal certification of the financial statements by the company’s executives.
  The trial balance for K and J Nursery, Inc., listed the following account balances at December 31, 2021,the end of its fiscal year: cash,
$21,000; accounts receivable, $16,000; inventory, $30,000; equipment (net), $85,000; accounts payable, $19,000; salaries payable,
$7,500; interest payable, $3,500; notes payable (due in 18 months), $35,000; common stock, $60,000.

Determine the year-end balance in retained earnings for K and J Nursery, Inc.
The following is a December 31, 2021, post-closing trial balance for the Jackson Corporation.
 

Account Title		Debits			Credits
Cash	$	55,000
Accounts receivable		49,000
Inventory		90,000
Prepaid rent (for the next 8 months)		31,000
Investment in equity securities (short term)		25,000
Machinery		220,000
Accumulated depreciation				$	26,000
Patent (net)		94,000
Accounts payable					15,500
Salaries payable					11,500
Income taxes payable					47,000
Bonds payable (due in 10 years)					220,000
Common stock					180,000
Retained earnings					64,000
Totals	$	564,000		$	564,000

Required:
Prepare a classified balance sheet for Jackson Corporation at December 31, 2021, by properly classifying each of the accounts.
(Amounts to be deducted should be indicated by a minus sign.)
 

Which of the following is not true about net operating cash flow?
It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows.
  The following information ($ in millions) comes from a recent annual report of Amazon.com, Inc.:
 

Net sales	$	10,880
Total assets		4,506
End of year balance in cash		1,136
Total stockholders' equity		343
Gross profit (Sales − Cost of Sales)		2,497
Net increase in cash for the year		12
Operating expenses		2,067
Net operating cash flow		669
Other income (expense), net		(27	)

 
Compute Amazon's total liabilities at the end of the year.
 
$4,163
  Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows:
Cash collected from customers, $305,000; Cash paid for rent, $33,000; Cash paid to employees for services rendered during the year,
$113,000; Cash paid for utilities, $43,000.

In addition, you determine that customers owed the company $53,000 at the end of the year and no bad debts were anticipated.
Also, the company owed the gas and electric company $1,300 at year-end, and the rent payment was for a two-year period.
 
Calculate accrual net income for the year.
 

  Listed below are several statements that relate to financial accounting and reporting.
Identify the accounting concept that applies to each statement.
 
    SiriusXM Radio Inc. files its annual and quarterly financial statements with the SEC.
    The president of Applebee’s International, Inc., travels on the corporate jet for business purposes only and does not use the jet for personal use.
    Jackson Manufacturing does not recognize revenue for unshipped merchandise even though the merchandise has been manufactured
according to customer specifications.
    Lady Jane Cosmetics depreciates the cost of equipment over their useful lives.
 
Listed below are several terms and phrases associated with basic assumptions, underlying principles, and constraints.
Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.
 


   
Identify the basic assumption or broad accounting principle that was violated in the following situation.
The Klingon Company sells farm machinery. Revenue from a large order of machinery from a new buyer was recorded the day the order was received.
revenue recognition principle (realization)
   
Mama's Pizza Shoppe borrowed $9,600 at 6% interest on May 1, 2021, with principal and interest due on October 31, 2022.
The company's fiscal year ends June 30, 2021. What adjusting entry is necessary on June 30, 2021?
Multiple Choice
 
    Interest expense           96        
             Interest payable    96
   
On December 31, 2021, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,300.
The company estimates that $2,600 of the year-end receivables will not be collected. Accounts receivable in the 2021 balance sheet will be valued at:
 
 $50,700.  
The year-end adjusted trial balance of the Timmons Tool and Die Corporation included the following account balances:
retained earnings, $260,000; dividends, $28,000; sales revenue, $870,000; cost of goods sold, $570,000;
salaries expense, $150,000; rent expense, $48,000; and interest expense, $23,000.

Prepare the necessary closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
 

   
The Pastina Company manufactures and sells various types of pasta to grocery chains as private label brands.
The company's fiscal year-end is December 31. A partial unadjusted trial balance as of December 31, 2006 appears below.
 

Account Title	Debits	Credits
Cash	$30,000
Accts receivable	35,000
Allow. for uncoll. accts		$3,000
Supplies	1,500
Inventory	60,000
Note receivable	25,000
Interest receivable	0
Prepaid rent	2,500
Prepaid insurance	0
Equipment	80,000
Accum. Deprec. - Eqpt		30,000

The company estimates that of the $40,000 in accounts receivable outstanding at year-end, $5,200 probably will not be collected.
Which of the following is the adjusting journal entry to reflect this at December 31?
 
Bad debt expense     2,200
                   Allowance for Doubtful Accts     2,200
   
Listed below are several terms and phrases associated with the accounting processing cycle.
Pair each item from the list with the item that is most appropriately associated with it.
 

 
Listed below are several terms and phrases associated with the accounting processing cycle.
Pair each item from the list with the item that is most appropriately associated with it.


 

 
Working capital is equal to:
Current assets minus current liabilities.
  Janson Corporation Co.'s trial balance included the following account balances at December 31, 2021:
 

Accounts receivable	$12,400
Inventory	40,000
Patent	13,500
Investments	31,100
Prepaid insurance	7,400
Notes receivable, due 2024	51,400

 
Investments consist of treasury bills that were purchased in November, 2021, and mature in January, 2022.
The balance of prepaid insurance represents coverage over the next two years.
What amount should be included in the current assets section of Janson’s December 31, 2021, balance sheet?
$87,200. The following is a December 31, 2021, post-closing trial balance for Culver City Lighting, Inc.
 

Account Title		Debits				Credits
Cash	$	57,000
Accounts receivable		41,000
Inventory		47,000
Prepaid insurance		17,000
Equipment		120,000
Accumulated depreciation					$	36,000
Patent (net)		42,000
Accounts payable						13,000
Interest payable						3,000
Notes payable (due in 10 years)						120,000
Common stock						72,000
Retained earnings						80,000
Totals	$	324,000			$	324,000

 
Prepare a classified balance sheet for Culver City Lighting, Inc.
(Amounts to be deducted should be indicated by a minus sign.)
 
 

   
The following is a December 31, 2021, post-closing trial balance for the Jackson Corporation.
 

Account Title		Debits			Credits
Cash	$	56,000
Accounts receivable		50,000
Inventory		91,000
Prepaid rent (for the next 8 months)		32,000
Investment in equity securities (short term)		26,000
Machinery		225,000
Accumulated depreciation				$	27,000
Patent (net)		95,000
Accounts payable					16,000
Salaries payable					12,000
Income taxes payable					48,000
Bonds payable (due in 10 years)					230,000
Common stock					190,000
Retained earnings					52,000
Totals	$	575,000		$	575,000

Required:
Prepare a classified balance sheet for Jackson Corporation at December 31, 2021, by properly classifying each of the accounts.
(Amounts to be deducted should be indicated by a minus sign.)