FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781618533111
Author: DYCKMAN
Publisher: Cambridge Business Publishers
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 1, Problem 49CP
a.
To determine
Explain the manner in which person K has arrived 30% of return and calculate the percentage of return if firm was purchased for $300,000.
b.
To determine
Indicate whether the amount of dividend would affect the reported net income of financial statements, and calculate the percentage of return if salary of $36,000 is taken into consideration.
c.
To determine
Indicate whether there is a legitimate reason for the difference between net income shown in financial statement and net income reported on the tax returns and explain the manner in which the firm might obtain additional assurance about the propriety of the financial statements.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
John Works as a distribution agent in DRC for diamond floor tiles. Under an agreement with manufacturers, he purchases the tiles and received a commission of 1% on purchases for the year ended on the previous 31st March in May. For several years, he has been obtaining a gross profit of 40% on all the sales. In a burglary which occurred in January 2001, he lost stock costing shs 4 million as well as most of his accounting records. However after careful investigations, the following information was obtained covering the year to 31st March 2001.
a)
Assets and liabilities as at 1st April 2000Shs’000Buildings at cost 10,000Provision for Depreciation (buildings) 6,000Motor vehicles at cost 5,000Provision for depreciation (vehicles) 2,000Inventory at cost 3,200Trade receivables 6,300Agency commission receivable 300Trade expenses prepaid 120Bank balance 4,310Trade payables 4,200Accrued vehicle expenses 230John was notified that he will receive an agency commission of shs 440,000 on May…
James Wright is the chief financial officer (CFO) for The Butcher Block, a major steakhouse restaurant chain. As CFO, James has the final responsibility for all aspects of financial reporting. James tells investors that The Butcher Block should post earnings of at least $1 million.
In examining the preliminary year-end numbers, James notices that earnings are coming in at $950,000. He also is aware that The Butcher Block has been depreciating most of its restaurant equipment over a five-year useful life. He proposes to change the estimated useful life for a subset of the equipment to a useful life of seven, rather than five, years. By depreciating over a longer useful life, depreciation expense will be lower in the current year, increasing earnings to just over $1 million. It looks like The Butcher Block is going to exceed earnings of $1 million after all.
Do you think James Wright’s change in the depreciable life of assets is ethical? What concerns might you have?
Panache Inc. is a small specialty automobile manufacturer. The company's long-time controller, Celia Brown, retired on January 10, 2016, at the age of eighty-eight years, and the president of the company, Andrew Cartwright, has hired you to be the company's new controller.
Andrew would like to take Panache public in the near future, which will require audited financial statements. He has retained the public accounting firm of Booker and Helwig to audit the 2015 financial statements as a preliminary step. He knows that Celia was not always up to date on current issues, and he has asked you to review all of the company's accounting policies and procedures. Your first task is to identify problem areas and make any corrections needed before the audit begins.
Andrew wants to be kept informed at all times, and when any problems are identified, he wants to be made aware of the problem as well as your solution.
You've spent your first week on the job getting familiar with the company's…
Chapter 1 Solutions
FINANCIAL ACCOUNTING
Ch. 1 - Prob. 1MCCh. 1 - Prob. 2MCCh. 1 - Prob. 3MCCh. 1 - Prob. 4MCCh. 1 - Prob. 5MCCh. 1 - Prob. 1QCh. 1 - Prob. 2QCh. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5Q
Ch. 1 - Prob. 6QCh. 1 - Prob. 7QCh. 1 - Prob. 8QCh. 1 - Prob. 9QCh. 1 - Prob. 10QCh. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - Prob. 13QCh. 1 - Prob. 14QCh. 1 - Prob. 15QCh. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - Prob. 19MECh. 1 - Prob. 20MECh. 1 - Prob. 21MECh. 1 - Prob. 24MECh. 1 - Prob. 25MECh. 1 - Prob. 26MECh. 1 - Prob. 27ECh. 1 - Prob. 28ECh. 1 - Prob. 29ECh. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Prob. 32ECh. 1 - Prob. 33ECh. 1 - Prob. 34ECh. 1 - Prob. 35ECh. 1 - Prob. 36PCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Prob. 39PCh. 1 - Prob. 40PCh. 1 - Prob. 41PCh. 1 - Prob. 42PCh. 1 - Prob. 43PCh. 1 - Prob. 44PCh. 1 - Prob. 45PCh. 1 - Prob. 46CPCh. 1 - Prob. 47CPCh. 1 - Prob. 48CPCh. 1 - Prob. 49CPCh. 1 - Prob. 50CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Diamond Computers, which is owned and operated by Dale Diamond, manufactures and sells different types of computers. The company has reported profits every year since its inception in 2002 and has applied for a bank loan near the end of 2021 to upgrade manufacturing facilities. These upgrades should significantly boost future productivity and profitability. In preparing the financial statements for the year, the chief accountant, Sandy Walters, mentions to Dale that approximately $80,000 of computer inventory has become obsolete and a write-down of inventory should be recorded in 2021. Dale understands that the write-down would result in a net loss being reported for company operations in 2021. This could jeopardize the company’s application for the bank loan, which would lead to employee layoffs. Dale is a very kind, older gentleman who cares little for his personal wealth but who is deeply devoted to his employees’ well-being. He truly believes the loan is necessary for the company’s…arrow_forwardYou are in the process of completing the gathering of sufficient appropriate evidence for Top Stove Corporation, a company engaged in the manufacture and sale of kerosene space heaters. To date, there has been every indication that the financial statements of the client present fairly the position of the company at December 31 and the results of its operations and cash flows for the year then ended. Top Stove had total assets at December 31 of $4 million and a net profit for the year (after deducting federal and state income taxes) of $285,000. The principal records of the company include a general ledger, cash receipts record, voucher register, sales register, check register, and general journal. Financial statements are prepared monthly. Your audit report is dated February 20, and you plan to deliver the reports to the client by March 12. a. Write a brief statement about the purpose and period to be covered in a review of subsequent events. b. Outline the program you would follow to…arrow_forwardLou Reed is the primary accountant and 1 of 87 employees at The Velvet Underground, a company that manufactures professional grade recording equipment and mixing boards. By the end of their third year, 2017, TVU had already turned a $150,000 profit. At that time, Lou used analytics to estimate promising sales of a new device TVU planned to sell. Unfortunately, the new device did not live up to expected potential. At the end of the following year, 2018, Lou was tasked with using analytics to figure out why the device did not sell well, and how those sales might be improved. Fortunately, in 2019, sales of the device increased, along with all of the company's other products. Each time Lou utilized analytics, he had to access a number of different databases to find all the data he needed. Velvet Underground's sales revenue grew from $250,000 in 2018 to $1 million in 2019, prompting Lou to upgrade his QuickBooks software. Which of the following options best describes TVU's accounting…arrow_forward
- Lou Reed is the primary accountant and 1 of 87 employees at The Velvet Underground, a company that manufactures professional grade recording equipment and mixing boards. By the end of their third year, 2017, TVU had already turned a $150,000 profit. At that time, Lou used analytics to estimate promising sales of a new device TVU planned to sell. Unfortunately, the new device did not live up to expected potential. At the end of the following year, 2018, Lou was tasked with using analytics to figure out why the device did not sell well, and how those sales might be improved. Fortunately, in 2019, sales of the device increased, along with all of the company’s other products. Each time Lou utilized analytics, he had to access a number of different databases to find all the data he needed. Velvet Underground’s sales revenue grew from $250,000 in 2018 to $1 million in 2019, prompting Lou to upgrade his QuickBooks software. Which of the following options best describes TVU's integrated…arrow_forwardFlo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi’s banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank’s point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following month. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.) Required 1. Identify decisions that managers like Choi must make in applying depreciation methods. 2. Is Choi’s rule an ethical…arrow_forwardFlo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi’s banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank’s point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following quarter. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.) Discuss the following: Identify decisions that managers like Choi must make in applying depreciation methods. Is Choi’s rule an…arrow_forward
- Cintu is a large marketer and distributor of food service products serving restaurants, hotels, schools, hospitals, and other institutions. The following transactions are typical of those that occurred in a recent year, but the amounts are simplified. a. Borrowed $101,000 from a bank, signing a short-term note payable. b. Provided $106,300 in service to customers, with $100,100 on account and the rest received in cash. c. Purchased equipment for $146,000 in cash. d. Incurred and paid employee wages of $2,450. e. Received $430 on account from a customer. f. Incurred and paid $4,850 cash for travel costs during the year. g. Paid $9,100 cash on accounts payable. h. Incurred $24,300 in utility expenses during the year, of which $18,800 was paid in cash and the rest owed on account. Required: 1. For each of the above transactions, prepare accrual basis journal entries. 2. Calculate the company's preliminary net income.arrow_forwardYou have been asked by a client to review the records of Sheffield Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information.1. Sheffield Company commenced business on April 1, 2018, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes. Year EndedMarch 31 IncomeBefore Taxes 2019 $83,772 2020 130,338 2021 121,189 2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each year, machines billed and in the hands of consignees amounted to: 2019 $7,605 2020 none 2021 6,540 Sales price was…arrow_forwardFor many years, Janice Virtue had been a professor of Business Ethics in the Faculty of Business at a major Canadian university. In 2018, while continuing to teach one section of Business Ethics, she established Virtue Ltd. (VL) in order to market her numerous publications and online courses involving the application of ethical principles to business situations. While the company experienced a net operating loss of $128,000 in the fiscal period ending December 31, 2018, VL experienced rapidly increasing sales during 2019. Because Janice believed the improvement was indicative of the success to come, VL moved to larger premises that were purchased for $423,000. Of this total, $100,000 related to the land, with the remaining $323,000 allocated to the building. Because the building was to be used exclusively for non-residential purposes, it was allocated to a separate Class 1. In selling the previous premises in 2019, VL experienced an allowable capital loss on the land of $36,000. The…arrow_forward
- Joey Juno began a web-based computer sales and service company on June 1, 20X8, called Juno's Toys. Joey has made a few decisions regarding the accounting system; all prepayments and unearned revenues will be recorded as assets and liabilities and the company will use a periodic inventory system. Juno's Toys completed these transactions during November of the current year: Joey invested $12,000 cash along with $9,000 of used computer equipment into his new business. Purchased 8 months of insurance for $1,200 cash; the insurance is effective immediately. Hired a computer technician, named Barney to be paid every two weeks. $23,000 of merchandise was purchased from Eastman Store on account terms 1/10, n30. Freight was paid in amount of $200 for above purchase. Bought $400 of office supplies on account. Sold merchandise to John Smith that cost $3,300 for $3,800. Mr. Smith paid $500 cash and put the rest on account, with term 1/15, n30. Bought office furniture for $9,000. Paid $1,000 cash…arrow_forwardColleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the loan. Colleen has told her accountant to provide the bank with a balance sheet. Colleen has decided to omit the other financial statements because there was a net loss during the past year. Given this scenario, share your thoughts on the following questions. Is Colleen behaving in a professional manner by omitting some of the financial statements? Why or Why not What impact could this omission have on the business or the bank, which is loaning the money?arrow_forwardYou are the audit manager for Piper Ltd, a limited liability company which sells books, CDs,DVDs and similar items via two divisions: mail order and on-line ordering on the Internet. Piperis a new audit client. You are commencing the planning of the audit for the year-ended 31 May2018. An initial meeting with the directors has provided the information below.The company’s turnover is in excess of $85 million with net profits of $4 million. All profits arecurrently earned in the mail order division, although the Internet division is expected to return asmall net profit next year. Turnover is growing at the rate of 20% p.a. Net profit has remainedalmost the same for the last four years.In the next year, the directors plan to expand the range of goods sold through the Internet divisionto include toys, garden furniture and fashion clothes. The directors believe that when one producthas been sold on the Internet, then any other product can be as well.The accounting system to record sales by…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License