Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Chapter 6, Problem 10AP
1.
To determine
Prepare
2.
To determine
State with the reason whether the cash rebate should be reported as revenue.
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A "bill and hold" scheme is most likely to include:
a) Shipment of items to a customer beyond what the customer has ordered
b) Selling itms at substantial discounts near year end
c) Billing items that are held by the customer in future revenue production purposes
d) Recording items that the company retaines as of year end as sales chegg
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Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, and (4) all debits to Accounts Payable reflect cash payments for inventory.
FORTEN COMPANY
Income Statement
For Current Year Ended December 31
Sales
$ 617,500
Cost of goods sold
292,000
Gross profit
325,500
Operating expenses (excluding depreciation)
$ 139,400
Depreciation expense
27,750
167,150
Other gains (losses)
Loss on sale of equipment
(12,125)
Income before taxes
146,225
Income taxes expense
34,050
Net income
$ 112,175
FORTEN COMPANY
Comparative Balance Sheets
December 31
Current Year
Prior Year…
he internal control questionnaire for purchases and accounts payable includes the following questions. Next to each of the questions, indicate the letter of the related transaction assertion.A. OccurrenceB. CompletenessC. AccuracyD. ClassificationE. Cutoff_______ 1. Are vendor's monthly statements reconciled with individual accounts payable accounts?_______ 2. Are all purchases made only on the basis of approved purchase requisitions?_______ 3. Are vendors' invoices listed immediately upon receipt?_______ 4. Are vendors' invoices matched against purchase orders and receiving reports before a liability is recorded?_______ 5. Is the accounts payable customer ledger balanced periodically with the general ledger control account?_______ 6. Does the accounting manual give instructions to date purchase entries on the date of receipt of goods?_______ 7. Are shipping documents authorized and prepared for goods returned to vendors?_______ 8. Is the accounts payable department notified of goods…
Chapter 6 Solutions
Principles of Accounting
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Assume a large shipment of uninsured merchandise...Ch. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Indicate whether each of the statements that...Ch. 6 - Prob. 2SECh. 6 - Prob. 3SE
Ch. 6 - Prob. 4SECh. 6 - Prob. 5SECh. 6 - Prob. 6SECh. 6 - Prob. 7SECh. 6 - Prob. 8SECh. 6 - Record the following transactions using T...Ch. 6 - Prob. 10SECh. 6 - Prob. 11SECh. 6 - Sutton Hills Companys management made the...Ch. 6 - Prob. 2EACh. 6 - A company has the following data: net sales,...Ch. 6 - Prob. 4EACh. 6 - Prob. 5EACh. 6 - Linear Company engaged in the following...Ch. 6 - Prob. 7EACh. 6 - Prob. 8EACh. 6 - Prob. 9EACh. 6 - Prob. 10EACh. 6 - Prob. 11EACh. 6 - Prob. 12EACh. 6 - Prob. 13EACh. 6 - Prob. 14EACh. 6 - Prob. 15EACh. 6 - Matuska Tools Corporations income statements...Ch. 6 - Selected accounts from Murrays Furniture Stores...Ch. 6 - Prob. 3PCh. 6 - Selected accounts from Dences Gourmet Shops...Ch. 6 - Prob. 5PCh. 6 - Teague Company engaged in the following...Ch. 6 - Prob. 7APCh. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Prob. 11APCh. 6 - Prob. 12APCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3CCh. 6 - Prob. 4CCh. 6 - Prob. 5CCh. 6 - Prob. 6C
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- 1. You are tasked to perform cut-off procedures for expenses and its related payable. In testing the completeness/cut-off assertion, what document would you most likely inspect? Group of answer choices a. Accounts payable subsidiary ledger. b. Vendor invoice register 15 days before and 15 days after report date. c. Purchase journal 15 days before and 15 days after report date. d. Cash disbursement journal 15 days before and 15 days after report date. 2. During the review of loan contracts and agreements, the auditor would most likely figure out the following, except: Group of answer choices a. The existence of loans. b. The completeness of loans. c. The accuracy of interest expense recorded by the entity. d. Related disclosures pertaining to assets pledged as collateral.arrow_forwardqw.125. Use the following information for the Problems below. (Algo) Skip to question [The following information applies to the questions displayed below.] Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $ 637,500 Cost of goods sold 296,000 Gross profit 341,500 Operating expenses (excluding depreciation) $ 143,400 Depreciation expense 31,750 175,150 Other gains (losses) Loss on sale of equipment (16,125) Income before taxes 150,225 Income taxes expense 39,650 Net income $ 110,575 FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year Assets Cash $ 66,400 $ 84,500 Accounts receivable 82,380…arrow_forward39) The payables ledger control account includes separate account for each supplier and helps to know how much the busines owe to them. Which of the following day books are used to prepare the above, except? a. Cash receipts book b. Purchases daybook c. Cash payments book d. Purchases return daybookarrow_forward
- questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: Cost of Goods Sold Income Tax Expense Merchandise Sales (gross revenue) for Cash Merchandise Sales (gross revenue) on Credit Office Expense Sales Returns and Allowances Salaries and Wages Expense E6-17 (Algo) Part 2 2-a. What was the dollar amount of gross profit? 2-b. What was the gross profit percentage? (Round your percentage to 1 decimal place.) 2-a. Gross Profit 2-b. Gross Profit Percentage MERCA Prev % 78 of 13 $ 171,000 19,530 252,000 44,400 19,600 7,410 42,600 Next > #arrow_forwardIn its annual report, American Eagle Outfitters states that its “e-commerce operation recordsrevenue upon the estimated customer receipt date of the merchandise.” Is this FOB shipping pointor FOB destination? If American Eagle were to change to the other terms of shipment, would itreport its Sales Revenues earlier or later?arrow_forwardhe questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: applies to th Cost of Goods Sold Income Tax Expense Merchandise Sales (gross revenue) for Cash Merchandise Sales (gross revenue) on Credit Office Expense Sales Returns and Allowances Salaries and Wages Expense E6-17 (Algo) Part 1 Required: 1. Prepare a multistep income statement for external reporting purposes. MYSTERY INCORPORATED Income Statementarrow_forward
- Activity 2 Directions: Compute the uncollectible account expense using the percent of accounts receivable method. The following information needed in the computation of uncollectible accounts expense for March 2021 is available for Parkland Enterprises: Sales Cash Sales Accounts Receivable-ending 200,000.00 50,000.00 5,000.00 Assume that the company decided that five percent (5%) of accounts receivable are deemed uncollectible.arrow_forwardUse the following information for the Problems below. Skip to question [The following information applies to the questions displayed below.]Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. FORTEN COMPANYComparative Balance SheetsDecember 31 Current Year Prior Year Assets Cash $ 58,900 $ 79,500 Accounts receivable 74,830 56,625 Inventory 284,656 257,800 Prepaid expenses 1,270 2,015 Total current assets 419,656 395,940 Equipment 151,500 114,000 Accum.…arrow_forwardUse the following information for the Problems below. Skip to question [The following information applies to the questions displayed below.]Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. FORTEN COMPANYComparative Balance SheetsDecember 31 Current Year Prior Year Assets Cash $ 58,900 $ 79,500 Accounts receivable 74,830 56,625 Inventory 284,656 257,800 Prepaid expenses 1,270 2,015 Total current assets 419,656 395,940 Equipment 151,500 114,000 Accum.…arrow_forward
- Required: For each of the sales terms, determine the following: 1. Amount to be recorded as Sale on June 1 2. Amount to be recorded as Sales Discount on the date of collection, if any 3. Amount of cash recieved on the dateof collection.arrow_forwardConceptual Connection: For each situation, indicate when the company should recognize revenue on an accrual basis. a. A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January.arrow_forward2. ABC Company left the sales journal open after year end for two extra days and included the January 1 & 2 sales in the December 31 totals. The company uses perpetual inventory system. What effect would this have on the 2018 financial statements? Assume that the client made the following actual credit sales and received cash receipts as follows after 12/29/20: Cash Receipts (Besixakles Only) 7,500.00 SALES COGS 12/30/2020 11,250.00 6,000.00 12/31/2020 7,750.00 3,500.00 6,750.00 1/1/2021 6,000.00 2,000.00 1/2/2021 5,700.00 1,500.00 4,500.00 3,700.00 ABC Company has the following balances at 12/29/20: a. Cash $115,000 b. Accounts Receivable $55,000 c. Sales $150,000 d. Cost of Goods Sold $61,000 e. Inventory $75,000 Determine the overstatements and understatements that would result from the following situations. Assume that each situation is independent of one another. In the case of a perpetual inventory, assume that the year-end inventory count did not identify and correct the…arrow_forward
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