ACCT 301 Connect Homework Chapter 1 solutions complete answers

ACCT 301 Connect Homework Chapter 1 solutions complete answers 

 

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Question 1

 

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $330,000; Cash paid for rent, $38,000; Cash paid to employees for services rendered during the year, $118,000; Cash paid for utilities, $48,000.

 

In addition, you determine that customers owed the company $58,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,800 at year-end, and the rent payment was for a two-year period.

 

Calculate accrual net income for the year.

 

Question 2

 

Identify the accounting concept that was violated in each of the following situations.

 

Astro Turf Company recognizes an expense, cost of goods sold, in the period the product is manufactured.

 

McCloud Drug Company owns a patent that it purchased three years ago for $2 million. The controller recently revalued the patent to its approximate market value of $8 million.

 

Philips Company pays the monthly mortgage on the home of its president, Larry Crosswhite, and charges the expenditure to miscellaneous expense.

 

Question 3

 

Listed below are several transactions that took place during the second and third years of operations for the RPG Company.

 

In addition, you learn that the company incurred advertising costs of $19,000 in year 2, owed the advertising agency $4,400 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.

 

1. Calculate accrual net income for both years.

 

2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.

 

Question 4

 

Listed below are several terms and phrases associated with the FASB’s conceptual framework. Pair each item from List A with the item from List B that is most appropriately associated with it.

 

Question 5

 

Listed below are several terms and phrases associated with the accounting concepts. Pair each item from List A with the item from List B that is most appropriately associated with it.

 

Question 6

 

Identify the accounting concept that was violated in each of the following situations.

 

Pastel Paint Company purchased land two years ago at a price of $250,000. Because the value of the land has appreciated to $400,000, the company has valued the land at $400,000 in its most recent balance sheet.

 

Atwell Corporation has not prepared financial statements for external users for over three years.

 

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.

 

Don Smith is the sole owner of a company called Hardware City. The company recently paid a $150 utility bill for Smith’s personal residence and recorded a $150 expense.

 

Golden Book Company purchased a large printing machine for $1,000,000 (a material amount) and recorded the purchase as an expense.

 

Ace Appliance Company is involved in a major lawsuit involving injuries sustained by some of its employees in the manufacturing plant. The company is being sued for $2,000,000, a material amount, and is not insured. The suit was not disclosed in the most recent financial statements because no settlement had been reached.

 

Question 7

 

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the accounting concept that is applied (if you agree) or violated (if you disagree).

 

Wagner Corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.

 

Spooner Oil Company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. No mention of the change was included in the financial statements. The change had a material effect on Spooner's financial statements.

 

Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery is being expensed over the life of the machinery.

 

Rudeen Corporation purchased equipment for $180,000 at a liquidation sale of a competitor. Because the equipment was worth $230,000, Rudeen valued the equipment in its subsequent balance sheet at $230,000.

 

Davis Bicycle Company received a large order for the sale of 1,000 bicycles at $100 each. The customer paid Davis the entire amount of $100,000 on March 15. However, Davis did not record any revenue until April 17, the date the bicycles were delivered to the customer.

 

Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators was expensed even though they had a three-year estimated useful life.

 

Esquire Company provides financial statements to external users every three years.