You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for
insurance as a result of a theft that took place the night before. You suggest that an inventory be
taken immediately. The following data are available.
Corrs Company began operations in 2013 and determined its ending inventory at cost and at
lower-of-cost-or-market at December 31, 2013, and December 31, 2014. This information is
(a) Prepare the journal entries requ
A fire destroys all of the merchandise of Assante Company on February 10, 2014. Presented
below is information compiled up to the date of the fire.
What is the approximate inventory on February 10, 2014?
Inventory, January 1, 2014.
Of what use is the statement of cash flows?
Some uses of this statement are:
Assessing future cash flows: Income data when augmented with current cash flow data provide a
better basis for assessing future cash flows.
Assessing reasons fo
Red Hot Chili Peppers Co. had the following activity in its most recent year of operations.
(a) Purchase of equipment.
(b) Redemption of bonds payable.
(c) Sale of building.
(e) Exchange of equipment for furniture.
Hendrickson Corporation reported net income of $50,000 in 2014. Depreciation expense was
$17,000. The following working capital accounts changed.
Compute net cash provided by operating activities.
Cash flows from operating activities
In 2014, Elbert Corporation had net cash provided by operating activities of $531,000; net cash
used by investing activities of $963,000; and net cash provided by financing activities of
$585,000. At January 1, 2014, the cash balance was $333,00
What are some of the arguments in favor of using the indirect (reconciliation) method as opposed
to the direct method for reporting a statement of cash flows?
Arguments for the indirect or reconciliation method are:
By providing a re
Indicate in general journal form how the items below would be entered in a worksheet for the
preparation of the statement of cash flows.
(a) Net income is $317,000.
(b) Cash dividends declared and paid totaled $120,000.
(c) Equipment was purchas
The financial statements of ConAgra Foods, Inc.s 2012 annual report disclose the following
(a) Inventory turnover and
(b) The average days to sell inventory for 2012 and 2011.
What factors might call for inventory valuation at sales prices (net realizable value or market
An exception to the normal recognition rule occurs where (1) there is a controlled market with a
quoted price applicable to specific
Why is it necessary to convert accrual-based net income to a cash basis when preparing a
statement of cash flows?
It is necessary to convert accrual-based net income to a cash basis because net income includes
items that do not provide o
Wainwright Corporation had the following activities in 2014.
1. Sale of land $180,000. 4. Purchase of equipment $415,000.
2. Purchase of inventory $845,000. 5. Issuance of common stock $320,000.
3. Purchase of treasury stock $72,000. 6. Purchase
Use the information for Kemper Company from BE9-5. In 2015, Kemper paid $1,000,000 to
obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase.
Kemper Company signed a long-term noncancelable purchase
Explain how the amount of cash payments to suppliers is computed under the direct method.
To determine cash payments to suppliers, it is first necessary to find purchases for the year. To
find purchases, cost of goods sold is adjusted fo
Under what circumstances is relative sales value an appropriate basis for determining the price
assigned to inventory?
Relative sales value is an appropriate basis for pricing inventory when a group of varying units is
purchased at a sin
Your roommate is puzzled. During the last year, the company in which she is a stockholder
reported a net loss of $675,000, yet its cash increased $321,000 during the same period of time.
Explain to your roommate how this situation could occur.
The board of directors of Gifford Corp. declared cash dividends of $260,000 during the current
year. If dividends payable was $85,000 at the beginning of the year and $90,000 at the end of the
year, how much cash was paid in dividends during the
In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and
$1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net
sales of $14,549 million. Compute Gaps inventory
Marvin Gaye Company has been having difficulty obtaining key raw materials for its
manufacturing process. The company therefore signed a long-term non-cancelable purchase
commitment with its largest supplier of this raw material on November 30,
Identify and explain the major steps involved in preparing the statement of cash flows.
Preparing the statement of cash flows involves three major steps:
Determine the change in cash. This is simply the difference between the beginni
In 2014, Leppard Inc. issued 1,000 shares of $10 par value common stock for land worth
(a) Prepare Leppards journal entry to record the transaction.
(b) Indicate the effect the transaction has on cash.
(c) Indicate how the transaction i
Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were
$120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were
$7,000; and sales revenue was $147,000. Compute ending inventor