GAAP is the accounting profession's rule-setting body. True False

GAAP is the accounting profession's rule-setting body. True False

Prepare journal entries to record the following merchandising transactions of Cabela's, which uses the perpetual inventory

Prepare journal entries to record the following merchandising transactions of Cabela's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.) July 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. 2 Sold merchandise to Creek Co. for $900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $500. 3 Paid $125 cash for freight charges on the purchase of July 1. 8 Sold merchandise that had cost $1,300 for $1,700 cash. 9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. 11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

True

False

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Electronic Innovators is the defendant in a $10 million lawsuit filed by one of its customers

Electronic Innovators is the defendant in a $10 million lawsuit filed by one of its customers, Aviation Systems. The litigation is in final appeal, and legal counsel advises that it is probable that Electronic Innovators will lose the lawsuit. The estimated amount is somewhere between $6 and $10 million.

Which of the following statement(s) are true? (Select all that apply.)

A loss and a liability must be recorded for $6 million.

A loss and a liability must be recorded for $10 million.

A disclosure note should be included for a range of $6 and $10 million to the financial statements with an entry for the minimum amount.

A disclosure note should be included for a range of $6 and $10 million to the financial statements with an entry for the maximum amount.

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Electronic Innovators has a contingent liability that is probable and can be reasonably estimated within a range between $6 and $10 million. Electronic Innovators should record a loss and a liability for the minimum amount ($6 million) and disclose the range between $6 and $10 million in the notes to the financial statements.

Mercy Hospital has the following balances on December 31, 2018, before any adjustment

Mercy Hospital has the following balances on December 31, 2018, before any adjustment: Accounts Receivable = $70,000; Allowance for Uncollectible Accounts = $1,400 (credit). Mercy estimates uncollectible accounts based on an aging of accounts receivable as shown below.

  Age Group        Amount

Receivable          Estimated Percent Uncollectible

  Not yet due      $ 50,000                15%

  0–30 days past due       11,000                   20%

  31–90 days past due     8,000                     45%

  More than 90 days past due      1,000                     85%

                                 

       Total               $ 70,000                 

                               

1. Estimate the amount of uncollectible receivables.

2. Record the adjustment for uncollectible accounts on December 31, 2018.

3. Calculate the net realizable value of accounts receivable.


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Below are several transactions for Witherspoon Incorporated, a small manufacturer of decorative glass designs

Below are several transactions for Witherspoon Incorporated, a small manufacturer of decorative glass designs.

Required:

For each transaction, indicate (1) whether cash is involved (yes or no), and, if cash is involved, (2) whether Witherspoon should classify it as operating, investing, or financing in a statement of cash flows, and (3) whether the cash is an inflow or outflow. Enter N/A if the question is not applicable to the statement.


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