12th Edition

ISBN: 9781285637877

Author: NEEDLES

Publisher: Cengage

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Textbook Question

Chapter 3, Problem 1C

Never Flake Company provided a rust-prevention coating for the underside of new automobiles. The company advertised widely and offered its services through new-car dealers. When a dealer sold a new car, the salesperson attempted to sell the rust-prevention coating as an option. A key selling point was Never Flake’s warranty, which stated that it would repair any damage due to rust at no charge for as long as the buyer owned the car.

For several years, Never Flake had been very successful, but in 2013, the company suddenly declared bankruptcy. Company officials said that the firm had only $5.5 million in assets against liabilities of $32.9 million. Most of the liabilities represented potential claims under the company’s lifetime warranty. It seemed that owners were keeping their cars longer than they had previously. Therefore, more damage was being attributed to rust.

Discuss what accounting decisions could have helped Never Flake to survive under these circumstances.

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Chapter 3, Problem 16AP

Chapter 3, Problem 2C

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Chapter 3 Solutions

Principles Of Accounting

Ch. 3 - Prob. 1DQ Ch. 3 - Will the carrying value of a long-term asset...Ch. 3 - If, at the end of the accounting period, you were...Ch. 3 - Prob. 4DQ Ch. 3 - Prob. 5DQ Ch. 3 - Prob. 6DQ Ch. 3 - Match the concepts of accrual accounting that...Ch. 3 - The Prepaid Insurance account began the year with...Ch. 3 - The Supplies account began the year with a balance...Ch. 3 - Prob. 4SE

Ch. 3 - Prob. 5SE Ch. 3 - During the month of August, deposits in the amount...Ch. 3 - Prob. 7SE Ch. 3 - Malesherbes Companys adjusted trial balance on...Ch. 3 - Prob. 9SE Ch. 3 - Prob. 10SE Ch. 3 - Carlos Companys accountant makes the assumptions...Ch. 3 - Four conditions must be met before revenue should...Ch. 3 - Prob. 3EA Ch. 3 - Prob. 4EA Ch. 3 - Prob. 5EA Ch. 3 - Prob. 6EA Ch. 3 - Prob. 7EA Ch. 3 - Prob. 8EA Ch. 3 - Prepare year-end adjusting entries for each of the...Ch. 3 - Prob. 10EA Ch. 3 - Prob. 11EA Ch. 3 - Wipro Companys income statement included the...Ch. 3 - At the end of the first three months of operation,...Ch. 3 - On November 30, the end of the current fiscal...Ch. 3 - Kinokawa Consultants Companys trial balance on...Ch. 3 - Hertz Limo Service was organized to provide...Ch. 3 - At the end of its fiscal year, Berwyn Cleaners...Ch. 3 - Brave Advisors Services trial balance on December...Ch. 3 - Prob. 7P Ch. 3 - Prob. 8P Ch. 3 - Prob. 9AP Ch. 3 - On March 31, the end of the current fiscal year,...Ch. 3 - Lee Technology Corporations trial balance on...Ch. 3 - Prob. 12AP Ch. 3 - Prob. 13AP Ch. 3 - Scoop Consulting Services trial balance on...Ch. 3 - Prob. 15AP Ch. 3 - Prob. 16AP Ch. 3 - Never Flake Company provided a rust-prevention...Ch. 3 - Prob. 2C Ch. 3 - Prob. 3C Ch. 3 - Prob. 4C Ch. 3 - Prob. 5C Ch. 3 - Prob. 6C

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Solution Summary: The author suggests the accounting decision that could have helped NF Company survive. According to accrual accounting concept, revenue and expenses are recorded only when it is earned or incurred, not at the time of receipt or payment.

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Chapter 3 Solutions