Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Textbook Question
Chapter 3, Problem 3.1CON
Accounting for Operating Activities in a New Business (the Accounting Cycle)
Penny’s Pool Service & Supply. Inc. (PPSS) had the following transactions related to operating the business in its first year’s busiest quarter ended September 30:
- a. Placed and paid for $2,600 in advertisements with several area newspapers (including the online versions). all of which ran in the newspapers during the quarter.
- b. Cleaned pools for customers for $19,200. receiving $16,000 in cash with the rest owed by customers who will pay when billed in October.
- c. Paid Pool Corporation. Inc., a pool supply wholesaler. $10,600 for inventory received by PPSS in May.
- d. As an incentive to maintain customer loyalty. PPSS offered customers a discount for prepaying next year’s pool cleaning service. PPSS received $10,000 from customers who took advantage of the discount.
- e. Paid the office receptionist $4,500. with $1,500 owed from work in the prior quarter and the rest from work in the current quarter. Last quarter's amount was recorded as an expense and a liability Wages Payable.
- f. Had the company van repaired, paying $310 to the mechanic.
- g. Paid $220 for phone, water, and electric utilities used during the quarter.
- h. Received $75 cash in interest earned during the current quarter on short-term investments.
- i. Received a property tax bill for $600 for use of the land and building in the quarter: the bill will be paid next quarter.
- j. Paid $2,400 for the next quarter’s insurance coverage.
Required:
- 1. For each of the events, prepare
journal entries , checking that debits equal credits. - 2. Based only on these quarterly transactions, prepare a classified income statement (with income from operations determined separately from other items) for the quarter ended September 30.
- 3. Calculate the net profit margin ratio at September 30. What does this ratio indicate about the ability of PPSS to control operations?
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Chapter 3 Solutions
Financial Accounting
Ch. 3 - Prob. 1QCh. 3 - Prob. 2QCh. 3 - Write the income statement equation and define...Ch. 3 - Explain the difference between a. Revenues and...Ch. 3 - Define accrual accounting and contrast it with...Ch. 3 - Prob. 6QCh. 3 - Explain the expense recognition principle.Ch. 3 - Explain why stockholders equity is increased by...Ch. 3 - Explain why revenues are recorded as credits and...Ch. 3 - Complete the following matrix by entering either...
Ch. 3 - Complete the following matrix by entering either...Ch. 3 - Prob. 12QCh. 3 - State the equation for the net profit margin ratio...Ch. 3 - Which of the following is not a specific account...Ch. 3 - Which of the following is not one of the criteria...Ch. 3 - The expense recognition principle controls a....Ch. 3 - Prob. 4MCQCh. 3 - Prob. 5MCQCh. 3 - Prob. 6MCQCh. 3 - Prob. 7MCQCh. 3 - Prob. 8MCQCh. 3 - Prob. 9MCQCh. 3 - Prob. 10MCQCh. 3 - Prob. 3.1MECh. 3 - Reporting Cash Basis versus Accrual Basis Income...Ch. 3 - Identifying Revenues The following transactions...Ch. 3 - Identifying Expenses The following transactions...Ch. 3 - Prob. 3.5MECh. 3 - Prob. 3.6MECh. 3 - Determining the Financial Statement Effects of...Ch. 3 - Prob. 3.8MECh. 3 - Prob. 3.9MECh. 3 - Identifying the Operating Activities in a...Ch. 3 - Prob. 3.11MECh. 3 - Prob. 3.1ECh. 3 - Reporting Cash Basis versus Accrual Basis Income...Ch. 3 - Identifying Revenues Revenues are normally...Ch. 3 - Identifying Expenses Revenues are normally...Ch. 3 - Prob. 3.5ECh. 3 - Determining Financial Statement Effects of Various...Ch. 3 - Recording Journal Entries Sysco, formed in 1969,...Ch. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Analyzing the Effects of Transactions in...Ch. 3 - Preparing an Income Statement Refer to E3-10....Ch. 3 - Prob. 3.12ECh. 3 - Analyzing the Effects of Transactions in...Ch. 3 - Prob. 3.14ECh. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - Prob. 3.20ECh. 3 - Prob. 3.1PCh. 3 - Recording Journal Entries (AP3-2) Ryan Terlecki...Ch. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.7PCh. 3 - Recording Nonquantitative Journal Entries (P3-1)...Ch. 3 - Prob. 3.2APCh. 3 - Prob. 3.3APCh. 3 - Prob. 3.4APCh. 3 - Prob. 3.5APCh. 3 - Prob. 3.6APCh. 3 - Accounting for Operating Activities in a New...Ch. 3 - Finding Financial Information Refer to the...Ch. 3 - Finding Financial Information Refer to the...Ch. 3 - Comparing Companies within an Industry Refer to...Ch. 3 - Analyzing a Company over Time Refer to the annual...Ch. 3 - Prob. 3.6CPCh. 3 - Evaluating an Ethical Dilemma Mike Lynch is the...
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