For each situation, select the assumption, principle, or constraint that has been violated, if any.

(a) Flanner Company recognizes revenue at the end of the production cycle but before the sale. The price of the product, as well as the amount that can be sold, is not certain.
(b) Falk Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.)
(c) Forgetta Hospital Supply Corporation reports only current assets and current liabilities on its balance sheet. Property, plant, and equipment and bonds payable are reported as current assets and current liabilities, respectively. Liquidation of the company is unlikely.

Matching principle
Monetary unit assumption
MaterialityCost principle or conservatism
Full disclosure principle
No violation
Time period assumption
Economic entity assumption
Going concern assumption
Revenue recognition principle

I tried them, however, was wrong, please help! =)
See, I said full disclosure principle for C, but was told I was wrong.

For A, I said time period assumption.

For B, I said going concern assumption.

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Chapter 15

P15-1
Comparative statement data for Douglas Company and Maulder Company, two competitors, appear below. All balance sheet data are as of December 31, 2009, and December 31, 2008.

Douglas Company Maulder Company
2009 2008 2009 2008
Net sales ,549,035 9,038
Cost of goods sold 1,080,490 241,000
Operating expenses 302,275 79,000
Interest expense 8,980 2,252
Income tax expense 54,500 6,650
Current assets 325,975 2,410 83,336 ,467
Plant assets (net) 521,310 500,000 139,728 125,812
Current liabilities 65,325 75,815 35,348 30,281
Long-term liabilities 108,500 90,000 29,620 25,000
Common stock, par 500,000 500,000 120,000 120,000
Retained earnings 173,460 146,595 38,096 29,998

Instructions
(a) Prepare a vertical analysis of the 2009 income statement data for Douglas Company and Maulder Company in columnar form.
(b) Comment on the relative profitability of the companies by computing the return on assets and the return on common stockholders’ equity ratios for both companies.

P15-6 The comparative statements of Dillon Company are presented below.

DILLON COMPANY
Income Statement
For Year Ended December 31

2009 2008
Net sales (all on account) 0,000 0,000
Expenses
Cost of goods sold 415,000 354,000
Selling and administrative 120,800 114,800
Interest expense 7,800 6,000
Income tax expense 18,000 14,000
Total expenses 561,600 488,800
Net income ,400 ,200

DILLON COMPANY
Balance Sheets
December 31

Assets 2009 2008
Current assets
Cash ,000 ,000
Short-term investments 18,000 15,000
Accounts receivable (net) 86,000 74,000
Inventory 90,000 70,000
Total current assets 215,000 177,000
Plant assets (net) 423,000 383,000
Total assets 8,000 0,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable 2,000 0,000
Income taxes payable 23,000 20,000
Total current liabilities 145,000 130,000
Long-term liabilities
Bonds payable 120,000 80,000
Total liabilities 265,000 210,000
Stockholders’ equity
Common stock ( par) 150,000 150,000
Retained earnings 223,000 200,000
Total stockholders’ equity 373,000 350,000
Total liabilities and stockholders’ equity 8,000 0,000

Additional data:
The common stock recently sold at .50 per share.
The year-end balance in the allowance for doubtful accounts was ,000 for 2009 and ,400 for 2008.

Instructions
Compute the following ratios for 2009.

(a) Current.
(b) Acid-test.
(c) Receivables turnover.
(d) Inventory turnover.
(e) Profit margin.
(f) Asset turnover.
(g) Return on assets.
(h) Return on common stockholders’ equity.
(i) Earnings per share.
(j) Price-earnings.
(k) Payout.
(l) Debt to total assets.
(m) Times interest earned.

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Ok, I need help with my accounting project. It’s due by 8 PM on Monday 3/2.

Given the following information about a company, prepare a Profit and Loss Statement (income statement), Balance Sheet, and compute the Current Ratio and Quick Ratio.

o Inventories ,000
o Current Liabilities ,000
o Quick Assets ,000
o Sales ,000
o General Expenses ,000

Current Ratios = Assets / Liabilities

Quick Ratio = (Current Assets – Inventories) / Current Liabilities

Are SALES included in assets on the balance sheet? I thought they were just on the P/L? This is where I’m getting confused. If I’m doing this correctly, If got P&L at a total net profit of ,000 (Sales less expenses)? If I don’t add sales into blance sheet, I come up with a total of ,000??? But then the Quick Ratio doesn’t make sence if that’s true.

ANY HELP WOULD BE APPRECIATED!!!
So this is what I have:

P&L
______________
Net Sales ,000
Less General Expenses ,000
Total Profit ,000

Balance Sheet
ASSETS
Inventory ,000
Quick Assets ,000
Total Assets ,000

LIABILITIES
Liabilities ,000
EQUITIES
Equity ,000
Total L&E ,000

Current Ratio
,000 / ,000 = 2.4

Quick Ratio
(,000/,000)/,000 = .4

Is all of the above correct based on the question?

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I’m working on a project and have to forecast a company’s balance sheet 6 years into the future. I used the percentage-of-sales method and wound up with negative net fied assets for the final two years. This was due to an accumulated depreciation higher than fixed assets for the year. When combining them with total current assets, both years come out positive in total assets.

Is this something that can stay as is, or do net fixed assets always have to be positive?

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1) Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined, the amounts can not be changed.

1. False

2. True

2) When exchanging equipment, if the trade-in allowance is greater than the book value a loss results.

1. False

2. True
3) Allowance for Doubtful Accounts is listed on the balance sheet under the caption

1. current assets

2. fixed assets

3. owner’s equity

4. investments

4) Dalton Company uses the estimate based on analysis of receivables to account for uncollectible accounts. The company has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit

1. Allowance for Doubtful Accounts and credit Accounts Receivable

2. Accounts receivable and credit Allowance for Doubtful Accounts

3. Uncollectible Accounts Expense and credit Accounts Receivable

4. Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts
5) Allowance for Doubtful Accounts has a debit balance of 0 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 4% of net sales. If net sales are 0,000, the amount of the adjusting entry to record the provision for doubtful accounts is

1. ,500

2. ,500

3. none of the above

4. ,000
6) A detective internal control is designed to find an error or misstatement after it has occurred.

1. True

2. False
7) The following lots of a particular commodity were available for sale during the year:

Beginning inventory 5 units at
First purchase 15 units at
Second purchase 10 units at
Third purchase 10 units at

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method?

1. ,510

2. ,220

3. ,375

4. ,380
One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

1. True

2. False

9) Companies having inventory decreases due to lower of cost or market valuations will disclose the information to stockholders.

1. True

2. False
10) Merchandise with an invoice price of ,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled 0. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

1. ,096

2. ,900

3. ,200

4. ,704
11) Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as

1. sales returns

2. sales when the credit card company remits the cash

3. cash sales

4. sales on account

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