UIL ACCOUNTING REGIONAL 2011-R

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1 GROUP 1 UIL ACCOUNTING REGIONAL 2011-R A--Current Asset--Assets that are either used up or converted to cash during the normal operating cycle of the business, usually 1 year. B--Plant Asset--Long-lived assets that are used in the production or sale of other assets or services over several accounting periods. C--Contra Asset--An asset account whose balance decreases another asset account. D--Not an Asset--not property or other items of value owned by the business. 1. A Accounts Receivable--Current Asset 2. A Merchandise Inventory--Plants--Current Asset 3. C Allowance for Uncollectible Accounts--a contra asset. It decreases Accounts Receivable 4. A Petty Cash--Current Asset 5. C Accumulated Depreciation--Equipment--Contra Asset, decreases Equipment 6. D Insurance Expense--Not an asset. It is an owner's equity expense account. 7. B Office Equipment--Plant Asset 8. A Prepaid Insurance--Current Asset 9. B Buildings--Plant Asset 10. D Income Summary--Not an Asset. It is a temporary owner's equity account 11. B Land--Plant Asset 12. A Cash in Bank--Current Asset 13. D Accounts Payable--Not an Asset. It is a Liability. 14. B Delivery Equipment--Plant Asset 15. D Transportation In--Not an Asset. It is a cost account. 16. A Supplies--Current Asset

2 UIL ACCOUNTING REGIONAL 2011-R PAGE 2 GROUP C $22,861 Cost of the merchandise estimated to be in inventory that was stolen on February 1, 2011 using the gross profit method of estimating inventory Net Sales Cost of Delivered Merchandise Sales 14,900 Purchases 8,710 - Sales Returns Transportation In Sales Discounts 415 = Cost of Delivered Merchandise 9,305 = Net Sales 14,200 Beginning Inventory January 1, ,650 + Net Purchases (Cost of Merchandise Delivered) 9,305 = Cost of Merchandise Available for Sale 30,955 Net Sales 14,200 X Gross Profit Percentage 43% = Estimated Gross Profit 6,106 Net Sales 14,200 - Estimated Gross Profit 6,106 = Estimated Cost of Merchandise Sold 8,094 Cost of Merchandise Available for Sale 30,955 - Estimated Cost of Merchandise Sold 8,094 = Estimated Ending Merchandise Inventory 22,861 GROUP $6,000 Amount of Net Income allocated to Dagwood if the partner's share net income is the same ratio as the beginning balances of their Capital accounts Total Assets of each partner equals Total Capital. Dagwood Blondie Beasley Total Cash 30,000 10,000 Supplies 5, Equipment 10,000 10,000 4,500 Building 70,000 Land 10,000 Total 45, , ,000 = 150,000 Amount allocated to Dagwood $45,000 / by total capital $150,000 =.3 Net Income 20,000 X Dagwood's allocation 0.3 = Dagwood's share of Net Income 6,000

3 UIL ACCOUNTING REGIONAL 2011-R PAGE 3 GROUP 3 CONTINUED *19. $9,240 Amount of Net Income allocated to Blondie according to the amount of time worked in the business, expressed as 5 : 4 : 1 = 10 (5/10, 4/10, 1/10) Net Income 23,100 X Blondie's share 0.4 = Amount of net income allocated to Blondie 9, $8,175 Amount of Net Income allocated to Beasley if the partnership agreement does not state how net income is divided. If the partnership agreement does not state how net income or net loss is divided, all partners share equally. Beasley will receive 1/3 of the net income. Net Income 24,525 / Beasley's share 3 = Amount Beasley will receive 8,175 GROUP 4 Perpetual Inventory System--keeps a constant, up-to-date record of merchandise on hand. This system reports what merchandise is on hand at any point in time. Under the perpetual inventory system, every time a purchase or sale occurs, an entry is recorded in the Merchandise Inventory account. After every sale the cost of the merchandise sold is recorded. 21. D Merchandise Inventory is debited for the merchandise purchased for resale on account. 22. H Sales is credited when merchandise is sold to a customer on account for the selling price. *23. G Cost of Merchandise Sold is determined for every sale of merchandise *24. D Merchandise Inventory is decreased every time a sale is made. Periodic Inventory method--inventory records are updated only after a physical count of merchandise on hand is made. Inventory records are not adjusted for every purchase and sale. 25. F Purchases is debited for the merchandise for resale on account. (Merchandise Inventory is not affected at this time, only when adjustments are made at the end of the accounting period.) 26. E Accounts Payable is credited for the purchase on account to be paid later. 27. C Accounts Receivable is debited for the sale of merchandise on account. The customer will pay for the merchandise later.

4 UIL ACCOUNTING REGIONAL 2011-R PAGE 4 GROUP 4 CONTINUED 28. H Sales is credited for the merchandise sold on account. GROUP E $1, amount of gross profit for the year is FIFO method of inventory valuation is used. FIFO--First In, First Out costing method of assigning cost of inventory assumes that the first items purchased (first-in) are the first items sold (first-out) The FIFO method assumes that the items purchased most recently are the ones on hand at the end of the period. Determining ending inventory using FIFO Find number of units sold (102 units) Jan 1 Beginning Inventory Jan. Purchase Feb. Purchase Mar. Purchase April Purchase Oct. Purchase Total units purchased that has been sold 102 = Cost of units sold 1, Amount of Sales units sold X $21.95 selling price of each unit = $2, Items remaining in ending inventory Oct. Purchase Nov. Purchase Dec. Purchase Total units in ending inventory 8 = Cost of units in inv Cost of Units available 110 Units 1, Cost of Ending Inventory (See above) = Cost of Units Sold 1, Amount of Sales 2, Cost of Units Sold using FIFO (See above) 1, = Gross Profit 1, *30. C $1, Amount of gross profit for the year using LIFO method of estimating inventory. LIFO--Last-In, First-out costing method--assumes that the last items purchased (last-in) are the first items sold (first-out). The LIFO method assumes that the items purchased first are still on hand at the end of the period.

5 UIL ACCOUNTING REGIONAL 2011-R PAGE 5 GROUP 5 CONTINUED 30. C CONTINUED Finding number of units sold (102 units) Dec. Purchased Nov. Purchased Oct. Purchased April Purchased Mar. Purchased Feb. Purchased = Number of units sold 102 = Cost of Units Sold 1, Find cost of ending inventory using LIFO Feb. Purchase = Jan. Purchase = Jan. 1 Beginning Inventory = = Units in ending inventory 8 = Cost of End. Inv Cost of Units Available 1, Cost of ending inventory = Cost of units sold 1, Amount of Sales ( ) 2, Cost of units sold 1, = Gross Profit using LIFO method of estimating inventory 1, D $1, gross profit using the average cost method of inventory Weighted-Average Cost Method Cost available 1, / by number of units 110 = Average cost of units X units in ending inventory 8 = Cost of units in ending inventory Cost of units available 1, Cost of units in ending inventory = Cost of units sold 1, Amount of Sales ( ) 2, Cost of units sold 1, = Gross Profit using average method 1,160.76

6 UIL ACCOUNTING REGIONAL 2011-R PAGE 6 GROUP DR A partner's drawing account--would have a normal debit balance. Drawing is a temporary owner's equity account that decreases capital. To decrease capital debit. 33. DR Land--would have a normal debit balance. It is an asset. 34. CR Gain on Plant Assets--is a revenue account which increases owner's equity. It would have a normal credit balance. 35. CR Accumulated Depreciation--Equipment--is a contra asset account that decreases the asset equipment; therefore, it has a normal credit balance. 36. DR Cost of Merchandise Sold (perpetual Method)--would decrease sales which is a revenue owner's equity account and has a credit balance. Cost of Merchandise Sold would have a normal debit balance. 37. CR Allowance for Uncollectible Accounts--would have a normal credit balance because it is a contra asset account that decreases the asset account Accounts Receivable. GROUP $250 Amount of depreciation expense--equipment that was purchased in 2010 $1,500 payment on equipment X 4 payments = cost of equipment $6,000 (on Sept. 1, 2010) Straight line method of depreciation Cost of Equipment 6,000 - Scrap Value 750 = Amount to be depreciated 5,250 / years of useful life 7 = Annual Depreciation 750 / by months in a year 12 = Monthly depreciation X months to be depreciated in 2010 (Sept., Oct., Nov., Dec.) 4 = Depreciation Expense--Equipment in *39. $160,000 Amount for equipment in the bookkeeper's trial balance Accumulated Depreciation--Equipment 38,650 - Depreciation Expense on 2nd piece of equipment in 2010 (above # 38) 250 = Accumulated Depreciation--Equipment purchased in ,400 / by double-declining rate 40% = Book Value for ,000

7 UIL ACCOUNTING REGIONAL 2011-R PAGE 7 GROUP 7 CONTINUED *39. $160,000 CONTINUED Accumulated Depreciation--Equipment purchased in ,400 / by Cost of equipment = 100% - Depreciation rate 40% = 60% 60% = Depreciation in ,000 + Book Value of Equipment in ,000 = Original cost of equipment purchased in , $64,000 Amount of Accumulated Depreciation in the bookkeeper's trial balance 160,000 X 40% = 64,000 First years depreciation for 2009 *41. $166,000 Amount on the line for Equipment in the adjusted trial balance Cost of Equipment purchased in ,000 + Cost of Equipment purchased in ,000 = Total cost of Equipment 166,000 *42. $102,650 Balance in Accumulated Depreciation--Equipment after all adjusting and closing entries are posted for 2010 Accumulated Depreciation on equipment purchased in ,000 X 40% = 64,000 Depr. 1st year 160,000-64,000 = 96,000 Bk. Val. 96,000 X 40% = 38,400 Depr. 2nd year 96,000-38,400 = 57,600 Bk. Val. Depreciation first year 64,000 + Depreciation second year 38,400 + Depreciation on Equipment purchased in 2010 (#38) 250 = Balance in Accumulated Depreciation--Equipment after adjusting and 102,650 closing entries are posted for 2010

8 UIL ACCOUNTING REGIONAL 2011-R PAGE 8 GROUP 8 *43. D $4, Total Payroll Tax Expense the employer incurred for the 3rd quarter Social Security Tax Medicare Tax Paul 31,800 X 6.20% = 1, ,500 X 1.45% = John 8,740 X 6.20% = ,740 X 1.45% = George 3,240 X 6.20% = ,240 X 1.45% = Ringo 2,600 X 6.20% = ,600 X 1.45% = Neil 7,320 X 6.20% = ,320 X 1.45% = Total Social Security Tax 3, Total Medicare Tax Federal Unemployment Tax (FUTA) State Unemployment Tax (SUTA) Paul Reached ceiling of $7,000 = 0.00 Reached ceiling of $9,000 = 0 John Reached ceiling of $7,000 = 0.00 Reached ceiling of $9,000 = 0 George 3,160 X 0.80% = ,240 X 1.40% = Ringo 2,600 X 0.80% = ,600 X 1.40% = Neil 4,700 X 0.80% = ,700 X 1.40% = Total FUTA Total SUTA GROUP 9 TABLE 1 Total Social Security Tax 3, Total Medicare Tax Total Federal Unemployment Tax Total State Unemployment Tax = Payroll Tax Expense incurred for the 3rd quarter 4, Bank Statement Balance (given) (# 44) 4, Checkbook Balance Ck. Stud # , Add: Deposit in Transit (stub #4202) (# 45) 2, Add: Stop Pay. on lost check (given) Subtotal 7, Subtotal 7, Less: Outstanding Checks Less: # 4203 (check stub # 4203) # Service Charge Debit Card Transaction Stop Payment Fee Total Less Corrections Reconciled Balance # 47 7, Reconciled Balance # 47 7, *Verify amounts are correct on the check stub. 44. C $4, amount written on the December bank reconciliation on the line with a description of "Bank Statement Balance." See Reconciliation Statement above (amount given)

9 UIL ACCOUNTING REGIONAL 2011-R PAGE 9 GROUP 9 TABLE 1 CONTINUED 45. C $2, Deposit in Transit (Check Stub #4202 Deposit for Dec. 30) 46. B $44.00 Total amount of Outstanding checks (given) 47. B $7,290 Reconciled Balance See Bank Reconciliation Statement above 48. C $4, Beginning Cash in Bank Balance on the December Cash Proof The ending balance on the November Cash Proof is the Beginning Balance for the December Cash Proof 49. D <$333> net results of the correction to the checkbook. Less Corrections (See checkbook side of reconciliation statement) Plus Corrections (See checkbook side of reconciliation statement) = Net result of the reconciling items. <333.00> *50. E A true statement is not found in choices A through D After verifying the check stubs, the math was not correct. The ending balance for check # 4201 was incorrect by $ Balance should be $7, not $7, # 4201 # 4202 # 4203 Balance brought forward 5, , , Deposits Dec. 30 2, This check = Balance to carry forward 5, , , GROUP 10 TABLE 2 *51. $3,279 Amount of Store Supplies purchased during 2010 Store Supplies debit column Trial Balance 4,739 - Beginning Balance January 1, 2010 (given) 1,460 = Store Supplies purchased during ,279 *52. $1,540 Balance of Prepaid Insurance on January 1, 2010 Purchased 12-month insurance policy for $2,640 in 2009 Straight-line depreciation for 5 months in 2009

10 UIL ACCOUNTING REGIONAL 2011-R PAGE 10 GROUP 10 TABLE 2 CONTINUED *52. $1,540 CONTINUED 12-month insurance policy purchased in ,640 / by months in year 12 = Amount expired monthly 220 X number of months expired in 2009 (Aug. through Dec.) 5 = Total amount expired in , month insurance policy purchased in ,640 - Total amount expired in ,100 = Amount left on policy (unexpired). This will be the balance on Jan. 1, , $2,544 Book Value of Accounts Receivable on the Balance Sheet dated December 31, 2010 Balance of Accounts Receivable in the Trial Balance 3,179 - Adjustment for writing-off the account of Jan Aniston 260 = Amount of Accounts Receivable left (# 56) 2,919 - Amount of adjustment for Accts. Rec. for Allow. for Uncollectible Accts. (given) 375 = Book Value of Accounts Receivable on the Balance Sheet dated Dec. 31, , $30,700 Book Value of the Equipment on the Balance Sheet dated Equipment purchased from Alcom (given) 27,800 + Correcting entry to take out of Maintenance Expense and put into Equipment 3,000 = Total Equipment 30,800 - Scrap Value 3,500 = Total Depreciation 27,300 / by years of useful life 7 = Annual Depreciation 3,900 / months in a year 12 = Monthly Depreciation 325 X months to be depreciated in 2010 (May through Dec.) 8 = Depreciation of Equipment in 2010 (Expense) 2,600 + Amount on the Trial Balance for Accumulated Depreciation 50,000 = Total Accumulated Depreciation on Equipment 52,600 Amount of Equipment on the Trial Balance 80,300 + Correction from Maintenance Expense to Equipment 3,000 = Total Equipment 83,300 - Accumulated Depreciation 52,600 = Book Value of Equipment on the Balance Sheet for December 31, ,700

11 UIL ACCOUNTING REGIONAL 2011-R PAGE 11 GROUP 10 TABLE 2 CONTINUED *55. $38,521 Total Expenses on the Income Statement for the 12 months ending Dec. 31, 2010 See work sheet Income Statement Debit for expenses. (Starting with Advertising) 56. $2,919 Balance of Accounts Receivable on the adjusted trial balance See # 53 & work sheet 57. $375 Allowance for Uncollectible Accounts The balance on the adjusted trial balance will be the amount determined to be uncollectible using the aging of Accounts Receivable of $375 (given) *58. $1,617 Balance of Prepaid Insurance on the adjusted trial balance Balance of Prepaid Insurance on Jan. 1, 2010 (# 52) 1,540 + Insurance premium of August 1, ,772 = Total Prepaid Insurance in 2010 (# 68) 4,312 Adjusting entry for 2010 August 1, 2010 insurance policy 2,772 / by months in a year 12 = Amount expired per month (Monthly premium) 231 X number of months expired (Aug. through Dec.) 5 = Total amount expired in ,155 + Amount expired on 2009 policy (Jan. through Dec.) ($220 X 7 = $1,540) 1,540 = Total adjustment for prepaid insurance (# 64) 2,695 Total Prepaid Insurance in ,312 - Total adjustment for prepaid insurance 2,695 = Balance of Prepaid Insurance on the Adjusted Trial Balance (or) The amount 1,617 of insurance unexpired in 2010 ($231 X 7 = $1,617) (Jan. through Sept.) 59. $83,300 Equipment balance on the Adjusted Trial Balance See work sheet for Equipment 60. $52,600 Accumulated Depreciation--Equipment balance on the adjusted trial balance See # Total accumulated depreciation or see work sheet

12 UIL ACCOUNTING REGIONAL 2011-R PAGE 12 GROUP 10 TABLE 2 CONTINUED **61. $8,070 Accounts Payable balance on the adjusted trial balance Find balance of the Sales Ret. & Allowances in the Trial Balance Net Purchases Purchases 45,364 + Transportation In 2,178 = Cost of Delivered Merchandise (# 74) 47,542 - Purchases Discount 3,278 - Purchases Ret. & Allowances 1,560 = Net Purchases ( # 75) 42,704 + Beginning Merchandise Inventory 25,210 = Cost of Merchandise Available for Sale (# 73) 67,914 - Ending Merchandise Inventory 24,615 = Cost of Merchandise Sold (# 76) 43,299 Net Income 14,400 + Expenses 38,521 = Gross Profit 52,921 + Cost of Merchandise Sold 43,299 = Net Sales 96,220 Sales 99,684 - Sales Discounts 2,494 - Net Sales (see above) 96,220 = Sales Returns & Allowances 970 Plug $970 into Sales Returns & Allowances Find Debit Total in Trial Balance and Total Credits Debit Total 238,678 - Credit Total 229,983 = Total Liabilities (# 69) 8,695 - Debit Card transaction to pay supplier in Table = Total Liabilities on adjusted trial balance 8, $2,100 Advertising Expense Balance on the Adjusted Trial Balance Advertising Expense on the Trial Balance 2,455 - Plus correction in checkbook for Stop Payment on check for Advertising 355 = Balance of Advertising Expense on Adjusted Trial Balance 2,100

13 UIL ACCOUNTING REGIONAL 2011-R PAGE 13 GROUP 10 TABLE 2 CONTINUED 63. $535 Maintenance Expense Balance on the Adjusted Trial Balance Maintenance Expense on the Trial Balance 3,510 - Correcting entry for Equipment installation instead of Maintenance 3,000 + Correction to replenishment of Petty Cash Window cleaning (Maintenance Exp) 25 = Balance of Maintenance Expense on the Adjusted Trial Balance $185 Bad Debt Expense Balance on the Adjusted Trial Balance (adjustment for Allowance for Uncollectible Accounts) Balance of Allowance for Uncollectible Accounts on Trial Balance Write-off of Jan Aniston's account before adjusting entry 260 = Balance of Allowance for Uncollectible Accounts on Adjusted Trial Balance 190 Bad Debts are figured on aged accounts receivable. So to bring the balance of Allowance for Uncollectible Accounts balance up to the amount of estimated Bad Debts subtract the Balance of the account from the amount estimated bad debts to find the amount of adjustment and the amount of Bad Debts Expense. Estimated Bad Debts on Aged Accounts Receivable Allowance for Uncollectible Accounts 190 = Bad Debts Expense and adjusted trial balance $3,534 Store Supplies Expense balance on the Adjusted Trial Balance Find adjustment for Store Supplies (amount used) Store Supplies on the Trial Balance 4,739 - Physical Inventory (given) 1,205 = Store Supplies Expense balance on the adjusted trial balance (amount of adj) 3, $2,695 Insurance Expense balance on the Adjusted Trial Balance See # 58 for adjustment to Prepaid Insurance, which is the amount expired and charged to insurance expense. 67. $7,623 Cash in Bank balance on unadjusted trial balance See Check Stub and Checkbook side of the Bank Reconciliation Statement (Group 9 Table 1). *68. $4,312 Prepaid Insurance balance on the unadjusted trial balance See # 58

14 UIL ACCOUNTING REGIONAL 2011-R PAGE 14 GROUP 10 TABLE 2 CONTINUED **69. $8,695 Accounts Payable balance on the unadjusted trial balance See # 61 (When subtracting Total Credits from Total Debits in the Trial Balance) **70. $970 Sales Returns & Allowances balance on the unadjusted trial balance See # $74,326 Karri Snow, Capital balance on the unadjusted trial balance Karri Snow, Capital on January 1, 2010 (given) 68,326 + Owner's Capital account had 1 credit posted to it on June 4, 2010 (given) 6,000 = Karri Snow, Capital balance on unadjusted trial balance 74, $30,000 Karri Snow, Drawing balance on the unadjusted trial balance The owner's drawing account had $2,500 debit posted on the 10th day of each month. Amount posted per month 2,500 X months of the year 12 = Amount of Karri Snow, Drawing on the unadjusted trial balance 30, E $67,914 Amount of Cost of Merchandise Available for Sale See # C $47,542 Amount of Cost of Delivered Merchandise See # D $42,704 Net Purchases See # F $43,299 Cost of Merchandise Sold See # 61

15 UIL ACCOUNTING REGIONAL 2011-R PAGE 15 GROUP 12 TABLE 2 CONTINUED 77. $11,250 Amount of gain on sale of all equipment purchased prior to January 1, A Gain on Sale Trial Balance total for Equipment 80,300 - Purchase of Equipment from Alcom 27,800 = Amount of Equipment prior to January 1, ,500 - Balance of accumulated Depreciation in the Trial Balance Credit column 50,000 (Would be the amount of depreciation on equipment prior to 2010 = Book Value of Equipment purchased prior to ,500 Sold Equipment for 13,750 - Book value of Equipment purchased prior to ,500 = Gain on Sale of Equipment 11,250 See # $400 Amount of loss on sale of all equipment purchased prior to January 1, B Loss on Sale See # 77 for book value of equipment Book Value of Equipment 2,500 - Amount received for sale of Equipment 2,100 = Loss on Sale of Equipment because book value is greater than amount of sale <400> See # 79

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