1 ACCOUNTING 105 CONCEPTS REVIEW A note from the tutors: This handout is designed to help you review important information as you study for your cumulative final exam. While it does cover many important topics, it is not meant to be 100% inclusive. You will still be responsible to know any concepts and vocabulary contained in chapters 1 through 14 (excluding chapter 12) regardless of whether it is covered in this review or not. Beginning in the Fall Semester of 2012, the Accounting 105 cumulative final exam will be in multiple choice format but you will still need to know how to calculate the answer. Please note that in the actual test, you will be required to perform many of the same calculations as in our review problem 13, but you may be using different sets of numbers for each calculation required. We have chosen to use one set of numbers for all of the calculations required in review problem 13 to save time. Problem 1 A company known as Brian s Landscaping, Inc. began business on January 1, Journalize the following transactions: 01/01/2012 Brian invested in his business by buying $50,000 worth of common stock. 01/01/2012 Brian purchased a truck costing $25,000; he paid $6,000 cash and will pay the remainder at a later date. He will depreciate the truck using straight line depreciation. Useful life is anticipated to be six years with a salvage value of $1, /03/2012 Brian purchased $1,500 worth of office supplies. 01/05/2012 Brian completed landscaping plans for a customer worth $3,000. The customer paid cash. 01/15/2012 Brian completed landscaping plans and billed the client for $2, /01/2012 Brian hired some part-time workers to assist him in his business. 02/05/2012 The customer billed on 01/15/2012 paid his bill in full. 02/10/2012 A customer paid Brian $3,000 in advance for a landscaping plan. 02/20/2012 Brian completed a landscaping plan for a customer for $2,000. The customer paid using his Master Card. Master card charges a fee of 3%. 02/28/2012 Brian recorded the payroll and payroll taxes for the month. His employees earned a total of $1,800. The following employee withholding tax rates were used: federal income tax rate 10%; social security 6.2%; medicare 1.45%; state income tax 3.07%; local income tax 1%. Brian also recorded the employer payroll taxes including the employer s portion of social security and medicare, federal unemployment tax of $15 and state unemployment tax of $25. Round to the nearest whole dollar. 03/01/2012 Brian paid the annual premium of $3,300 for a one year policy of liability insurance.
2 03/15/2012 Brian completed the landscaping plan for the customer who paid in advance on 02/10/ /01/2012 Brian borrowed $5,000 by signing a six month, 9% note. Problem 2 On April 1, 2012, Brian opened a garden supply store. Journalize the following transactions using both the periodic and the perpetual inventory systems. 04/01/2012 Brian purchased $5,000 worth of merchandise from the ABC Garden Supply Co. on account, terms 1/10, net 30, FOB shipping point. Freight charges were $150 (paid in cash by the appropriate party.) 04/04/2012 Brian returned $500 worth of merchandise to ABC Garden Supply Co. 04/10/2012 Brian paid his bill to ABC Garden Supply Co. in full, less the applicable discount. Problem 3 Journalize the following May transactions using both the periodic and the perpetual inventory systems: 05/05/2012 Sold $200 worth of garden supplies for cash. The merchandise cost $ /07/2012 Sold $1000 worth of garden supplies to Tyler Co. on account, terms 2/10, net 30. The merchandise cost $ /10/2012 Tyler Co. returned $200 worth of supplies which originally cost $ /17/2012 Tyler Co. paid its bill in full, less any applicable discount. Problem 4 On December 31, 2012, Brian is told by his accountant that he must make some adjusting entries. Journalize the following adjusting entries as of 12/31/2012. Refer back to the original entries in Problem 1 for information needed for depreciation, supplies, insurance and the note payable. 1. An inventory of supplies showed that only $300 worth of supplies remained. 2. The account Prepaid Insurance must be updated to show the appropriate balance as of 12/31/ Depreciation on the truck must be recognized. 4. Wages of the employees earned in December but not due to be paid until January totaled $1, Interest has accrued on the Note Payable. 6. On December 31, 2012, Brian completed a landscaping plan worth $1,500. It has not yet been recorded. 7. As of December 31, 2012, $2,000 of unearned revenue has been earned.
3 Problem 5 Brian must determine which method of valuing his ending inventory and cost of goods sold he will use in his store. Brian has the information shown below regarding his merchandise. As of December 31, 2012, Brian had 175 units remaining. Using this information, calculate: 1. Total cost of goods available for sale; 2. Total value of Brian s ending inventory using three different assumptions: FIFO, LIFO and Weighted Average; 3. Total cost of goods sold using FIFO, LIFO and Weighted Average; Date Units Unit Cost Beginning Inventory 150 $50 04/15/2012 Purchase 200 $52 06/18/2012 Purchase 150 $54 07/10/2012 Purchase 175 $55 09/04/2012 Purchase 75 $57 Problem 6 Problem 7 (Continuation of Problem 5 above.) Due to the introduction of new models at the end of the year and a weakened economy, the market value of Brian s inventory is now $45 per unit. How would Brian report the value of his ending inventory on his balance sheet? Brian decides to raise some badly needed cash by issuing stock to the general public. Journalize the following transactions. 01/15/2013 Issues 10,000 shares of common stock, no par value, $2.00 stated value, for $60, /01/2013 Declares a.50 cent per share cash dividend to all common stockholders of record on 08/01/2013, payable on 08/15/ /15/2013 Paid the dividend. 09/30/2013 Declared a 2-for-1 stock split. 11/15/2013 Declared a 10% stock dividend on its outstanding shares of common stock to stockholders of record on 12/15/2013, to be distributed on 01/15/2014. The common stock is currently selling at $4.00 per share.
4 Problem 8 Classify the following accounts by placing an in the appropriate box. Account Current Assets Property, Plant & Equipment Current Liabilities Long Term Liabilities Common Stock Stockholders Equity Retained Earnings Revenue Dividends Expenses Wages Payable Prepaid Ins. Acct. Receivable Equipment Utilities Expense Cost of Goods Sold Sales Cash Acct. Payable Common Stock Supplies Mortgage Payable Dividends Accumulated Depreciation Equipment Unearned Revenue Dividends Payable Dividends Distributable Inventory Bonds Payable Allowance for Doubtful Accounts
5 Problem 9 On January 2, 2014, Brian decides to set up a Petty Cash fund and establishes it at $200. At the end of the month, Petty Cash had the following receipts: meals $12.00; postage $44.00; transportation $25.00; meals $18.00; shipping $30.00; gasoline $54.00; miscellaneous $ On January 31, the fund contains $5.00 and Brian decides to replenish the fund. 1. Journalize the entry to establish the fund. 2. Journalize the entry to replenish the fund. 3. Prepare the required journal entry if Brian should decide to increase the fund to $300. Problem 10 Brian uses the allowance method of recording bad debt expense. On December 31, 2014, it is estimated that 1% of net credit sales will be uncollectible. Prior to the adjustment, Brian s ledger had the balances shown below. All sales are on account. Journalize the appropriate adjusting entry. Sales $175,000 Sales Returns & Allowances $2,000 Allowance for Doubtful Accts. $650 Problem 11 On March 15, Brian purchased a piece of land on which he intends to build a warehouse. The land cost $150,000. The real estate agent s commission was $9,000. He had to pay off a lien for back taxes totaling $6,000. The land had a dilapidated building which he demolished costing $11,000. Salvage was $2,300. Current year s real estate taxes were $3,300. He paid an architect $7,500 for plans for the new warehouse. He had a driveway constructed costing $4,500. Journalize the transaction. Problem 12 On June 30, 2016, Brian sells equipment for $1,000 which he originally purchased for $16,000 on January 1, He used straight line depreciation with a useful life of four years, no salvage value. On December 31, 2015, his balance sheet had the account balances shown below. Equipment $16,000 Accumulated Depreciation Equipment $12,000 Journalize all entries required on June 30, 2016.
6 Problem 13 Assume that Brian s Garden Supply uses a periodic inventory system. On December 31, 2013, the ending inventory in Brian s Garden Supply was $9,600. On December 31, 2014, Brian s business had post-adjustment account balances listed below. Brian's Garden Supply Post-Adjustment Trial Balance For the Year Ended December 31, 2014 Account Debit Credit Cash 28,895 Accounts Receivable 35,000 Allowance for Doubtful Accounts 870 Inventory 11,600 Supplies 950 Prepaid Insurance 1,400 Truck 25,000 Accumulated Depreciation - Truck 5,000 Equipment 16,000 Accumulated Depreciation - Equipment 4,000 Notes Payable (due 9/1/2016) 5,000 Bonds Payable 15,000 Accounts Payable 1,850 Wages Payable 300 Unearned Revenue 400 Interest Payable (due 9/1/2016) 700 Common Stock 50,000 Additional Paid in Capital 10,000 Retained Earnings 26,200 Dividends 10,000 Sales 124,500 Sales Returns & Allowances 12,100 Sales Discounts 1,900 Purchases 60,500 Purchase Returns & Allowances 1,800 Freight-in 4,250 Wages Expense 16,700 Depreciation Expense 9,000 Telephone Expense 5,250 Advertising Expense 6,375 Interest Expense , ,620
7 Using this information, calculate the following: 1. Net sales 2. Book value of depreciable assets 3. Net realizable value of accounts receivable 4. Total current assets 5. Cost of goods sold 6. Gross profit 7. Net income or loss 8. Ending balance (post closing) in retained earnings 9. Total property, plant and equipment 10. Total current liabilities 11. Total long-term liabilities 12. Total stockholders equity Problem 14 Costs of long lived assets are allocated as expenses in a rational, systematic manner over the assets useful lives. Depending on the type of asset, the cost allocation system will be one of the following: depreciation, depletion, or amortization. For the assets listed below, indicate which type of cost allocation system Brian will use for each type of asset by placing an in the appropriate box. Asset Depreciation Depletion Amortization Forests Computers Oil Limited life franchise Trucks Copyrights Buildings Patents
8 Problem 15 Brian wants to understand the principles of internal controls required and what actions he can take to comply with the internal control requirements. The principles of internal control include the following: A. Establishment of responsibility B. Segregation of duties C. Documentation procedures D. Physical controls E. Independent internal verification F. Human resource control For each action listed below, identify by letter the principle of internal control it follows. 1. Using a cash register in the store. 2. Having one person make the deposits and a different person reconcile the account. 3. Using prenumbered checks. 4. Requiring employees to take vacations. 5. Having only one person using the cash register during a work shift. 6. Having a supervisor comparing the bank deposits with the register receipts. 7. Keeping cash in the safe until it is deposited. 8. Conducting background checks on all employees. 9. One employee maintains the record of an asset; another employee has custody of the asset. 10. Cash register receipts. 11. Creating passcodes for employees. 12. Installing an alarm system 13. The key to the warehouse is kept by the warehouse supervisor.
9 Problem 16 Using the following accounts and balances, prepare the necessary closing entries. Cash 665 Accounts Receivable 4,210 Allowance for Doubtful Accounts 870 Inventory 11,600 Supplies 950 Prepaid Insurance 1,400 Truck 16,000 Accumulated Depreciation - Truck 6,400 Equipment 10,000 Accumulated depreciation - Equipment 4,000 Notes Payable 5,000 Bonds Payable 20,000 Accounts Payable 1,850 Wages Payable 300 Unearned Revenue 400 Interest Payable 600 Common Stock 20,000 Additional Paid-in Capital 10,000 Retained Earnings 26,300 Dividends 1,000 Sales 36,900 Sales Returns & Allowances 2,100 Sales Discounts 900 Rent Revenue 1,913 Cost of Goods Sold 18,850 Wages Expense 6,700 Depreciation Expense 4,200 Telephone Expense 858 Advertising Expense 2,200 Interest Expense 700 Problem 17 An aging schedule for the Duck & Goose Corp. calculated total estimated bad debts of $7,948. As of December 31, 2013, the Allowance for Doubtful Accounts had a credit balance of $1,290. Journalize the adjusting entry required on December 31, 2013.
10 Problem 18 Prepare the bank reconciliation and the necessary journal entries at September 30, 2013 for Josh s Computer Repair, Inc. using the following information: 1. The cash balance per books was $6, Total of the outstanding checks was $1, Deposit in transit was $ The cash balance per bank was $8, The bank collected a note of $1,500 plus interest of $45, less a fee of $15. No interest has been accrued. 6. There was a bank service charge of $3. 7. Check no was written for $373 but recorded at $ A customer s check for $406 was returned due to non-sufficient funds. Problem 19 Precision Manufacturing, Inc. issues $100,000, 5 year, 6% bonds at 103, with interest payable on July 1 and January 1. a) Prepare the journal entry to record the sale on January 1, b) Assuming that the bonds were sold at 96 instead, prepare the journal entry to record the sale of the bonds on January 1, Problem 20 Assume that Precision Manufacturing, Inc. issues $100,000, 5 year, 8% bonds at 94, with interest payable on July 1 and January 1. a) What is the total discount? b) What is the total cost of borrowing? c) What would the semi-annual amortization of the discount be using straight line amortization? d) Record the entry on July 1, 2013 to pay the interest and record the amortization of the discount. e) What would the carrying value of the bonds be on January 1, 2014 after recording the January 1 interest? Problem 21 On March 31, 2014, the stockholders equity section of Walton, Inc. s Balance Sheet lists the following balances: Common Stock $500,000, $5 par value; Retained Earnings $1,200,000. Walton, Inc. wants to understand the effect on its stockholder equity if it chooses to do either a 2-for-1 stock split or a 10% stock dividend. The stock is currently trading for $15 per share. Prepare a chart comparing the effects of both actions on the different elements of stockholders equity. Include columns for Before Action, After Stock Dividend, and After Stock Split.
11 Problem 22 The Everbright Corporation is preparing its Statement of Cash Flows using the Indirect Method. It had the following transactions during 2013: a) Issued $100,000 par value common stock for cash. b) Purchased new machinery for its plant for $50,000. c) Declared and paid a cash dividend of $25,000. d) Redeemed $200,000 of bonds payable. e) Sold land originally purchased for $250,000 for $225,000. f) Collected $36,000 of accounts receivable. g) Converted $30,000 face value of bonds payable into $30,000 par value common stock. h) Paid a total of $29,000 of accounts payable. i) On January 1, 2013, sold machinery for $20,000. The machinery was originally purchased on January 1, 2007 for $60,000. The company uses straight line depreciation, no salvage value, and a useful life of 10 years. j) Bought land with a fair market value of $600,000 in exchange for a patent. For each transaction listed above, indicate in which section of the Indirect Statement of Cash Flows Everbright would report the transaction: Operating Activities; Investing Activities; Financing Activities; or Non-Cash Investing and Financing Activities. We recommend that you additionally review the following exercises found in Weygandt, J., P. Kimmel, and D. Kieso. Financial and Managerial Accounting.1st ed. John Wiley & Sons, Print.: Accounting Equation BE1-3 Page 34 Ratios BE14-9 and BE14-10 Pages Come to the Tutoring Center for answers to these problems.
12 ACCOUNTING 105 CONCEPTS REVIEW ANSWER KEY Problem 1 Journal entries Date Description Debit Credit 01/01/2012 Cash 50,000 Common Stock 50,000 01/01/2012 Truck 25,000 Accounts Payable 19,000 Cash 6,000 01/03/2012 Supplies 1,500 Cash 1,500 01/05/2012 Cash 3,000 Service Revenue 3,000 01/15/2012 Accounts Receivable 2,500 Service Revenue 2,500 02/01/2012 No journal entry is required. 02/05/2012 Cash 2,500 Accounts Receivable 2,500 02/10/2012 Cash 3,000 Unearned Revenue 3,000 02/20/2012 Cash 1,940 Service Charge Expense 60 Service Revenue 2,000 02/28/2012 Salaries and Wages Expense 1,800 Federal Income Tax Payable 180 FICA Taxes Payable 138 State Income Tax Payable 55 Local Income Tax Payable 18 Salaries and Wages Payable 1,409
13 Date Description Debit Credit 02/28/2012 Salaries and Wages Payable 1,409 Cash 1,409 02/28/2012 Payroll Tax Expense 178 FICA Taxes Payable 138 State Unemployment Tax Payable 25 Federal Unemployment Tax Payable 15 03/01/2012 Prepaid Insurance 3,300 Cash 3,300 03/15/2012 Unearned Revenue 3,000 Service Revenue 3,000 09/01/2012 Cash 5,000 Note Payable 5,000 Problem 2 Journal Entries for Purchases by a Merchandiser Perpetual Inventory System Date Description Debit Credit 04/01/2012 Inventory 5,000 Accounts Payable ABC Garden Supply 5,000 04/01/2012 Inventory 150 Cash /04/2012 Accounts Payable ABC Garden Supply 500 Inventory /10/2012 Accounts Payable ABC Garden Supply 4,500 Cash 4,455 Inventory (4,500 x 1%) 45 Accounts Payable - ABC Garden Supply 5, ,500
14 Problem 2 Journal Entries for Purchases by a Merchandiser Period Inventory System Date Description Debit Credit 04/01/2012 Purchases 5,000 Accounts Payable ABC Garden Supply 5,000 04/01/2012 Freight-In 150 Cash /04/2012 Accounts Payable ABC Garden Supply 500 Purchase Returns & Allowances /10/2012 Accounts Payable ABC Garden Supply 4,500 Cash 4,455 Purchase Discounts 45 Problem 3 Journal Entries for Sales by a Merchandiser Perpetual Inventory System Date Description Debit Credit 05/05/2012 Cash 200 Sales Revenue 200 Cost of Goods Sold 100 Inventory /07/2012 Accounts Receivable Tyler Co. 1,000 Sales Revenue 1,000 Cost of Goods Sold 500 Inventory /10/2012 Sales Returns & Allowances 200 Accounts Receivable Tyler Co. 200 Inventory 100 Cost of Goods Sold /17/2012 Cash 784 Sales Discounts (800 x 2%) 16 Accounts Receivable Tyler Co. 800
15 Accounts Receivable - Tyler Co. 1, Problem 3 Journal Entries for Sales by a Merchandiser Periodic Inventory System Date Description Debit Credit 05/05/2012 Cash 200 Sales Revenue /07/2012 Accounts Receivable Tyler Co. 1,000 Sales Revenue 1,000 05/10/2012 Sales Returns & Allowances 200 Accounts Receivable Tyler Co /17/2012 Cash 784 Sales Discounts 16 Accounts Receivable Tyler Co. 800 Problem 4 Adjusting Entries Date Description Debit Credit Adjusting Entries 1. 12/31/2012 Supplies Expense 1,200 Supplies 1,200 Supplies Supplies Expense 1,500 1,200 1,
16 Date Description Debit Credit 2. 12/31/2012 Insurance Expense 2,750 Prepaid Insurance 2,750 3,300 divided by 12 = 275 per month 275 x 10 months = 2,750 Prepaid Insurance 3,300 2, /31/2012 Depreciation Expense 4,000 Accumulated Depreciation Truck 4,000 25,000 Cost -1,000 Salvage Value 24,000 Depreciable Cost 6 Divide by useful life 4,000 Annual Depreciation Expense Depreciation Expense Accumulated Depreciation - Truck 4,000 4, /31/2012 Wages Expense 1,000 Wages Payable 1, /31/2012 Interest Expense 150 Interest Payable 150 Face Value of Note Annual Interest Rate # of months 12 5,000 9% 4 =
17 Date Description Debit Credit 6. 12/31/2012 Accounts Receivable 1,500 Service Revenue 1, /31/2012 Unearned Revenue 2,000 Service Revenue 2,000 Problem 5 FIFO, LIFO and Weighted Average Cost of Goods Available for Sale Date Units Unit Price Total Beginning Inventory 150 $50 $7,500 04/15/2012 Purchase 200 $52 $10,400 06/18/2012 Purchase 150 $54 $8,100 07/10/2012 Purchase 175 $55 $9,625 09/04/2012 Purchase 75 $57 $4,275 Total 750 $39,900 FIFO Ending Inventory Units Unit Price Total 09/04/2012 Purchase 75 $57 $4,275 7/10/2012 Purchase 100 $55 $5,500 Total Ending Inventory 175 $9,775 Total Cost of Goods Available $39,900 Less: Ending Inventory 9,775 Cost of Goods Sold $30,125 LIFO Ending Inventory Units Unit Price Total Beginning Inventory 150 $50 $7,500 4/15/2012 Purchase 25 $52 $1,300 Total Ending Inventory 175 $8,800 Total Cost of Goods Available $39,900 Less: Ending Inventory $8,800 Cost of Goods Sold $31,100
18 Weighted Average Total Cost of Goods Available for Sale $39,900 Divide by total number of units available 750 Average price per unit $53.20 Ending Inventory in units 175 Average price per unit $53.20 Total Ending Inventory $9,310 Total Cost of Goods Available $39,900 Less: Ending Inventory $9,310 Cost of Goods Sold $30,590 Problem 6 Lower of Cost or Market Brian would report the value of his ending inventory at the lower of cost or market. In this case, the market price is lower than his cost. Therefore, he would report his ending inventory as being $7,875 (175 units $45.) Problem 7 Issuance of Common Stock, Cash and Stock Dividends Date Description Debit Credit 01/15/2013 Cash 60,000 Common Stock (10,000 x $2) 20,000 Paid-in Capital in Excess of Stated Value 40,000 07/01/2013 Cash Dividends 5,000 Dividends Payable 5,000 08/01/2013 No journal entry is required. 08/15/2013 Dividends Payable 5,000 Cash 5,000 09/30/2013 No journal entry is required. 11/15/2013 Stock Dividends (2,000 shares x $4) 8,000 Common Stock Dividends Distributable (2,000 shares x $1) 2,000 Paid-in capital in Excess of Stated Value 6,000
19 Note: There were 10,000 shares of $2 stated value common stock outstanding prior to the stock split. After the split, there were 20,000 shares of $1 stated value common stock outstanding. The stock dividend on 11/15/2013 was 10% of 20,000 shares 2,000 shares of $1 stated value stock with a fair market price of $4 per share. On the distribution date, Brian will make the following entry: 1/15/2014 Dividends Distributable 2,000 Common Stock 2,000
20 Problem 8 Classify the following accounts by placing an in the appropriate box. Account Current Assets Property, Plant & Equipment Current Liabilities Long Term Liabilities Common Stock Stockholders Equity Retained Earnings Revenue Dividends Expenses Wages Payable Prepaid Ins. Acct. Receivable Equipment Utilities Expense Cost of Goods Sold Sales Cash Acct. Payable Common Stock Supplies Mortgage Payable Dividends Accumulated Depreciation Equipment Unearned Revenue Dividends Payable Dividends Distributable Inventory Bonds Payable Allowance for Doubtful Accounts
21 Problem 9 Petty Cash 01/02/2014 Petty Cash 200 Cash /31/2014 Meals Expense 30 Postage Expense 44 Transportation Expense 25 Freight-out 30 Gasoline Expense 54 Miscellaneous Expense 14 Cash 195 Cash Over and Short 2 01/31/2014 Petty Cash 100 Cash 100 Problem 10 Allowance for Doubtful Accounts 12/31/2014 Bad Debt Expense 1,730 Allowance for Doubtful Accounts 1,730 Sales (all credit) 175,000 Less: Sales Returns & Allowances 2,000 Net Credit Sales 173,000 Times estimated 1% uncollectible.01 Bad Debt Expense 1,730 Problem 11 Recording Cost of Fixed Asset Cost of Land Purchase Price 150,000 Real Estate Agent s Fee 9,000 Back taxes 6,000 Demolition of old building 11,000 Salvage (2,300) Total Cost of Land 173,700 03/15/2014 Land 173,700 Land Improvements 4,500 Building 7,500 Real Estate Tax Expense 3,300 Cash 189,000
22 Problem 12 Sale of Fixed Asset 06/30/2016 Depreciation Expense 2,000 Accumulated Depreciation Equipment 2,000 06/30/2016 Cash 1,000 Accumulated Depreciation Equipment 14,000 Loss on Disposal 1,000 Equipment 16,000 Equipment Accumulated Depreciation - Equipment 16,000 12,000 16,000 2, ,000 14,000 0 Book value of the equipment at the time of the sale, after adjusting for one-half year of depreciation, was $2,000 (cost 16,000 accumulated depreciation 14,000.) He received $1,000 cash which was $1,000 less than its book value. He therefore had a loss. Problem 13 Calculations 1. Net Sales = Sales $124,500 Less: Sales Returns & Allowances $12,100 Sales Discounts $1,900 Net Sales $110, Book Value = Cost Less: Accumulated Depreciation Truck Equipment $25,000 $16,000 - $5,000 - $4,000 $20,000 $12, Net (cash) realizable value of accounts receivable = Accounts Receivable $35,000 Less: Allowance for Doubtful Accounts 870 Net realizable value of accounts receivable $34,130
23 4. Total current assets Cash $28,895 Accounts Receivable $35,000 Allowance for Doubtful Accounts ($870) Inventory $11,600 Supplies $950 Prepaid Insurance $1,400 Total Current Assets $76, Cost of Goods Sold Purchases $60,500 Less: Purchase Returns & Allowances $1,800 Purchase Discounts 0 Net Purchases $58,700 Net Purchases $58,700 Add: Freight-in $4,250 Cost of Goods Purchased $62,950 Beginning Inventory $9,600 Add: Cost of Goods Purchased $62,950 Cost of Goods Available for Sale $72,550 Cost of Goods Available for Sale $72,550 Less: Ending Inventory $11,600 Cost of Goods Sold $60, Gross Profit = Net Sales $110,500 Less: Cost of Goods Sold $60,950 Gross Profit $49,550
24 7. Net Income or Loss Operating Expenses Wages Expense $16,700 Depreciation Expense 9,000 Telephone Expense 5,250 Advertising Expense 6,375 Total Operating Expenses $37,325 Gross Profit $49,550 Less: Operating Expenses 37,325 Income from Operations 12,225 Less: Other Expenses 700 Net Income $11, Retained Earnings Beginning Balance in Retained Earnings $26,200 Add: Net Income 11,525 37,725 Less: Dividends 10,000 Ending Balance in Retained Earnings $ 27, Total Property, Plant & Equipment Truck $25,000 Less: Accumulated Depreciation Truck 5,000 20,000 Equipment $16,000 Less: Accumulated Depreciation Equip. 4,000 12,000 Total Property, Plant & Equipment $32, Total Current Liabilities Accounts Payable $1,850 Wages Payable 300 Unearned Revenue 400 Total Current Liabilities $2,550
25 11. Total Long-term Liabilities Bonds Payable $15,000 Notes Payable 5,000 Interest Payable 700 Total Long-term liabilities $20, Stockholders Equity Common Stock $50,000 Add: Additional Paid-in Capital 10,000 Total Paid-in Capital 60,000 Add: Retained Earnings 27,725 Total Stockholders Equity $87,725 Problem 14 Cost Allocation Systems Asset Depreciation Depletion Amortization Forests Computers Oil Limited life franchise Trucks Copyrights Buildings Patents Problem 15 Internal Controls 1. D 8. F 2. B 9. B 3. C 10. C 4. F 11. A 5. A 12. D 6. E 13. A 7. D
26 Problem 16 Closing Entries Date Description Debit Credit 12/31/20 Sales 36,900 Rent Revenue 1,913 Income Summary 38,813 12/31/20 Income Summary 36,508 Sales Returns & Allowances 2,100 Sales Discounts 900 Cost of Goods Sold 18,850 Wages Expense 6,700 Depreciation Expense 4,200 Telephone Expense 858 Advertising Expense 2,200 Interest Expense /31/20 Income Summary 2,305 Retained Earnings 2,305 12/31/20 Retained Earnings 1,000 Dividends 1,000 Income Summary 36,508 38,813 2,305 2,305 0 Problem 17 Allowance for Doubtful Accounts 12/31/20 Bad Debt Expense 6,658 Allowance for Doubtful Accounts 6,658 The aging schedule calculates the required balance in Allowance for Doubtful Accounts. Since Allowance for Doubtful Accounts had a beginning credit balance of 1,290, the adjusting entry would be for the difference between the beginning balance and the required balance.
27 Problem 18 Bank Reconciliation Josh s Computer Repair, Inc. Bank Reconciliation September 30, 2013 Cash Balance per Bank Statement $8,392 Add: Deposits in Transit 560 8,952 Less: Outstanding Checks 1,618 Adjusted Cash Balance Per Bank Statement $7,334 Cash Balance per Books $6,249 Add: Collection of Note Receivable $1,500 plus interest $45.00, Less collection fee of $ ,530 7,779 Less: NSF Check $406 Error in recording check # Bank Service Fee Adjusted Cash Balance Per Books $7,334 Adjusting Entries a) Cash 1,530 Miscellaneous Expense 15 Note Receivable 1,500 Interest Revenue 45 (To record receipt of Notes Receivable plus interest less fee) b) Accounts Receivable 406 Cash 406 (To record return of NSF check) c) Accounts Payable 36 Cash 36 (To correct error in recording check #8249) d) Miscellaneous Expense 3 Cash 3 (To record bank service charge fee)
28 Problem 19 Bonds Payable a) Cash 103,000 Bonds Payable 100,000 Premium on Bonds Payable 3,000 b) Cash 96,000 Discount on Bonds Payable 4,000 Bonds Payable 100,000 Problem 20 Bonds Payable a) 100,000 Bonds Payable -94,000 Cash Received 6,000 Discount on Bonds Payable b) Total Interest to be Paid $40,000 Discount on Bonds Payable 6,000 Total Cost of Borrowing $46,000 c) Bond Discount / # of interest periods = Bond Discount Amortization 6, = 600 d) Interest Expense 4,600 Cash 4,000 Discount on Bonds Payable 600 e) Bonds Payable 100,000 Less: Discount on Bonds Payable 4,800 (6, = 4,800) Carrying Value of Bonds Payable 95,200
29 Problem 21 Stock Dividends vs. Stock Splits Stockholders Equity Paid in Capital Before After Dividend After Stock Spit Common Stock 500, , ,000 Paid in Capital in Excess of Par Value Common Stock 0 100,000 0 Total Paid in Capital 500, , ,000 Retained Earnings 1,200,000 1,050,000 1,200,000 Total Stockholders Equity 1,700,000 1,700,000 1,700,000 Outstanding Shares 100, , ,000 Par Value per Share Stock Dividend Calculations ,000 / $5 par value = 100,000 shares ,000 shares 10% stock dividend = 10,000 dividend shares 3. 10,000 $15 market price = $150,000 total value of 10,000 shares of stock 4. Dividends would be debited for $150, Common stock dividends distributable would be credited for the par value of the stock $50, Paid in Capital in Excess of Par Value Common Stock would be credited for $100, On the distribution date, the Common Stock Dividends Distributable is debited and Common Stock is credited for $50,000 Problem 22 Cash Flow Statement a) Financing Activities b) Investing Activities c) Financing Activities d) Financing Activities e) Investing Activities for the sale; Operating Activities for the Gain f) Operating Activities g) Non-cash Investing and Financing Activities h) Operating Activities i) Investing Activities for the sale; Operating Activities for the Loss j) Non-cash Investing and Financing Activities
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1. A company purchased land for $72,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start.
ACCOUNTING ENTRANCE EXAMINATION PRACTICE QUESTION SET J.M. TULL SCHOOL OF ACCOUNTING ENTRANCE EXAMINATION PRACTICE QUESTION SET Important: PRINT your response (A,B,C,D or E) that best completes the statement
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Test 2 Review - Fall 2008 Friday class ONLY Chapters 5,6,7 & 8 Name The following review includes 80 multiple choice questions of which I will choose 33 on the test. MULTIPLE CHOICE. Choose the one alternative
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ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/ product&path=737&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC
ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/product&path=7 37&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC
GBA 521 Midterm Review Dr. Markelevich Multiple Choice (3 points for each question) Identify the letter of the choice that best completes the statement or answers the question. Wynn Corp. Wynn Corp. reported
General Goal This course is designed to give students an introduction to accounting. In it, we will explore many topics including: accounting for a service business organized as a proprietorship, accounting
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100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II firstname.lastname@example.org
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Analysis of Review Number Topic Chap. Answer 1. Inventories Cost basis 8 c 2. Standards 1 c 3. Conceptual Framework 2 d 4. Accounting Cycle 3 d 5. Accounting Cycle 3 c 6. Accounting Cycle 3 a 7. Conceptual
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Advanced Accounting 1 Career Opportunities Recognize the different Workbook types of jobs. Define the education required for each. September Special Journals Discounts Bank Statement Journalize entries
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ANSWERS TO SAMPLE TEST #4 PART A: 1 F 21 C 41 B 2 T 22 D 42 A 3 T 23 D 43 A 4 F 24 A 44 C 5 T 25 B 45 B 6 F 26 A 46 D 7 F 27 C 47 C 8 T 28 B 48 A 9 T 29 B 49 C 10 F 30 C 50 A 11 T 31 A 12 F 32 D 13 F 33
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