ACC 557 Homework Problems Chapter 1-14 ACC 557 Problems Chapter 1 – 14 100% Score Guaranteed You can purchase all solutions from following:
Click here to Purchase ACC 557 Problem Solutions Note: All solutions are in .png format (Original WileyPlus Environment Snapshots) You cant go wrong with this help Contact us if you need help with Quizzes, Assignments, Discussion Questions for ACC 557 our email is support@hwmojo.com Instant download Chapter 1 ACC 557 Week 1 Homework Chapter 1 Exercise 1-4 Your answer is correct. The following situations involve accounting principles and assumptions. For each of the three situations, state if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated. Accounting method Principle/Assumption 1. Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting repor 2. Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money. Monetary unit assumption 3. Omar Shariff, president of Omar’s Oasis, records his personal living costs as expenses of the Oasis Exercise 1-7
Collins Computer Timeshare Company entered into the following transactions during May 2014. Describe the effect of each transaction on assets, liabilities, and stockholder's equity.
1. account. 2.
Purchased computer terminals for $20,000 from Digital Equipment on
3. April. 4. cash. 5. May.
Received $15,000 cash from customers for contracts billed in
6.
Stockholders invested an additional $32,000 in the business.
7. above. 8.
Paid Digital Equipment for the terminals purchased in (1)
Paid $3,000 cash for May rent on storage space.
Provided computer services to Schmidt Construction Company for $2,400 Paid Central States Power Co. $11,000 cash for energy usage in
Incurred advertising expense for May of $900 on account.
Exercise 1-11 Your answer is correct. Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2014, Steven Craig and Georgia Enterprises. Determine the missing amounts. Steven Craig Georgia Enterprises Beginning of year: Total assets Total liabilities Total stockholders’ equity year: Total assets Total liabilities equity Changes during year in stockholders’ equity: Additional investment Dividends Total revenues Total expenses
End of Total stockholders’
Problem 1-2A On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September, the following transactions occurred. 1. Paid $2,900 cash for accounts payable due. 2. Collected $1,300 of accounts receivable. 3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account. 4. Earned revenue of $7,300, of which $2,500 is paid in cash and the balance is due in October. 5. Declared and paid a $400 cash dividend
6. Paid salaries $1,700, rent for September $900, and advertising expense $200. 7. Incurred utilities expense for month on account $170. 8. Received $10,000 from Capital Bank on a 6-month note payable. 1) Prepare a tabular analysis of the September transactions beginning with August 31 balances. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 1-8 for example.) b1) Prepare an income statement for September. B2) Prepare a retained earnings statement for September. (List items that increase retained earnings first.) B3) Prepare a balance sheet at September 30. (List assets in order of liquidity.)
Chapter 2 Chapter 2 Exercise 2-6
Elvira Industries had the following transactions. 1 .
Borrowed $5,000 from the bank by signing a note.
2 .
Paid $2,500 cash for a computer.
3 .
Purchased $450 of supplies on account.
(a) Indicate what accounts are increased and decreased by each transaction. (b) Journalize each transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 2-9 Selected transactions from the journal of Roberta Mendez, investment broker, are presented below.
Exercise 2-11
Presented below is the ledger for Sparks Co. Cash No. 101 10/1
5,000 10/4
400
10/10
650 10/12
1,500
10/10
3,000 10/15
280
10/20
500 10/30
300
10/25
2,000 10/31
500
Accounts Receivable No. 112 10/6
800 10/20
10/20
940
500
Supplies No. 126 10/4
400 Equipment No. 157
10/3
2,000 Balance Notes Payable No. 200 10/10
3,000
Accounts Payable No. 201 10/12
1,500 10/3
2,000
Common Stock No. 311 10/1
5,000
10/25
2,000
Dividends No. 332 10/30
300 Service Revenue No. 400 10/6
800
10/10
650
10/20
940
Salaries and Wages Expense No. 726 10/31
500 Rent Expense No. 729
10/15
280
a) Reproduce the journal entries for the transactions that occurred on October 1, 10, and 20
and provide explanations for each. (Record entries in the order displayed in the TAccounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Determine the October 31 balance for each of the accounts above, and prepare a trial balance at October 31, 2014.
Problem 2-2A Kara Shin is a licensed CPA. During the first month of operations of her business, Kara Shin, Inc., the following events and transactions occurred. May 1 2 3 7
Stockholders invested $20,000 cash in exchange for common stock. Hired a secretary-receptionist at a salary of $2,000 per month. Purchased $1,500 of supplies on account from Hartig Supply Company. Paid office rent of $900 cash for the month.
11 12 17 31 31
Completed a tax assignment and billed client $2,800 for services provided. Received $3,500 advance on a management consulting engagement. Received cash of $1,200 for services completed for Lucille Co. Paid secretary-receptionist $2,000 salary for the month. Paid 40% of balance due Hartig Supply Company.
Kara uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies, No. 201 Accounts Payable, No. 209 Unearned Service Revenue, No. 311 Common Stock, No. 400 Service Revenue, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.
a) Journalize the transactions. (Record entries in the order displayed in the problem
statement. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Post to the ledger accounts. (Post the entries into ledger in the order displayed in Part 1.)
c) Prepare a trial balance on May 31, 2014. Chapter 3 Chapter 3
Exercise 3-6 Your answer is correct. Orwell Company accumulates the following adjustment data at December 31. 1 . 2 . 3 . 4 . 5 . 6 .
Services provided but not recorded total $1,420. Supplies of $300 have been used. Utility expenses of $225 are unpaid. Unearned service revenue of $260 is recognized for services performed. Salaries of $800 are unpaid. Prepaid insurance totaling $380 has expired.
For each of the above items indicate the following. (Answer for account balances before adjustment should be entered in alphabetical order.) (a)
The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
(b )
The status of accounts before adjustment (overstatement or understatement).
Exercise 3-7 Your answer is correct. The ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Debit Prepaid Insurance Supplies Equipment
$ 3,600 2,800 25,000
Credit
Accumulated Depreciation—Equipment
$ 8,400
Notes Payable
20,000
Unearned Rent Revenue
9,900
Rent Revenue
60,000
Interest Expense
0
Salaries and Wages Expense
14,000
An analysis of the accounts shows the following 1 .
The equipment depreciates $300 per month.
2 .
One-third of the unearned rent revenue was recognized during the quarter.
3 .
Interest of $500 is accrued on the notes payable.
4 .
Supplies on hand total $650.
5 .
Insurance expires at the rate of $200 per month.
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Exercise 3-11
A partial adjusted trial balance of Ruiz Company at January 31, 2014, shows the following. Ruiz Company Adjusted Trial Balance January 31, 2014 Debit
Credit
Supplies
$ 850
Prepaid Insurance
2,400
Salaries and Wages Payable
$ 800
Unearned Service Revenue
750
Supplies Expense
950
Insurance Expense
400
Salaries and Wages Expense
2,500
Service Revenue
2,000
Answer the following questions, assuming the year begins January 1. (a) If the amount in Supplies Expense is the January 31 adjusting entry, and $670 of supplies was purchased in January, what was the balance in Supplies on January 1? The balance in Supplies on January 1
$
(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original
insurance premium was for one year, what was the total premium and when was the policy purchased? The total premium
$
The policy purchased (c) If $3,300 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2013? The balance in Salaries and Wages Payable at December 31, 2013
$
Problem 3-2A Lazy River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. Lazy River Resort, Inc. Trial Balance August 31, 2014 Account Number
Debit
101
Cash
126
Supplies
130
Prepaid Insurance
140
Land
143
Buildings
157
Equipment
201
Accounts Payable
208
Unearned Rent Revenue
275
Mortgage Payable
311
Common Stock
332
Dividends
429
Rent Revenue
622
Maintenance and Repairs Expense
726
Salaries and Wages Expense
732
Utilities Expense
$ 19,600 3,300 6,000 25,000 125,000 26,000
5,000 3,600 51,000 9,400 $273,900
In addition to those accounts listed on the trial balance, the chart of accounts for Lazy River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation—Buildings, No. 158 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1 .
Insurance expires at the rate of $400 per month.
2 .
A count on August 31 shows $900 of supplies on hand.
3 .
Annual depreciation is $4,500 on buildings and $2,400 on equipment.
4 .
Unearned rent revenue of $4,100 was recognized for services performed prior to August 31.
5
Salaries of $400 were unpaid at August 31.
Cr
. 6 .
Rentals of $3,700 were due from tenants at August 31. (Use Accounts Receivable.)
7 .
The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Chapter 4 Exercise 4-1 The trial balance columns of the worksheet for Cajon Company at June 30, 2014, are as follows. CAJON COMPANY Worksheet For the Month Ended June 30, 2014 Account Titles Cash Accounts Receivable Supplies Accounts Payable Unearned Service Revenue Common Stock Service Revenue Salaries and Wages Expense Miscellaneous Expense
Trial Balance Dr. Cr. $4,020 2,440 1,900 $1,120 240 5,000 3,100 860 240 $9,460 $9,460
Other data: 1 A physical count reveals $500 of supplies on hand. . 2 $100 of the unearned revenue is still unearned at month-end. . 3 Accrued salaries are $250. . Complete the worksheet. CAJON COMPANY Worksheet For the Month Ended June 30, 2014 Trial Adj. Trial Income Adjustments Balance Balance Statement Account Dr Cr. Dr Cr. Dr Cr. Dr Cr.
Balance Sheet Dr
Cr.
Titles 4,0 20 Accounts 2,4 Receivable 40 1,9 Supplies 00 Accounts 1,12 Payable 0 Unearned Service 240 Revenue Common 5,00 Stock 0 Service 3,10 Revenue 0 Salaries and Wages 860 Expense Miscellane ous 240 Expense 9,4 9,46 Totals 60 0 Supplies Expense Salaries and Wages Payable Totals Net Income Totals Cash
Exercise 4-5 Your answer is correct. The adjustments columns of the worksheet for Munoz Company are shown below. Adjustments Account Titles Accounts Receivable
Debit
Credit
600
Prepaid Insurance
400
Accumulated Depreciation—Equipment
900
Salaries and Wages Payable
500
Service Revenue
600
Salaries and Wages Expense
500
Insurance Expense
400
Depreciation Expense
900 2,400
2,400
(a) Prepare adjusting entries in order presented in the problem. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (b) Indicate with an "X" the financial statement column to which each balance should be extended. Exercise 4-7 Lanza Company had the following adjusted trial balance. LANZA COMPANY Adjusted Trial Balance For the Month Ended June 30, 2014 Adjusted Trial Balance Account Titles
Debit
Cash
Credit $3,712
Accounts Receivable Supplies
3,904 480
Accounts Payable
$1,556
Unearned Service Revenue
160
Common Stock
4,000
Retained Earnings
1,760
Dividends
600
Service Revenue Salaries and Wages Expense Miscellaneous Expense Supplies Expense
4,300 1,344 180 1,900
Salaries and Wages Payable
344 $12,120
a) Prepare closing entries at June 30, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Prepare a post-closing trial balance. Exercise 4-13
Kogan Company has an inexperienced accountant. During the first 2 weeks on the job, the accountant made the following errors in journalizing transactions. All entries were posted as made. 1 .
A payment on account of $840 to a creditor was debited to Accounts Payable $480 and credited to Cash $480.
2 .
The purchase of supplies on account for $380 was debited to Equipment $38 and credited to Accounts Payable $38.
3 .
A $500 cash dividend was debited to Salaries and Wages Expense $500 and credited to Cash $500.
Prepare the correcting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
$12,120
Problem 4-4A Excelsior Amusement Park has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below. Excelsior Amusement Park Worksheet For the Year Ended September 30, 2014 Trial Balance Dr.
Adjusted Trial Balan
Cr.
Dr.
C
Cash
34,400
34,400
Supplies
18,600
2,200
Prepaid Insurance
29,900
10,900
Land
80,000
80,000
Equipment
120,000
120,000
Accumulated Depreciation-Equip.
36,200
Accounts Payable
14,600
Unearned Ticket Revenue
3,900
Mortgage Payable
50,000
Common Stock
60,000
Retained Earnings
36,100
Dividends
14,000
Ticket Revenue
14,000 277,900
Salaries and Wages Expense
98,000
98,000
Maintenance and Repairs Expense
30,500
30,500
9,400
9,400
Utilities Expense
16,900
16,900
Property Tax Expense
21,000
24,000
6,000
8,000
Advertising Expense
Interest Expense Totals
478,700
478,700
Insurance Expense
19,000
Supplies Expense
16,400
Interest Payable Depreciation Expense
6,000
Property Taxes Payable Totals
a) Prepare a complete worksheet. b) Prepare a classified balance sheet. (Note: $15,000 of the mortgage note payable is due for payment in the next fiscal year.) (List current assets in order of liquidity.)
C) Journalize the adjusting entries using the worksheet as a basis d) Journalize the closing entries using the worksheet as a basis. Chapter 5 Chapter 5
Exercise 5-4
On June 10, Rebecca Company purchased $7,600 of merchandise from Clinton Company, FOB shipping point, terms 2/10, n/30. Rebecca pays the freight costs of $400 on June 11. Damaged
489,700
goods totaling $300 are returned to Clinton for credit on June 12. The fair value of these goods is $70. On June 19, Rebecca pays Clinton Company in full, less the purchase discount. Both companies use a perpetual inventory system. (a) Prepare separate entries for each transaction on the books of Rebecca Company. (Record journal entries in the order in which they must have occurred. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (b) Prepare separate entries for each transaction for Clinton Company. The merchandise purchased by Rebecca on June 10 had cost Clinton $4,300. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Exercise 5-8 Your answer is correct. Presented below is information related to Taylor Co. for the month of January 2014. Ending inventory per perpetual records
Insurance expense $ 21,600
Ending inventory actually on hand Cost of goods sold Freight-out
Rent expense Salaries and wages expense
21,000 208,000 7,000
Sales discounts Sales returns and allowances Sales revenue
(a) Prepare the necessary adjusting entry for inventory. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (b) Prepare the necessary closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Exercise 5-13 Presented below is financial information for two different companies. (a) Determine the missing amounts. (b) Determine the gross profit rates. (Round answer to 1 decimal place, e.g. 25.2%.)
Problem 5-3A
Starz Department Store is located near the Towne Shopping Mall. At the end of the company’s calendar year on December 31, 2014, the following accounts appeared in two of its trial balances.
Unadjusted Accounts Payable
Adjusted
$ 79,300
$ 80,300
Accounts Receivable
50,300
50,300
Inventory
Accumulated Depr.—Buildings
42,100
52,500
Mortgage Payable
29,600
42,900
Prepaid Insurance
290,000
290,000
Accumulated Depr.—Equipment Buildings Cash
Interest Revenue
Property Tax Expense
23,800
23,800
Common Stock
112,000
112,000
Retained Earnings
Cost of Goods Sold
412,700
412,700
Salaries and Wages Expen
Depreciation Expense Dividends Equipment
23,700
Sales Revenue
24,000
24,000
Sales Commissions Expen
110,000
110,000
Sales Commissions Payab
Insurance Expense Interest Expense
Property Taxes Payable
3,000
Interest Payable
7,200
Sales Returns and Allowan
8,600
Utilities Expense
5,600
a) Prepare a multiple-step income statement. (List other revenues before other expenses.)
b) Prepare retained earnings statement. (List items that will increase retained earnings first.)
c) Prepare a classified balance sheet. $16,000 of the mortgage payable is due for payment next year. (List current assets in order of liquidity. Property, plant and equipment list in order of land, buildings and equipment.)
d) Journalize the adjusting entries that were made. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Chapter 6 Exercise 6-1 Your answer is correct. Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following. 1 . 2 . 3 . 4 . 5 .
Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse. The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end. Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count. Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory. Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.
Determine the correct inventory amount on December 31.
The correct inventory amount
$
Exercise 6-10 Your answer is correct. Fenton Company applied FIFO to its inventory and got the following results for its ending inventory. Cameras
100
units at a cost per unit of
$68
DVD players
150
units at a cost per unit of
$75
iPods
125
units at a cost per unit of
$80
The cost of purchasing units at year-end was cameras $70, DVD players $69, and iPods $78. Determine the amount of ending inventory at lower-of-cost-or-market. The ending inventory
$
Exercise 6-14 The cost of goods sold computations for Silver Company and Gold Company are shown below. Silver Company Beginning inventory
Gold Company
$ 47,000
$ 71,000
Cost of goods purchased
200,000
290,000
Cost of goods available for sale
247,000
361,000
55,000
69,000
$192,000
$292,000
Ending inventory Cost of goods sold
a) Compute inventory turnover for each company. (Round answers to 2 decimal places, e.g. 1.25.)
b) Compute days in inventory for each company. (Round inventory turnover values to 2 decimal places, e.g. 1.25 and final answers to 0 decimal places, e.g. 125.)
Problem 6-3A Milo Company had a beginning inventory of 400 units of Product Kimbo at a cost of $8 per unit. During the year, purchases were: Feb. 20
300
@
$9
Aug. 12
600
@
$11
May 5
500
@
$10
Dec. 8
200
@
$12
Milo Company uses a periodic inventory system. Sales totaled 1,500 units.
a) Determine the cost of goods available for sale. The cost of goods available for sale
$
b) Calculate the weighted-average unit cost. (Round answer to 2 decimal places, e.g. $2.25.)
c) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the
assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. $2,120.)
d) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?
Chapter 7 Exercise 7-5 Your answer is correct. Listed below are five procedures followed by Parson Company. 1 . 2 . 3 . 4 . 5 .
Several individuals operate the cash register using the same register drawer. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities. Fran Vorbeck writes checks and also records cash payment journal entries. One individual orders inventory, while a different individual authorizes payments. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.
Indicate whether each procedure is an example of good internal control or of weak internal control. If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated. Exercise 7-7 Your answer is correct. LaSalle Company established a petty cash fund on May 1, cashing a check for $100. The company reimbursed the fund on June 1 and July 1 with the following results. June 1: Cash in fund $1.75. July 1: Cash in fund $3.25.
Receipts: delivery expense $31.25; postage expense $41; and miscellaneous expense $25. Receipts: delivery expense $21; entertainment expense $51; and miscellaneous expense $24.75.
On July 10, LaSalle increased the fund from $100 to $150.00. Prepare journal entries for LaSalle Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Exercise 7-14 Your answer is correct. Nayak Company has recorded the following items in its financial records. Cash in bank
$41,000
Cash in plant expansion fund
100,000
Cash on hand
8,000
Highly liquid investments
34,000
Petty cash
500
Receivables from customers
89,000
Stock investments
61,000
The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments had maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6 to 12 months. The plant expansion project will begin in 3 years. What amount should Nayak report as “Cash and cash equivalents” on its balance sheet? Cash and cash equivalents
$
Problem 7-3A
On May 31, 2014, Terrell Company had a cash balance per books of $6,781.50. The bank statement from Home Town State Bank on that date showed a balance of $6,804.60. A comparison of the statement with the cash account revealed the following facts. 1 . 2 . 3 . 4 . 5 . 6 . 7 .
The statement included a debit memo of $40 for the printing of additional company checks. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Terrell Company for the correct amount. Outstanding checks at May 31 totaled $276.25. Deposits in transit were $1,916.15. On May 18, the company issued check No. 1181 for $685 to Barry Dietz on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terrell Company for $658. A $3,000 note receivable was collected by the bank for Terrell Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note. Included with the cancelled checks was a check issued by Bridges Company to Jon Newton for $600 that was incorrectly charged to Terrell Company by the bank. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Terrell Company on account.
(a) Prepare the bank reconciliation at May 31, 2014. (Reconcile the bank balance first and then the book balance.) (b) Prepare the necessary adjusting entries for Terrell Company at May 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Chapter 8 Exercise 8-3 The ledger of Elburn Company at the end of the current year shows Accounts Receivable $110,000, Sales Revenue $840,000, and Sales Returns and Allowances $28,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a)
(b )
If Elburn uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Elburn determines that T. Thum’s $1,400 balance is uncollectible. If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.
(c)
If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.
Exercise 8-5
At December 31, 2013, Crawford Company had a balance of $15,000 in Allowance for Doubtful Accounts. During 2014, Crawford wrote off accounts totaling $14,100. One of those accounts ($1,800) was later collected. At December 31, 2014, an aging schedule indicated that the balance in Allowance for Doubtful Accounts should be $19,000. Prepare journal entries to record the 2014 transactions of Crawford Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Exercise 8-14 Lashkova Company had accounts receivable of $100,000 on January 1, 2014. The only transactions that affected accounts receivable during 2014 were net credit sales of $1,000,000, cash collections of $920,000, and accounts written off of $30,000. (a) Your answer is correct. Compute the ending balance of accounts receivable. Ending balance of accounts receivable
$
(b) Your answer is correct. Compute the accounts receivable turnover ratio for 2014. (Round answer to 2 decimal places, e.g. 2.50.) Accounts receivable turnover ratio (c) Your answer is correct. Compute the average collection period in days. (Round answer to 1 decimal place, e.g. 25.5.) Average collection period in days
days
Problem 8-7A
On January 1, 2014, Derek Company had Accounts Receivable $139,000, Notes Receivable $30,000, and Allowance for Doubtful Accounts $13,200. The note receivable is from Kaye Noonan Company. It is a 4-month, 12% note dated December 31, 2013. Derek Company prepares financial statements annually. During the year, the following selected transactions occurred. Jan. 5 20 Feb. 18
Sold $24,000 of merchandise to Zwingle Company, terms n/15. Accepted Zwingle Company’s $24,000, 3-month, 9% note for balance due. Sold $8,000 of merchandise to Gerard Company and accepted Gerard’s $8,000, 6-
month, 8% note for the amount due. Apr. 20
Collected Zwingle Company note in full.
30
Received payment in full from Kaye Noonan Company on the amount due.
May 25
Accepted Isabella Inc.’s $4,000, 3-month, 7% note in settlement of a past-due balance on account.
Aug. 18
Received payment in full from Gerard Company on note due. The Isabella Inc.’s note was dishonored. Isabella Inc.’s is not bankrupt; future payment is anticipated.
25
Sold $12,000 of merchandise to Fernando Company and accepted a $12,000, 6month, 10% note for the amount due.
Sept. 1
Journalize the transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to the nearest whole dollar, e.g. 5,275.)
Chapter 9 Exercise 9-9
Presented below are selected transactions at Tomas Company for 2014. Jan. 1
Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $58,000 on that date. It had a useful life of 10 years with no salvage value.
June 30
Sold a computer that was purchased on January 1, 2011. The computer cost $40,000. It had a useful life of 5 years with no salvage value. The computer was sold for $14,000.
Dec. 31
Discarded a delivery truck that was purchased on January 1, 2010. The truck cost $33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Tomas Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2013.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 9-11 On July 1, 2014, Sutton Inc. invested $720,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2014, 120,000 tons of ore were mined and sold.
a) Calculate depletion cost per unit. (Round answer to 2 decimal places, e.g. $0.50.) Depletion cost per unit
$
b) Prepare the journal entry to record depletion expense. (Round answers to 0 decimal
places, e.g. $2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
c) Assume that the 120,000 tons of ore were mined, but only 90,000 units were sold. How are the costs applicable to the 30,000 unsold units reported?
Reported in What is the cost pertaining to the unsold units reported ? Cost pertaining to unsold units
$
Exercise 9-12
The following are selected 2014 transactions of Yosuke Corporation. Jan. 1
Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
May 1
Purchased for $84,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.
Prepare necessary adjusting entries at December 31 to record amortization required by the events above. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date
Account Titles and Explanation
Debit
Credit
Dec. 31
(To record goodwill amortisation.) Dec. 31
(To record patent amortisation.)
Problem 9-3A On January 1, 2014, Thao Company purchased the following two machines for use in its production process.
Machine A :
The cash price of this machine was $35,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $5,000 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.
Machine B :
The recorded cost of this machine was $80,000. Thao estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period.
a) Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. $2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) 1 . 2 .
The journal entry to record its purchase on January 1, 2014. The journal entry to record annual depreciation at December 31, 2014.
b) Calculate the amount of depreciation expense that Thao should record for Machine B each
year of its useful life under the following assumptions. (Round answers to 0 decimal places, e.g. $2,125. Round cost per unit to 2 decimal place, e.g. 1.25.) (1 )
Thao uses the straight-line method of depreciation.
(2 )
Thao uses the declining-balance method. The rate used is twice the straight-line rate.
(3 )
Thao uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2014, 42,000 units; 2015, 35,000 units; 2016, 28,000 units; 2017, 20,000 units.
Chapter 10 Exercise 10-9 Your answer is correct. Global Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1 . 2 .
Issue 60,000 shares of common stock at $40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 10%, 10-year bonds at face value for $2,400,000.
It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. $2.25.) Plan One Issue Stock Net income Earnings per share
Plan Two Issue Bonds $
$ $
Exercise 10-12 Your answer is correct. Pueblo Company issued $300,000 of 5-year, 8% bonds at 98 on January 1, 2014. The bonds pay interest twice a year. (a) (1) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (2) Compute the total cost of borrowing for these bonds. (2) Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 104. Exercise 10-15 Your answer is correct. Tucki Co. receives $240,000 when it issues a $240,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $17,660 on June 30 and December 31. Prepare the journal entries to record the mortgage loan and the first two installment
payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Problem 10-1A On January 1, 2014, the ledger of Shumway Company contains the following liability accounts. Accounts Payable Sales Taxes Payable Unearned Service Revenue During January, the following selected transactions occurred. Jan. 5 12 14 20 21 25
Sold merchandise for cash totaling $22,470, which includes 7% sales taxes. Provided services for customers who had made advance payments of $10,000. (Credit Service Revenue.) Paid state revenue department for sales taxes collected in December 2013 ($5,800). Sold 600 units of a new product on credit at $50 per unit, plus 7% sales tax. Borrowed $14,000 from DeKalb Bank on a 3-month, 8%, $14,000 note. Sold merchandise for cash totaling $12,947, which includes 7% sales taxes.
a) Journalize the January transactions. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Journalize the adjusting entries at January 31 for the outstanding notes payable. (Hint: Use one-third of a month for the DeKalb Bank note.) (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) c) Prepare the current liabilities section of the balance sheet at January 31, 2014. Assume no change in accounts payable. (Round answers to 0 decimal places, e.g. 125.)
Chapter 11 Exercise 11-7 Your answer is correct. Fallow Co. had the following transactions during the current period. Mar. 2 June 12 July 11 Nov. 28
Issued 5,000 shares of $1 par value common stock to attorneys in payment of a bill for $38,000 for services provided in helping the company to incorporate. Issued 60,000 shares of $1 par value common stock for cash of $475,000. Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share. Purchased 2,000 shares of treasury stock for $18,000.
Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Exercise 11-13 Your answer is correct. On January 1, Chevon Corporation had 98,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following occurred. Apr. 1 June 15
Issued 25,000 additional shares of common stock for $17 per share. Declared a cash dividend of $1 per share to stockholders of record on June 30.
$52,000 5,800 14,000
July 10 Dec. 1 15
Paid the $1 cash dividend. Issued 2,000 additional shares of common stock for $19 per share. Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.
Prepare the entries, if any, on each of the three dividend dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 11-17 Your answer is correct. On January 1, 2014, Richard Corporation had retained earnings of $550,000. During the year, Richard had the following selected transactions. 1 .
Declared cash dividends $96,000.
2 .
Corrected overstatement of 2013 net income because of depreciation error $40,000.
3 .
Earned net income $350,000.
4 .
Declared stock dividends $80,000.
Prepare a retained earnings statement for the year. (List items that increase retained earnings first.)
Problem 11-3A The stockholders’ equity accounts of Terrell Corporation on January 1, 2014, were as follows. Preferred Stock (9%, $50 par, cumulative, 10,000 shares authorized) Common Stock ($1 stated value, 2,000,000 shares authorized)
$
1
Paid-in Capital in Excess of Par—Preferred Stock Paid-in Capital in Excess of Stated Value—Common Stock
1
Retained Earnings
1
Treasury Stock (20,000 common shares) During 2014, the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1 Apr. 14 Sept. 3 Nov. 10 Dec. 31
Issued 25,000 shares of common stock for $120,000. Sold 9,000 shares of treasury stock—common for $46,000. Issued 7,000 shares of common stock for a patent valued at $42,000. Purchased 1,000 shares of common stock for the treasury at a cost of $6,000. Determined that net income for the year was $452,000.
No dividends were declared during the year.
a) Journalize the transactions and the closing entry for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Enter the beginning balances in the accounts, and post the journal entries to the
stockholders’ equity accounts. (Use J5 for the posting reference.) (Post entries in the order of journal entries presented in the previous part.)
c) Prepare a stockholders’ equity section at December 31, 2014. Chapter 12
Exercise 12-7 On January 1, Vince Corporation purchased a 25% equity in Morelli Corporation for $180,000. At December 31, Morelli declared and paid a $60,000 cash dividend and reported net income of $200,000.
a) Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Determine the amount to be reported as an investment in Morelli stock at December 31. Exercise 12-8 Your answer is correct. Presented below are two independent situations. 1 .
Chicory Cosmetics acquired 15% of the 200,000 shares of common stock of Racine Fashion at a total cost of $13 per share on March 18, 2014. On June 30, Racine declared and paid a $60,000 dividend. On December 31, Racine reported net income of $122,000 for the year. At December 31, the market price of Racine Fashion was $15 per share. The stock is classified as non-trading.
2 .
Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Nowak declared and paid a cash dividend of $30,000. On December 31, Nowak reported a net income of $80,000 for the year.
Prepare all the necessary journal entries for 2014 for (a) Chicory Cosmetics and (b) Frank, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 12-12
Zippydah Company has the following data at December 31, 2014. Securities Trading Non-trading
Cost
Fair Value $120,000
$124,000
100,000
94,000
The non-trading securities are held as a long-term investment. (a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Non-trading securities at fair value. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (b) Indicate the statement presentation of each class of securities.
Problem 12-2A In January 2014, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred. Feb. 1
Purchased 600 shares of Superior common stock for $31,800, plus brokerage fees of $600.
Mar. 1
Purchased 800 shares of Pawlik common stock for $20,000, plus brokerage fees of $400.
Apr. 1
Purchased 50 $1,000, 7% Venice bonds for $50,000, plus $1,000 brokerage fees.
Interest is payable semiannually on April 1 and October 1. July 1 Aug. 1 Sept. 1
Received a cash dividend of $0.60 per share on the Superior common stock. Sold 200 shares of Superior common stock at $58 per share less brokerage fees of $200. Received a $1 per share cash dividend on the Pawlik common stock.
Oct. 1
Received the semiannual interest on the Venice bonds.
Oct. 1
Sold the Venice bonds for $50,000 less $1,000 brokerage fees.
At December 31, the fair value of the Superior common stock was $55 per share. The fair value of the Pawlik common stock was $24 per share.
a) Journalize the transactions and post to the accounts Debt Investments and Stock
Investments. (Use the T-account form.) (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
b) Prepare the adjusting entry at December 31, 2014, to report the investment securities at fair value. All securities are considered to be trading securities. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
c) Show the balance sheet presentation of investment securities at December 31, 2014. d) Give the statement classification of each income statement account.
Chapter 13 Exercise 13-3 Your answer is correct. Tim Latimer Corporation had the following transactions. 1 . 2 . 3 . 4 . 5 . 6 .
Sold land (cost $12,000) for $10,000. Issued common stock at par value for $22,000. Recorded depreciation on buildings for $14,000. Paid salaries of $7,000. Issued 1,000 shares of $1 par value common stock for equipment worth $9,000. Sold equipment (cost $10,000, accumulated depreciation $8,000) for $3,200.
For each transaction above, prepare the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 13-4 Your answer is correct. Bracewell Company reported net income of $195,000 for 2014. Bracewell also reported depreciation expense of $40,000 and a gain of $5,000 on disposal of plant assets. The comparative balance sheet shows an increase in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Exercise 13-6
The three accounts shown below appear in the general ledger of Chaudry Corp. during 2014. Equipment Date
Debit
Jan. 1
Balance
July 31
Purchase of equipment
70,000
Sept. 2
Cost of equipment constructed
53,000
Nov. 10
Cost of equipment sold
Credit
Ba
49,000
Accumulated Depreciation—Equipment Date
Debit
Jan. 1
Balance
Nov. 10
Accumulated depreciation on equipment sold
Dec. 31
Depreciation for year
Credit
Ba
28,000 23,000
Retained Earnings Date
Debit
Jan. 1
Balance
Aug. 23
Dividends (cash)
Dec. 31
Net income
Credit
17,000 67,000
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of plant assets was $5,000. (Hint:Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Problem 13-3A Your answer is correct. The income statement of Toby Zed Company is presented here. Toby Zed Company Income Statement For the Year Ended November 30, 2014 Sales revenue
$7,500,000
Cost of goods sold Beginning inventory
$1,900,000
Purchases
4,400,000
Goods available for sale
6,300,000
Ending inventory
1,400,000
Total cost of goods sold
4,900,000
Gross profit
2,600,000
Operating expenses Net income
1,150,000 $1,450,000
Ba
Additional information: 1 . 2 . 3 . 4 . 5 .
Accounts receivable increased $200,000 during the year, and inventory decreased $500,000. Prepaid expenses increased $175,000 during the year. Accounts payable to suppliers of merchandise decreased $340,000 during the year. Accrued expenses payable decreased $105,000 during the year. Operating expenses include depreciation expense of $85,000.
Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2014, for Toby Zed Company, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Chapter 14 Exercise 14-3 Your answer is correct. The comparative condensed balance sheets of Garcia Corporation are presented below. GARCIA CORPORATION Comparative Condensed Balance Sheets December 31 2014
2013
Assets Current assets Property, plant, and equipment (net) Intangibles Total assets
$ 76,000
$ 80,000
100,000
90,000
24,000
40,000
$200,000
$210,000
Liabilities and stockholders’ equity Current liabilities
$ 40,000
$ 48,000
Long-term liabilities
140,000
150,000
Stockholders’ equity
20,000
12,000
$200,000
$210,000
Total liabilities and stockholders’ equity
(a) Prepare a horizontal analysis of the balance sheet data for Garcia Corporation using 2013 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, e.g. 12.3%.) (b) Prepare a vertical analysis of the balance sheet data for Garcia Corporation in columnar form for 2014. (Round percentages to 0 decimal places, e.g. 12%.) Exercise 14-4 Your answer is correct. The comparative condensed income statements of Hendi Corporation are shown below. HENDI CORPORATION Comparative Condensed Income Statements For the Years Ended December 31
2014 Net sales
2013 $600,000
$500,000
Cost of goods sold
468,000
400,000
Gross profit
132,000
100,000
Operating expenses Net income
60,000
54,000
$ 72,000
$ 46,000
(a) Prepare a horizontal analysis of the income statement data for Hendi Corporation using 2013 as a base. (Show the amounts of increase or decrease.) (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, e.g. 12.3%.) (b) Prepare a vertical analysis of the income statement data for Hendi Corporation in columnar form for both years. (Round percentages to 1 decimal place, e.g. 12.3%.)
Exercise 14-13
Maulder Corporation has income from continuing operations of $290,000 for the year ended December 31, 2014. It also has the following items (before considering income taxes). 1 .
An extraordinary loss of $70,000.
2 .
A gain of $35,000 on the discontinuance of a division.
3 .
A correction of an error in last year’s financial statements that resulted in a $25,000 understatement of 2013 net income.
Assume all items are subject to income taxes at a 30% tax rate. Prepare an income statement, beginning with income from continuing operations.
Problem 14-6A
The comparative statements of Beulah Company are presented below. BEULAH COMPANY Income Statement For the Years Ended December 31 2014 Net sales (all on account)
2013
$500,000
$420,000
Cost of goods sold
315,000
254,000
Selling and administrative
120,800
114,800
Expenses
Interest expense Income tax expense Total expenses Net income BEULAH COMPANY Balance Sheets
7,500
6,500
20,000
15,000
463,300
390,300
$ 36,700
$ 29,700
December 31 Assets
2014
2013
Current assets Cash
$ 21,000
$ 18,000
Short-term investments
18,000
15,000
Accounts receivable (net)
85,000
75,000
Inventory
80,000
60,000
204,000
168,000
423,000
383,000
$627,000
$551,000
$122,000
$110,000
12,000
11,000
134,000
121,000
120,000
80,000
254,000
201,000
Common stock ($5 par)
150,000
150,000
Retained earnings
223,000
200,000
Total current assets Plant assets (net) Total assets Liabilities and Stockholders’ Equity Current liabilities Accounts payable Income taxes payable Total current liabilities Long-term liabilities Bonds payable Total liabilities Stockholders’ equity
Total stockholders’ equity Total liabilities and stockholders’ equity
373,000
350,000
$627,000
$551,000
Additional data: The common stock recently sold at $19.50 per share. Compute the following ratios for 2014. (Round Earnings per share and Acid-test ratio to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)