Ac550 Final

Submitted by raymcgeisey on October 20, 2011

Category: Business and Economics Words: 1552 | Pages: 7 Views: 26 Report this Essay

1. (TCO A) Listed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Points: 30) Matching: Answer : Historical cost principle : Going concern principle : Matching principle : Monetary unit : Revenue recognition principle Potential Matches: 1: Stable dollar assumption 2: Notes as part of necessary information to a fair presentation. 3: Earnings process completed and realized or realizable. 4: Valuing assets at amounts originally paid for them. 5: the impact of an item on the overall financial operations of a company. 6: Accruals and deferrals in adjusting and closing process (Do not use going concern). 7: Affairs of the business distinguished from those of its owners. 8: Presentation of error-free information with representational faithfulness 9: Business enterprise assumed to have a long life. 10: Cost of providing financial information versus the benefits derived from its use. : Full disclosure principle : Reliability characteristic : Cost-benefit relationship : Materiality constraint : Economic entity assumption 2. (TCO B) Adjusting Entries: Unearned rent at 1/1/10 was $10,300 and at 12/31/10 was $6,000. The records indicate cash receipts from rental sources during 2010 amounted to $50,000, all of which was credited to the Unearned Rent Account. You are to prepare the missing adjusting entry. For each journal entry write Dr for debit and Cr for credit. (Points: 10) 3. (TCO B) Adjusting Entries: Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/10 was $5,000. During 2010 cash received from debtors for interest on outstanding notes receivable amounted to $5,000. The 2010 income statement showed interest revenue in the amount of $4,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr for debit and Cr for credit. (Points: 10)

4. (TCO B) Adjusting entries: Accumulated depreciation-equipment at 1/1/10 was $200,000. At 12/31/10, the balance of the account was $320,000. During 2010, one piece of equipment was sold. The equipment had an original cost of $50,000 and was 1/2 depreciated when sold. You are to prepare the missing adjusting entry. For each journal entry, write Dr. for debit and Cr. for credit. (Points: 10) 5. (TCO B) Adjusting Entries: Allowance for Doubtful Accounts made on 1/1/10 was $70,000. The balance in the allowance account on 12/31/10 after making the annual adjusting entry was $100,000 and during 2010 bad debts written off amounted to $50,000. You are to provide the missing adjusting entry. For each journal entry write Dr for debit and Cr for credit. (Points: 10) 6. (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $50,000. During 2010 rent payments of $110,000 were made and charged to "rent expense." The 2010 income statement shows as a general expense the item "rent expense" in the amount of $135,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr for debit and Cr for credit. (Points: 10) 7. (TCO B) Adjusting Entries: Retained earnings at 1/1/10 was $100,000 and at 12/31/10 it was $300,000. During 2010, cash dividends of $40,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr for debit and Cr for credit. (Points: 10) 1. Retained earnings, December 31, 2010 $ 2,750,000 Sales 2,000,000 Selling and administrative expenses 240,000 Hurricane loss (pre-tax) on plant (extraordinary item) 250,000 Cash dividends declared on common stock 33,600 Cost of goods sold 960,000 Gain resulting from computation error 2,000,000 on depreciation charge in 2009 (pre-tax) Other revenue 80,000 Other expenses 50,000 Sales CGS Gross Profit Admin Exp. & Selling Exp. Income from Operations Other revenue $2,000,000 -$960,000 $1,040,000 -$240,000 $800,000 $80,000 $880,000 -$50,000 $830,000 $249,000 $201,250 $250,000 $75,000 -$175,000 $26,250 Other expenses Income before tax Income Tax Income before extraordinary item Extraordinary item-Hurricane Loss tax reduction NET INCOME Per Share of Common Stock Income before extraordinary item Extraordinary item Net Income Retained Earnings Statement Retained earnings, Jan.1 as reported $2.01 -$1.75 $0.26 Correction for understatement RE due to error (net of tax) Retained earnings, Jan.1 as adjusted

Add Net Income Less Dividends declared Retained earnings , Dec. 31 $2,750 ,000 $1,400 ,000 $4,150 ,000 $26,25 0 $4,176 ,250 $33,60 0 $4,142 ,650 2. (TCO D) The following balance sheet was prepared by the bookkeeper for Blue Company as of December 31, 2011 Blue Company Balance Sheet as of December 31, 2011 Cash Accounts receivable (net) Inventories Investments Equipment (net) Patents $ 90,000 42,200 57,000 76,300 96,000 32,000 $393,500 Accounts payable $ 75,000 Long-term liabilities 100,000 Stockholders' equity 218,500 $393,500 The following additional information is provided: (1) Cash includes the cash surrender value of a life insurance policy $5,000, and a bank overdraft of $4,000 has been deducted. (2)The net accounts receivable balance includes: (a)accounts receivable debit balances $50,000; (b)accounts receivable credit balances $0; (c)allowance for doubtful accounts $3,800. (3)Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods. (4)Investments include investments in common stock, trading $13,000 and available-for-sale $46,300, and franchises $17,000. (5)Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000. Instructions Prepare a balance sheet in good form (stockholders' equity details can be omitted.) Do not worry about balancing the statement but rather use your time to compute the account balances properly for presentation purposes. (Points: 40) 3. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $4,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors: 9 Periods 10 Periods 11 Periods Future Value of 1 1.99900 Present Value of 1 .50025 Future Value of 12.48756 Ordinary Annuity of 1 Present Value of 6.24689 Ordinary Annuity of 1 Present Value of 6.74664 Annuity Due of 1 2.15892 .46319 14.48656 6.71008 7.24689 2.33164 .42888 16.64549 7.13896 7.71008 Instructions (a) Assuming the computer has an eleven-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John? (b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period? (Points: 25) 4. (TCO F) Northville Paper and Paint deposits all receipts and makes all payments by check. The following information is available from the cash records: April 30 BANK RECONCILIATION Balance per bank Add: Deposits in transit $26,746 2,100 Deduct: Outstanding checks (3,800) Balance per books $25,046 Month of May Results Per Bank Per Books $27,995 10,000 11,100 3,000 35 900 $24,355 12,889 16,080 -0-0-0Balance May 31

May deposits May checks May note collected (not included in April deposits) May bank service charge May NSF check of a customer returned by the bank (recorded by bank as a charge) Calculate the following amounts: 1. Deposits in transit on May 31. 2. Outstanding checks on May 31. (Points: 25) 5. (TCO G) Tan Company was formed on December 1, 2010. The following information is available from Tan's inventory record for Product Lotion. Units Unit Cost January 1, 2011 1,600 (beginning inventory) Purchases: January 5, 2011 January 25, 2011 February 16, 2011 March 15, 2011 2,600 2,400 1,000 1,800 $20.00 $21.00 $22.00 $23.00 $18.00 A physical inventory on March 31, 2011, shows 2,400 units on hand. Instructions Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods: (a) FIFO. (b) LIFO. (c) Weighted-average. Show supporting computations in good form. (Points: 30) 6. (TCO H) A machine which cost $200,000 is acquired on October 1, 2010. Its estimated salvage value is $20,000 and its expected life is eight years. Instructions Calculate depreciation expense for 2010 and 2011 by each of the following methods, showing the figures used. (a) Double-declining balance (b) Sum-of-the-years'-digits (Points: 30)