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1. Set up a simple accounting system for Pedal Rentals, Inc., similar to that of 215 Housekeepers.
o Use the following Accounts:
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Common Stock
Retained Earnings
2. Record the transactions above into the simple accounting system.
3. Identify each change to Retained Earnings as one of the following:
o Concession Fee Expense
o Dividends
o Maintenance Expense
o Rental Revenue
o Repair Expense
o Supplies Expense
o Wages Expense
4. Calculate the June 30th balances the accounts in Pedal Rentals, Inc.’s accounting system.
(CkFigs: Cash = 3,510; Retained Earnings = $950)
5. Using good form, prepare General Purpose Financial Statements for the month. Do not prepare a Cash
Flow Statement.
FOCUS ON NOT “COOK-BOOKING” YOUR FINANCIAL STATEMENTS
[1]
[2]
IMPORTANT: The ending balances on 6/30/05 will be the beginning balances on 7/1/2005!
[2]
[3]
Event Interpretation, Simple Accounting System & General Purpose Financial Statement
Randi had a tough time finding a summer job when she went home from college, so she decided to go
into business for herself mowing lawns. Randi’s Lawn Care, Inc.(RLC, Inc.) is the business name.
Randi’s corporation had the following economic events during the month of June.
June 1 Used $200 of her own money and RLC, Inc. borrowed $450 from Randi’s father for financing.
2 Rented a used pickup truck from an uncle for $85 per month. Paid for the first month’s use.
3 Rented a lawnmower ($75 per month), an edger ($50 per month), and a wheelbarrow ($10 per
month) at an equipment rental store. Paid only the June rental fees in full.
16 During the first two weeks, performed $528 of lawn-mowing services. Customers paid in cash.
Incidentally, RLC, Inc. paid $75 for 30 gallons of gasoline and paid $48 for various other supplies.
18 Received a $35 bill (on open account) for a newspaper advertisement that had appeared earlier in
the month. (RLC, Inc. will pay the bill when due on July 10.)
29 During the last half of the month, performed $507 of lawn-mowing services and collected the cash.
30a On Saturday, Randi mowed and trimmed lawn in front of HomeTownBank. HomeTownBank will
pay $75 for the service on Monday July, 2.
30b Randi physically counted the remaining inventory of supplies. The results of which include 24
gallons of gas and 1/3 of other supplies are still on-hand at the close of business on June 30..
30c RLC, Inc. paid back one third of the amount borrowed from Randi’s father plus $5 for interest.
30d RLC, Inc. declared and paid a dividend of $125 to the sole shareholder (i.e., Randi).
30e Randi mailed a $135 RLC Inc., check payable to the equipment rental store for July’s equipment
rental. For this event Randi will need to set up a new asset account titled Prepaid Rent.
Randi knows from taking an accounting class at college that the following accounts(listed in alphabetic
order) may be needed to keep track of her business activities.
ACCOUNTS: ASSET LIABILITY OWNER’S EQUITY
Accounts Payable
Accounts Receivable
Cash
Contributed Capital(a/k/a Common Stock)
Equipment
Note Payable—Dad (a/k/a Loan Payable)
Prepaid Rent (a/k/a Prepaid Expense)
Retained Earnings
Supplies
[3]
[4]
IMPORTANT: The ending balances on 6/30/05 will be the beginning balances on __________!
[4]
[5]
Financial Accounting Laslo Advertising Turck
During March, its 1st month of operations, Laslo Advertising Agency recorded the following transactions.
Instructions: 1) Reconstruct each transaction in General Journal form (include a short explanation)
Transaction (a) has been done for you.
2) Calculate the balance in each T-account.
Use your own paper for items 3) and 4).
3) Prove the equality of DEBITS and CREDITS by preparing a Trial Balance. (CkFig: 26,880)
4) Prepare financial statements. (Income Statement, Stmt of OE & Balance Sheet)
(CkFig: Net Income = $10,505)
5) Prepare the 3 Closing Entries in General Journal form
6) Post the 3 Closing Entries into the system of T-accounts
7) Prepare a Post-closing Trial Balance
Rent Expense(#520)
Retained Earnings or Deficit(#320) f 600
-0- bal.
13680 C1 bal. 600
Equipment (#150) C2 3175 600 C2
b 1600 C3 700 closed
d 3200 9,805 bal.
bal. 4800 Utilities Expense(#530)
h 175
Dividends(#330)
j 700 bal. 175
bal. 700 175 C2
700 C3 closed
closed
5 5
9 9
11 Cash 350.00 11
13 13
17 17
21 21
23 Cash 600.00 23
25 25
29 29
31 Cash 175.00 31
33 33
35 Cash 2,400.00 35
37 37
39 Cash 700.00 39
41 41
42 42
43 43
44 44
[6]
Tab name: Laslo_General Journal(1)
File name: (3)Laslo_Advertising.xls
[7]
5 5
7 A/R 1,000.00 7
9 9
13 13
14 14
21 21
22 22
29 29
30 30
31 31
33 Dividends 700.00 33
36 36
37 37
38 38
39 39
40 40
41 41
42 42
43 43
44 44
[7]
Tab name: Laslo_General Journal(2)
[8]
Listed below are several statements that relate to financial accounting and reporting. Identify
the accounting principle that applies to each statement. (more than one answer may be
appropriate)
1. Sirius Satellite Radio Inc. files its annual and quarterly financial statements with SEC.
2. The notes to the financial statements report McDonKingBurger International, Inc.’s president
and majority shareholder travels on the corporate jet for business purposes only and does not
use the jet for personal use.
3. Jackson Manufacturing does not recognize Revenue for unshipped merchandise even though
the merchandise has been manufactured according to customer specifications.
4. Lady Fred Cosmetics expenses (i.e., writes-off) the cost of equipment over the useful life of
such equipment.
Identify the accounting principle that was violated in each of the following situations.
(more than one answer may be appropriate)
1. Astro Turf Company recognizes an expense, “Costs of Goods Sold”, for the reporting period
the product is manufactured instead of in the reporting period the product is delivered.
2. McCloud Drug Company owns a patent for a drug manufacturing process that it purchased
three years ago for $2 million. The chief accountant recently recorded a journal entry to
revalue the patent up to its “market value” of $8 million.
3. Prince Incorporated, a small publicly traded corporation pays the monthly mortgage on the
palatial estate of its president, Larry Crosswhite, and debits Miscellaneous Expense.
For each of the following situations, (1) indicate whether you agree or disagree with the
financial reporting practice employed and (2) state the accounting principle that is applied (if
you agree), or violated (if you disagree). (more than one answer may be appropriate)
1. Loser Corporation did not disclose that it was the defendant in a material lawsuit because the
trial was still in progress.
2. Alliant Semiconductor Corporation files quarterly and annual financial statements with the SEC.
3. Reliant Pharmaceutical Inc. paid rent in advance for the next two years on its office building
and charged the entire expenditure to Rent Expense.
4. Rockville Engineering credits the Revenue account after products have been shipped, even
though customers pay Rockville 50% of the sales price in advance.
[8]
[9]
(5)supplemental(acorn_school).doc
Financial Accounting – Turck
[9]
[ 10 ]
(5)supplemental(acorn_school).doc
Financial Accounting – Turck
Acorn Nursery School Corporation (ANSC) (cont):
The following transactions were completed by ANSC during February.
February
2 Paid rent for the month, $270.
3 Paid for a one-year insurance policy, $290.
4 Received payments for February’s services provided to customers, $650.
5 Bought supplies on account from Duncan Office Supply, $85.
6 Ordered playground equipment.
8 Made payment to a vendor on open account, $170.
9 Received payments from customers for services provided in January, $1,200.
10 Billed regular customers for February services performed, but not yet paid for, $700.
11 Paid for supplies purchased on February 5.
13 Received the playground equipment ordered on Feb. 6. Paid cash, $1,000.
16 Paid part-time employees for their work through the first half of February, $230.
17 Purchased office equipment on account, $290.
19 Paid this month’s utility bill, $145.
22 Received payment from customers of $500. These customers were originally billed
on Feb. 10.
27 Received an invoice from the bus driver for gas expenses, $35. ANSC will pay invoice on
March 10.
28 Declared and paid a dividend of $110.
Instructions
1. Record the transactions for February in a General Journal starting on general journal page 17.
2. Post all February entries to the General Ledger.
3. At the end of the month, prepare a Trial Balance. Use your own paper.
4. Prepare General Purpose Financial Statements for the month of February. Use your own
paper.
5. Do not prepare Closing Entries at this time.
CkFigs: Cash balance $1,920; Net Income $670; Retained Earnings $1,930
[ 10 ]
File name: (5)supplemental(acorn_school).xls
[ 11 ]
POST.
ACCOUNTS/(EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 2009 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
41 41
42 42
[ 11 ]
Tab name: Acorn- General Journal (1)
File name: (5)supplemental(acorn_school).xls
[ 12 ]
POST.
ACCOUNTS/(EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 2009 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
41 41
42 42
[ 12 ]
Tab name: Acorn- General Journal (2)
File name: (5)supplemental(acorn_school).xls
[ 13 ]
GENERAL LEDGER
[ 13 ]
Tab name: Acorn- Gen Ledger (1)
File name: (5)supplemental(acorn_school).xls
[ 14 ]
GENERAL LEDGER
[ 14 ]
Tab name: Acorn- Gen Ledger (2)
File name: (5)supplemental(acorn_school).xls
[ 15 ]
GENERAL LEDGER
CkFig: 1,350.00
[ 15 ]
Tab name: Acorn- Gen Ledger (3)
[ 16 ]
Peter Valente operates a document delivery company. In the past (until August 1, 2008),
the accounting records were maintained by an outside accounting service. According to
those records, Valente’s Total Owner’s Equity balance was $81,500 at the close of
business on July 31, 2008. To save on expenses Valente decides to keep the records
himself. He manages to correctly record all August transactions, but he has significant
problems preparing the financial statements. His versions of the Income Statement and
Balance Sheet follow. Using the account balances contained in these financial
statements, prepare revised (corrected) general purpose financial statements, don’t forget
a Statement of Owner’s Equity, for the month of August.
(6)supplemental(correcting_financial_stmts).doc
[ 16 ]
[ 17 ]
Problem 1 (What is the reporting (i.e., measurement) period for Failwell? _____________)
Background Failwell has to complete its 2007 annual report in time for its annual stockholders’ meeting
scheduled for February 15, 2008. The following economic events must be properly accounted for before
financial statements can be finalized and published in the 2007 annual report. In other words, Failwell
needs to prepare end of year Adjusting Journal Entries 1 Assume Failwell does not issue monthly
financial statements and so no Adjusting Journal Entries have been prepared during the year. (include the
date for each journal entry)
1. Employees’ salaries amount to $15,000 per week (5-day work week). The last payday of 2007 was
on Monday, December 24. Payday is every other Monday and paychecks include pay for the most
recent Friday. The unadjusted balance in Salaries Expense is at $762,000.
a. Prepare the necessary AJE to accrue salaries owed but not paid as of 12/31/2007.
b. Prepare the explicit journal entry to record the first pay day in 2008 (i.e., January 7, 2008).
(hint: you will need a compound entry involving three accounts)
2. On November 1, 2007, Failwell debited Prepaid Rent when it paid its equipment rental of $6,000.
The payment represents rent costs for the months of November through January.
a. Reconstruct the explicit journal entry that was recorded back on November 1, 2007.
b. Prepare the necessary AJE to account for rent used during November and December.
3. On December 1, 2007, the company received $3,000 in cash from a tenant that is renting office space
in Failwell’s building. The cash receipt, representing rent for December, January February and
March, was balanced in the accounting system with a credit to Unearned Rent Revenue.
a. Reconstruct the explicit journal entry that was recorded back on December 1, 2007.
b. Prepare the necessary AJE to account for service provided to tenant during 2007.
4. On November 1, 2007, the company borrowed $100,000 from the bank. The loan contract requires
principal 2 and interest at a 10% annual 3 rate to be paid on April 30, 2008.
a. Reconstruct the explicit journal entry that would have been recorded back on November 1,
2007.
b. Prepare the necessary AJE to account for interest owed at 12/31/2007.
c. Try to prepare the April 30, 2008 necessary journal entry required at maturity of the loan.
(hint: you will need a compound entry involving four accounts)
1
Adjusting Journal Entries (almost) never include Cash. AJEs in this problem set will NOT include Cash.
2
Principal usually refers to the original amount borrowed.
3
Interest Rates are always stated in annual rates. Calculate the monthly or daily interest rates as follows:
(monthly interest rate = annual interest rate ÷ 12 mos) or (daily interest rate = annual interest rate ÷ 365 days)
1 || ] J | F | M | A | M | J | J | A | S | O | N |
| A | M | J | J | A | S | O | N | D[ 17
[ 18 ]
5. On October 1, 2007, Failwell lent $60,000 to another company. A promissory note was signed stating
principal and interest at a 12% annual rate is due to be paid back on September 30, 2008.
a. Reconstruct the explicit journal entry that was recorded back on October 1, 2007.
b. Prepare the necessary AJE to account for interest earned during 2007.
c. Try to prepare the explicit September 30, 2008 journal entry required at maturity of the loan.
(hint: you will need a compound entry involving four accounts)
6. On August 1, 2007, Failwell collected $12,000 in Cash as advance payments from a customer for services
to be provided in the future. The $12,000 represents one year’s services and the entire amount was
credited directly to Unearned Revenue. Assume the balance in Unearned Revenue was $-0- before this
event.
a. Reconstruct the journal entry that would have been recorded back on August 1, 2007.
Setting up these T-accounts will prove beneficial for working out the correct AJE.
Unearned Revenue Service Revenue
Beg. Bal. Beg. Bal.
Aug. 1, 07 Unadj. Bal.
Unadj. Bal.
AJE AJE
Adj. Bal. Adj. Bal.
b. Prepare the necessary AJE to account for service provided to customer during 2007.
c. After posting the AJE, what would be the adjusted (i.e., reported) balance in Unearned Revenue?
7. Suppose instead of (6) above: On August 1, 2007, Failwell collected $12,000 in advance payments from
a customer for services to be provided in the future. The $12,000 represents one year’s services and the
entire amount was credited directly to Service Revenue.
a. Reconstruct the journal entry that was recorded back on August 1, 2007. (read #6 & #7 carefully)
Setting up these T-accounts will prove beneficial for working out the correct AJE.
Unearned Revenue Service Revenue
Beg. Bal. Beg. Bal.
Aug. 1, 07
Unadj. Bal. Unadj. Bal.
AJE AJE
Adj. Bal. Adj. Bal.
2 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 18 ]
[ 19 ]
8. A three-year fire insurance policy was purchased on July 1, 2007, for $6,000. On July 1 the company
debited Prepaid Insurance for the entire amount.
a. Reconstruct the journal entry that was recorded back on July 1, 2007.
Setting up these T-accounts will prove beneficial for working out the correct AJE.
Prepaid Insurance Insurance Expense
Adj.Bal. Adj.Bal.
Adj.Bal. Adj.Bal.
4
Examples: For a long-term asset placed in service on February 10, include February and depreciate 11 months in the first year. If
the asset is placed in service on February 18, then exclude February and depreciate over the remain 10 months in the first year.
3 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 19 ]
[ 20 ]
d. After posting the AJE, what would be the adjusted balance in Supplies Expense account?
12. Suppose instead of (11) above: Failwell started 2007 with $2,000 worth of supplies in the storeroom;
the 1/1/2007 balance in the Supplies account was appropriately at $2,000. During the year, $6,500 in
supplies were purchased and debited to Supplies Expense. On 12/31/2007, counting supplies in the
storeroom reveals that $3,250 remain on hand at year end. (read this carefully)
a. Reconstruct a journal entry that represents the $6,500 worth of supplies purchases. (ignore date)
Setting up these T-accounts will prove beneficial for working out the correct AJE.
Supplies Supplies Expense
Beg. Bal.
12a)
Unadj. Bal. Unadj. Bal.
Adj.Bal. Adj.Bal.
4 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 20 ]
[ 21 ]
Liabilities
CURRENT LIABILITIES:
Accounts payable....................................................... ... $ 12,400
Salaries Payable ......................................................... ........... 5,400
Short-term Loan Payable(due 4/30/2005) ................. ..... 50,000
Total Current Liabilities ............................................. ................................ $ 67,800
NON-CURRENT LIABILITIES ..................................... ............................... NONE
Total Liabilities ........................................................... ............................................... 67,800
Owners’ Equity
Common Stock ........................................................... .................... ............... 19,000
Retained Earnings ...................................................... .................... ........... 42,500
Total Owners’ Equity.................................................. .................... .......................... 61,500
Total liabilities and owners’ equity ........................... ............................................... $129,300
5 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 21 ]
[ 22 ]
c. During 2004, the company received a $1,000 cash advance from a customer for services to be
performed in 2005. The $1,000 was credited to Sales Revenue. No AJE was made.
d. There were $-0- Supplies listed on the Balance Sheet in the asset section. However, you
discover that Supplies costing $750 were in the storeroom at December 31, 2004.
e. Hales borrowed $50,000 from a local bank on May 1, 2004. Principal and interest at 12% annual
rate will be paid on April 30, 2005. No accrual was made for interest.
6 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 22 ]
[ 23 ]
[ 23 ]
File name: (8)Butch's Paintball Distribution1.xls
[ 24 ]
POST.
ACCOUNTS / (EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 2006 1
5 5
7 A/P 5,900.00 7
9 9
10 4 A/R 5,000.00 10
11 COGS 4,000.00 11
13 M/I 4,000.00 13
15 15
17 CASH 200.00 17
19 19
20 6 A/P 300.00 20
21 M/I 300.00 21
23 23
28 28
33 33
34 14 M/I 4,400.00 34
35 CASH 4,400.00 35
37 37
38 16 CASH 500.00 38
39 M/I 500.00 39
[ 24 ]
Tab name: General Journal (1)
File name: (8)Butch's Paintball Distribution1.xls
[ 25 ]
POST.
ACCOUNTS / (EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 2006 1
3 A/P 4,200.00 3
5 5
6 20 M/I 100.00 6
7 CASH 100.00 7
9 9
10 23 CASH 6,400.00 10
11 COGS 5,120.00 11
13 M/I 5,120.00 13
15 15
16 26 M/I 2,300.00 16
17 CASH 2,300.00 17
19 19
24 24
26 CASH 90.00 26
28 28
29 29 M/I 70.00 29
30 COGS 70.00 30
32 32
33 30 A/R 3,700.00 33
34 COGS 3,000.00 34
36 M/I 3,000.00 36
38 38
39 39
40 40
[ 25 ]
Tab name: General Journal (2)
File name: (8)Butch's Paintball Distribution1.xls
[ 26 ]
POST.
ACCOUNTS / (EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
[ 26 ]
Tab name: General Journal (3)
File name: (8)Butch's Paintball Distribution1.xls
[ 27 ]
GENERAL LEDGER
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
APR 4 J1 5,000.00 5,000.00
13 J1 5,000.00 0.00
30 J1 3,700.00 3,700.00
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
[ 27 ]
Tab name: Gen Ledger p. (1)
File name: (8)Butch's Paintball Distribution1.xls
[ 28 ]
GENERAL LEDGER
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
[ 28 ]
Tab name: Gen Ledger p. (2)
File name: (8)Butch's Paintball Distribution1.xls
[ 29 ]
GENERAL LEDGER
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
APR 29 J2 90.00 90.00
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
APR 13 J1 100.00 100.00
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
APR 4 J1 4,000.00 4,000.00
23 J2 5,120.00 9,120.00
29 J2 70.00 9,050.00
30 J2 3,000.00 12,050.00
[ 29 ]
Tab name: Gen Ledger p. (3)
File name: (8)Butch's Paintball Distribution1.xls
[ 30 ]
GENERAL LEDGER
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
[ 30 ]
Tab name: Gen Ledger p. (4)
[ 31 ]
(8)Butch's Paintball Distribution1.xls
CASH 4,106.00
A/R 3,700.00
M/I 3,854.00
A/P 0.00
COMMON STOCK 9,000.00
SALES REVENUE 15,100.00
SALES RETURNS AND ALLOWANCES 90.00
SALES DISCOUNTS 100.00
COST OF GOODS SOLD 12,050.00
FREIGHT OUT 200.00
24,100.00 24,100.00
[ 31 ]
[ 32 ]
Transactions During calendar year 2009, the following purchases and sales were made:
Purchases __ Sales__
March 15,2009 300 units at $24 April 10, 2009 200 units
July 20, 2009 300 units at $25 August 20, 2009 300 units
September 4, 2009 200 units at $28 November 18, 2009 150 units
December 22, 2009 100 units at $30 Dec. 12, 2009 200 units
Assume units sold for $70 each.
Instructions:
1. Determine the number of Units available for sale and Cost of Goods Available for Sale for 2009.
2. Assume the company uses a Periodic system. Determine Ending Inventory, Cost of Goods Sold
and Gross Profit under following cost flow assumptions:
(a) FIFO (CkFig: CoGS = $20,900)
(b) LIFO (CkFig: CoGS = $22,100)
(c) Weighted-Average Cost (CkFig: CoGS = $21,505)
(d) Specific Identification (CkFig: CoGS = $21,050).
3. Assume the company uses a Perpetual system.
Determine Ending Inventory and Cost of Goods Sold under following cost flow assumptions:
(a) FIFO
(b) LIFO (CkFig: CoGS = $21,300)
(c) Weighted-Average Cost (CkFig: CoGS = $20,995).
(d) Specific Identification Short Answer: What critical information is missing from the problem
and prevents us from employing a combination perpetual-specific identification inventory method
for 2009? Hint: try to journalize Cost of Goods Sold on the April 10, 2009 sale.
4. In general journal form, prepare the required entries for July 20 and November 18 under the
following conditions: (a) Perpetural FIFO, (b) Perpetual LIFO, (c) Perpetual Weighted-Ave.
(d) If at all, how would your journal entries differ under Periodic?
Note: I am 97% confident of the check figures, but I do not guarantee them.
1
Warning: The reporting period for this problem is 2009. The assignment is to get
fairly stated year-end inventory and CoGS for 2009.
2
Do companies that can “specifically identify” inventory units, have to use
Specific Identification in published financial statements? No, they do not!
Presentation of Specific Identification is very rare in practice!
Use plenty of paper for this problem set. -1-
[ 32 ]
[ 33 ]
Using your own paper, set up a table similar to the one presented below:
Preliminary Physical Inventory $ 100,000 Comments:
1.
2.
3.
4.
5.
6.
7.
8.
Check Figure $ 102,275
C1) GROSS PROFIT METHODSmith Distributors, Inc., supplies ice cream shops with various
toppings for making sundaes. On November 17, 2010, a pack of wild people escaped from a
weight-reduction spa broke into one section of the warehouse and ate all the toppings resulting in a
total loss of all toppings stored in that section. The company must provide its insurance company
with an estimate of the amount of inventory lost. The following information is available from the
company’s accounting records:
Required: Calculate the estimated cost of each of the toppings lost in the melee:
(show your work)
Fruit Marshmallow Chocolate
Toppings Toppings Toppings
Inventory, January 1, 2010 $ 20,000 $ 7,000 $ 3,000
Net purchases through Nov 17 150,000 36,000 12,000
Net sales through Nov. 17 200,000 55,000 20,000
ADDITIONAL CONSIDERATION:
The Gross Profit Ratio is, by definition, a Percentage of Sales (i.e., Net Sales = 100%). Sometimes,
though, information will instead provide a “percentage” measuring the “Markup on Cost.” In that case, the
“percentage” will be referred to as the Markup on Cost (percentage of cost, i.e., cost = 100%).
When I pay $60 for a skateboard that I plan to resell, I need to determine the price tag value. I always add
50% of the cost ($30) to the cost and that is my selling price. I would sell a $60 skateboard for $90. I
employed a 50% “Markup on Cost”. What “Gross Profit Percentage” is implied by a 50% Markup on
Cost?
Be careful to note which way the percentage is being stated. If stated as “Markup on Cost”, then convert to
“Gross Profit Percentage”, then Gross Profit Method can be applied the usual way. See next problem.
Make your work clear and easy to follow! Use plenty of paper for this problem set. -3-
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Make your work clear and easy to follow! Use plenty of paper for this problem set. -4-
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Required:
(a) Use arithmetic and confirm the detail inventory records agree with the General Ledger
Balance.
(b) Determine an adjusted inventory balance by applying “Lower of Cost or Market(LCM)”
analysis to the inventory using the “aggregate approach”. Your expert has provided you
with an approximation of market value as shown above. Propose the AJE if needed.
(c) Assume the auditor has asked you to do the LCM adjustment on an “item-by-item
approach” and that your expert delivered these per unit “replacement values” for your
Merchandise Inventory:
Replacement
Part No. Cost per Unit
110 $ 100
111 52
112 76
113 180
120 208
121 14
122 235
Use arithmetic and confirm the ending inventory after applying LCM on the “item-by-item
approach” should be $352,900. Propose the AJE if needed.
Make your work clear and easy to follow! Use plenty of paper for this problem set. -5-
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E1) RETAIL INVENTORY METHOD Suppose Home Improvement Store Inc.’s (HISI) largest
lender(creditor) has asked HISI for monthly financial statements as a condition attached to a new
loan dated May 31, 2010. In order to avoid costly monthly physical counts of inventory, HISI
management intends to use the retail inventory method to estimate Ending Inventory and Cost of
Goods Sold for each month starting with June. Using data available in its general ledger and
additional accounting records, show how HISI can estimate Cost of Goods Sold, Ending Inventory
and Gross Profit for June.
at Cost at Retail
Beginning Inventory, June 1, 2010 $ 60,000 $100,000
Net Purchases for June 287,200 460,000
Goods Avail for Sale (at cost & at retail respectively)
E2) RETAIL INVENTORY METHOD (continued) Suppose the President of HISI suspects the
Inventory Manager of theft (stealing inventory). After sending the Inventory Manager home for the
day, the President calls for a physical inventory on June 30, 2010. Inventory counters are instructed
to count 6/30/2010 inventory using retail value (i.e., each item of inventory will be counted at its
price tag value). The count results in a retail inventory valuation of $130,000. At cost value how
much inventory seems to be missing?
Make your work clear and easy to follow! Use plenty of paper for this problem set. -6-
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1. Compute the missing amounts for each of the following notes: (for easier calculations, assume 360 days per year)
Principal Annual Interest Rate Time Total Interest
(a) $17,000 10% 180 days ?
(b) ? 9% 120 days $450
(c) $60,000 ? 5 months $3,000
(d) $50,000 11% ? $1,375
2. Buck’s Best Coffee Company(BBCC), an importer of Columbian coffee, BBCC maintains a tight credit policy for
customers, but has a few regular customers and so makes some sales on account and manages the resulting receivables.
Average experience for the past three years has been as follows:
Buck Anderson, the sole shareholder, is considering loosening the credit policy by accepting credit cards (VISA,
Mastercard). He expects to sell 10% more coffee by easing credit restrictions. Analysis suggests that ALL sales will be
via credit card. If BBCC switches to credit cards, Buck believes the business can save $2,000 on accounting and additional
operating expenses, however VISA and Mastercard will charge BBCC a 2% fee on credit-card sales.
Instructions (assume no income taxes):
1. Should Buck’s Best Coffee Company start accepting credit cards? (to answer the question, prepare income
statements under the present scenario and then under the credit card plan, then compare Net Income projections)
2. If Buck believes that credit card companies are planning to triple their fees, does your answer change?
1
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5. Mount Digital Co. reported the following information on its balance sheet as of December 31, 2008.
Accounts Receivable, gross $960,000
Less: Allowance for Doubtful Accounts 70,000
Accounts Receivable, net $890,000
During 2009, the company had the following transactions related to receivables.
A. Sales on Account $3,200,000
B. Sales returns and allowances 50,000
C. Collections of accounts receivable 2,800,000
D. Write-offs of accounts receivable deemed uncollectible 90,000
E. Recovery of bad debts previously written off (not included in C. above) 25,000
Instructions:
a. Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on
the collections of accounts receivable.
b. Start with the January 1, 2009, balances in A/R and AfDA, then post the entries to these two accounts (use T-
accounts), and determine year-end unadjusted balances.
c. Prepare the journal entry to record bad debts expense for 2009, assuming that an aging of A/R indicates that
uncollectible accounts are $100,000(i.e., calculated amount)
6. Assume Dunn-Pitts Inc., famous for its canned olives, completed the following selected transactions:
2008
Nov 1 Sold goods to Kroger, Inc., receiving a $24,000, three-month, 6% note.
Dec 31 Made an adjusting entry to accrue interest on the Kroger note.
Dec 31 Made an AJE to record Bad Debt Expense based on an aging of A/R. The aging analysis indicates that
$197,400 of A/R will not be collected. The unadjusted balance in Allow. for Doubtful Accts is $19,300<cr>.
2009
Feb 1 Collected the maturity value of the Kroger note.
Feb 23 Received a 90-day, 15%, $4,000 note from Bliss Co. for a past-due account
Mar 31 Sold the Bliss Co. note to U.S. Bank, receiving cash of $3,810.
Nov 16 Loaned $15,000 cash to McNeil, Inc., receiving a 90-day, 12% note.
Dec 31(a) Accrued the interest on the McNeil, Inc., note.
Dec 31(b) AJE to record Bad Debt Expense based on an aging of A/R. Management has calculated that $274,100 of
A/R will likely not be collected. The unadjusted balance in Allow. for Doubtful Accts is $23,000<dr>.
Instructions:
Prepare all necessary journal entries for years 2008 and 2009.
2
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7. Following are selected transactions, including all transactions affecting Allowance for Doubtful Accounts, for Garden
Company during the year 2000. The balance in Allowance for Doubtful Accounts as of January 1, 2000 is a $1,500 credit.
May 8 Garden Co. purchases 300 shares of Federal Express stock as a short-term investment as
available-for-sale securities at a cost of $40 per share plus $975 in broker fees.
July 14 Write off a $750 account receivable arising from a sale to Briggs Company 13 months ago.
(Garden Company uses the allowance method.)
July 30 Garden Company receives a $1,000, 3-month, 10% note from a product sale to Sumrell
Company. (assume Garden Company uses periodic inventory system)
Aug. 15 Receives $2,000 cash plus $10,000 note from Evans in exchange for merchandise that sells for
$12,000. The note is dated August 15, bears 12% interest, and matures in six months.
Sep. 2 Sells 100 shares of Federal Express at $47 per share and continues to hold the remaining 200
shares. The broker’s commission on this sale is $225.
Sep. 15 Receives $9,900 in exchange for discounting without recourse the $10,000 note (see August 15)
at the local bank.
Oct. 2 Purchases 400 shares of McDonald’s stock of $60 per share plus $1,600 in commission. The
stock is held as a short-term investment in available-for-sale securities.
Oct. 30 Garden Company receives payment on Sumrell note dated July 30.
Nov. 1 Made a $200 credit card sale with a 4% fee—the net cash proceeds will be received overnight
from the credit card company—and automatically deposited in company’s bank account
Nov. 5 Made a $500 credit card sale with a 5% fee—the payment from the credit card company is
received via check on Nov 7. Prepare the Nov. 7 entry also.
Nov. 15 Receives the full amount of $750 from Briggs Company that was previously written off on July
14. Record the bad debts recovery.
Nov. 20 Write off a $2,500 account receivable arising from a prior year sale to Owens’ Inc.
(1) Prepare journal entries to record these transactions on the books of Garden Company.
(2) Prepare the following:
A. AJE(a): Prepare an adjusting entry to accrue any Interest Income and Interest Receivable on the basis of
outstanding Notes Receivable. (if any)
B. AJE(b): Before any AJE(b) the Allowance for Doubtful Accounts shows a $1,000 debit balance. [confirm
this balance for yourself by posting AFDA entries to the General Ledger (there should be 3 entries to post)].
Has management over or under estimated the level of write-offs to Accounts Receivable for the year 2000?
Following the directions below, prepare two alternative adjusting journal entries for Bad Debt Expense on
December 31, 2000.
(i) AJE(b) (alternative 1) Balance Sheet Method:
Assume Bad Debt Expenses is estimated by an aging of Accounts Receivable. Based on analysis of
Accounts Receivable, management estimates $20,400 of the outstanding Account Receivable will never
be collected.
(ii) AJE(b) (alternative 2) Income Statement Method:
Assume Bad Debt Expenses is estimated by using the percent of Sale Revenue approach. Management
estimates Bad Debt Expense for the period is 1% of credit sales. Credit sales for the year amounted to
$2,000,000.
3
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Financial Accounting
Instructor—Turck Prepare your solutions neatly on your own paper.
(11)supplemental(PPE).docx Start each problem on a new sheet of paper.
1. DeLisa Company purchased equipment on January 1, 2008, for $44,000. The expected useful life of the equipment is 10
years or 100,000 units of production, and its residual value is $4,000. Under three depreciation methods, the annual
depreciation expense and the balance of accumulated depreciation at the end of 2008 and 2009 are as follows:
-1-
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4. Record the following transaction: Synonyms: Trade-in Value = Trade-in Allowance = Fair Market Value
(A) On January 2, 2010, Gel, Inc., traded in old communication equipment with book value of $11,000 (cost of $96,000) for similar new
equipment with a fair market value $88,000. The seller gave Gel, Inc. a trade-in allowance of $7,500 on the old equipment, and Gel,
Inc. paid the remainder in cash. Assume this event has “commercial substance”.
(B) Bright Company recently traded in an smaller model coffee roaster for bigger customized model. The old model’s book value was
$180,000 (original cost of $300,000) and its fair market value was $170,000. Bright Company had to pay $50,000 cash to complete the
exchange. Assume this event has “commercial substance”.
(C) Assume the same facts as (A), except the trade-in allowance was $70,000.
(A) On January 2, 2010, Gel, Inc., traded in old communication equipment with book value of $11,000 (cost of $96,000) for similar
new equipment with a fair market value $88,000. The seller gave Gel, Inc. a trade-in allowance of $70,000 on the old equipment,
and Gel, Inc. paid the remainder in cash. Assume this event has “commercial substance”.
(D) Assume the same facts as (B), except the fair market value of the old equipment is $200,000.
(B) Bright Company recently traded in an smaller model coffee roaster for bigger customized model. The old model’s book value
was $180,000 (original cost of $300,000) and its fair market value was $200,000. Bright Company had to pay $50,000 cash to
complete the exchange. Assume this event has “commercial substance”.
(E) Assume the events referred to above do not have “commercial substance”, Prepare the journal entry for (A), (B), (C) and (D). If the
entry is unchanged based on assuming no commercial substance, then report “original journal entry is unchanged”.
6. (part 1) Girvin Exercise Company has recently purchased for $80,000 cash, a patent for the design of a new weight-lifting
machine. Although the patent gives legal protection for 20 years, the patent is expected to provide Girvin with a competitive
advantage for only eight years. Assuming the straight-line method of amortization, (a) make a journal entry to record the purchase
of the patent and (b) record an AJE to record amortization for year 1.
(part 2) After using the patent for four years, Girvin learns at a trade-show that another company has designed a much better
machine. On the basis of this new information, Girvin decides to revise the useful life to a total of six years; and starting with year
5, amortize the remaining cost of the patent over the two remaining years of useful life. Prepare the year 5 AJE for patent
amortization.
(part 3) Assume the facts in part 2, except Girvin sells the patent to a less informed competitor on December 31, year 4. The
proceeds on the sale are Cash of $24,000 and a 7%, 3-year promissory note for $19,000. Record the journal entry to record the
sale of the patent.
-2-
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Financial Accounting
Instructor—Turck Prepare your solutions neatly on your own paper.
(12)supplemental(current_liabilities).doc Start each problem on a new sheet of paper.
EXERCISES
1. (Accounts and Notes Payable)
The following are selected 2007 transactions of Palmeiro Corporation.
Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records
purchases gross and uses a periodic inventory system. Payment is due Oct 1.
Palmeiro finds itself short of cash on October 1. Assume the following independent alternatives:
Oct. 1a Issued a $125,000, 12-month, 12% note to Ripken in payment of account.
Oct. 1b Borrowed $125,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $142,000
note.
Instructions
(a) Prepare journal entries for the selected transactions above.
(b) Prepare adjusting entries at December 31. (Use straight-line amortization of the discount.)
(c) Compute the total net liability (i.e., carrying value) to be reported on the December 31 balance sheet
for:
(1) the interest-bearing note.
(2) the zero-interest-bearing note. (Use straight-line amortization of the “Discount on N/P”.)
2. (Short-term Notes Payable) Johnson Company issued a 3-month note dated May 1, 2007, for cash.
The face value of the note is $12,000.
Instructions
Assume the note is interest bearing at an annual rate of 8%, which is considered a reasonable rate:
(a) Prepare the journal entries for May 1 and at maturity assuming Johnson prepares financial statements
only annually at calendar year end.
(b) instead of (a) assume Johnson Co. prepares financial statements on a monthly basis. Prepare the
necessary AJEs dated May 31, June 30, July 31 and the entry for maturity on the due date.
Assume the note is a non-interest bearing note.(c) the note is noninterest-bearing and the “effective”
interest rate for similar financing is 8% per annum. Johnson received cash equal to the present value
of the note at the date of issuance.
(CkFig: loans proceeds = $11,765 rounded to the nearest dollar)
(Hint: to calculate $11,765 you need to use a substitution technique you learned in algebra)
(d) determine the “bank discount rate” applied to the noninterest-bearing note.
3. (Warranties) Incaviglia Company began selling photo-copiers in 2007. Incaviglia sold 400 photo-
copiers in 2007 for $3,000 apiece and included a free one-year service warranty with each machine.
Assume the sales occurred evenly through the year. Service on each machine during the warranty period
is expected to average $330. During 2007, $24,000 in actual warranty claims have been paid out with
cash.
Instructions
(a) Prepare three journal entries to 1) record the sale of the copiers(assume periodic); 2) the actual
warranty costs; and 3) the Dec. 31 AJE.
(b) On the basis of the entries in (a) above, what will Incaviglia report for Estimated Warranty Liabilitiy
as of 12/31/2007?
(c) On the basis of the entries in (a) above, what will Incaviglia report for Warranty Expense for the year
ended 12/31/2007?
(d) On the basis of the data above, assume the warranty costs can not be reasonably estimated, prepare the
appropriate entries.
-1-
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Financial Accounting
Instructor—Turck Prepare your solutions neatly on your own paper.
(12)supplemental(current_liabilities).doc Start each problem on a new sheet of paper.
5. (Payroll & Payroll Tax Entries) The payroll of Grich Company for September 2008 is as follows.
Gross payroll was $960,000;
Included in the Gross payroll is $220,000 that is exempt from Social Security tax because it
represented amounts paid in excess of $102,000 for the year to certain employees;
Similarly, the amount paid to employees in excess of $7,000 for the year was $800,000;
Income taxes in the amount of $180,000 were withheld;
Similarly withheld was $18,000 in union dues;
F.I.C.A. tax is 7.65% on an employee’s wages to $102,000 and 1.45% in excess of $102,000;
The state unemployment tax is 5.4%, but Grich Company is allowed a credit of 4.2% by the state for
its stable work force (i.e., low employee turnover experience). Use 1.2% as the tax rate;
The federal unemployment tax rate is 0.8% after state credit;
Instructions
Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are
recorded separately. (CkFigs: Credit to Cash = $702,200; Debit to Payroll Tax Expense = 63,000)
-2-
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Financial Accounting
Instructor—Turck Prepare your solutions neatly on your own paper.
(13)supplemental(bonds).doc Start each problem on a new sheet of paper.
1. (a) Determine whether the bond will issue at (i) par, (ii) with a premium, or (iii) with a
discount. (b) Calculate the present value of a $1 million bond issue under each of the following
independent situations (round table factors to the 4th place after the decimal point). (c)
Journalize each bond issue (assume the bonds issue on authorization date of May 1, 2009):
Maturity Interest Paid Stated Rate Effective (market) Rate Ck Fig
a. 10 years Annually 10% 10% ≅ $1,000,000
b. 10 years Annually 10% 12% ≅ $887,020
c. 10 years Semiannually 10% 12% ≅ $885,295
d. 10 years Semiannually 12% 10% ≅ $1,124,632
e. 20 years Semiannually 12% 10% ≅ $1,171,546
f. 20 years Semiannually 12% 12% ≅ $1,000,000
2. NOC Inc. issued 9% bonds, dated January 1, 2010 with a face amount of $500,000. The bond
matures at the end of 2013 (4 years). For bonds of similar risk and maturity the market yield was
10%. Interest is paid semiannually on June 30 and December 31. (round table factors to the 4th
place after the decimal point)
Required:
a. Determine NOC’s semiannual cash payments as stipulated in this bond obligation.
b. Determine the price of the bonds at January 1, 2010. CkFig: ≈$483,842 (±$20)
c. Prepare the journal entry to record their issuance by NOC Inc. on January 1, 2010. Use
$483,842 as the loan proceeds.
d. Construct an interest amortization schedule using the effective interest amortization.
e. Using the effective interest method (i.e., not the straight-line method.), prepare the
journal entry to record interest on June 30, 2010 and Dec. 31, 2010.
CkFig: Interest Expense $24,192.10 and $24,276.70 respectively.
f. Prepare the two necessary journal entries on December 31, 2013.
3. The balance sheet of Yakima Lake Computers as of December 31, 2009, included bonds with
a stated rate of 12.25% and having a face amount of $90 million. The bonds had been issued in
2002 and had a Carrying Value of $87 million at December 31, 2009. On January 1, 2010,
Yakima Lake Computers called and retired 1/3 the bonds before their scheduled maturity at the
call price of 102.
Required:
1) Prepare the journal entry by Yakima Lake Computer to record the redemption of the
bonds at January 1, 2010. CkFig: Loss on retirement = $1,600,000
2) Assume all the same facts, except the bond had a Carrying Value of $93 million on
December 31, 2009. Journalize the retirement entry.
-1-
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(Prob 1) (Recording the Issuances of Common Stock) During its first year of operations, Pride Corporation had the
following transactions pertaining to its common stock.
Apr. 26 Issued 15,000 shares for cash at $4.50 per share.
May 11 Issued 10,000 shares to attorneys to satisfy a $48,000 invoice for
services received to help the company to incorporate.
(the debit in this entry is not an asset account)
Aug. 1 Issued 20,000 shares for cash at $5 per share.
Nov. 1 Issued 10,000 shares for cash at $7 per share.
Instructions
(a) Prepare the journal entries for these transactions, assuming that
the common stock has a par value of $1 per share.
(b) Prepare the journal entries for these transactions, assuming that
the common stock is no par with a stated value of $3 per share.
(Prob 2)(Recording the Issuance of Common and Preferred Stock) Envy Gas Corporation was organized on June 1, 2007.
It is authorized to issue 100,000 shares of 5%, $100 par value preferred stock, and 1,750,000 shares of no par common stock
with a stated value of $1 per share. The following stock transactions were completed during the first year.
June 15 Issued 165,000 shares of common stock for cash at $5 per share.
June 30 Issued 25,000 shares of preferred stock for cash at $102 per share.
Aug. 15 Issued 20,000 shares of common stock for a factory building. The asking price of
the factory building was $150,000; the appraised value of the factory building was $140,000.
Sept. 1 Issued 200,000 shares of common stock for cash at $7 per share.
Oct. 1 Issued 5,000 shares of common stock to attorneys in payment of their bill
of $40,000 for services rendered in helping the company organize.
Oct. 15 Issued 25,000 shares of common stock for cash at $8.50 per share.
Nov. 1 Issued 6,000 shares of preferred stock for cash at $104 per share.
Instructions
1) Calculate the amount of annual dividend assigned to one share of preferred stock.
2) When does a preferred shareholder know that his or her limited right to an annual dividend will be granted each year?
3) Prepare the journal entries to record the above transactions.
(Prob 3) (Purchase Land using Corporate Stock) Twenty thousand shares reacquired (i.e., Treasury Stock) by Gluttony
Land Inc. for $153 per share were exchanged for land that has an appraised value of $3,600,000. At the time of the exchange
the common stock was trading at $176 per share on an organized exchange.
Instructions
(a) Prepare the journal entry to record the acquisition of land.
(b) Briefly identify the possible alternatives (including those that are totally
unacceptable) for quantifying the cost of the land, and briefly support your choice.
(Prob 4) (Stock Issuances and Repurchase) Anger Corporation is authorized to issue 250,000 shares of $1 par value common
stock. During 2007, Anger Corporation took part in the following selected transactions.
1. Issued 55,000 shares of stock at $76 per share, less costs related to the issuance of the stock totaling $27,000.
2. Issued 10,000 shares of stock for land appraised at $815,000. The stock was actively traded on a national
stock exchange at approximately $78 per share on the date of issuance.
3. Purchased 6,000 shares of treasury stock at $74 per share. These treasury shares were originally issued in
2003 at $46 per share.
Instructions
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3.
(Prob 5) (Preferred Stock Presentation, Dividends and Disclosure) Greed Corporation has 30,000 shares of $75 par value,
10%, preferred stock and 150,000 shares of $1 par value common stock outstanding at December 31, 2007.
Instructions
Answer the questions in each of the following independent situations.
(a) If the preferred stock was issued at $83 per share, how should the preferred stock be reported in the stockholders’ equity
section?
(b) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2003, what are the
dividends in arrears that should be reported on the December 31, 2007, balance sheet? How and where should these
dividends in arrears reported?
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[ 48 ]
Alpha Royal
Income Statement
For the year ended Dec. 31, 2006
(15)supplemental(cashflow_statement_data).xlsx
[ 48 ]
[ 49 ]
Financial Accounting
Instructor - Turck
Bridgestone Company
Balance Sheets
at
Dec. 31, 2005 Dec. 31, 2006
Bridgestone Company
Income Statement
For the year ended Dec. 31, 2006
(15)supplemental(cashflow_statement_data).xlsx
[ 49 ]
[ 50 ]
Cramer Financials
The Cramer Corp.
Comparative Balance Sheets
as of December 31,
change
2010 2009 in acct bal.
Current Assets:
Cash 3,900 15,000
Accounts Receivable, net 11,000 5,000
Inventory 10,000 5,000
Prepaid Rent 4,000 2,000
Total Current assets 28,900 27,000
Non-current Assets:
Notes Receivable 8,000 0
Land 30,000 30,000
Plant and Equipment 116,000 60,000
Accumulated Depreciation -15,000 -10,000
Plant and Equip, net 101,000 50,000
Total Non-current assets 139,000 80,000
Total Assets 167,900 107,000
Current Liabilities:
Accounts Payable 30,500 8,000
Unearned Revenue 5,000 7,000
Income Tax Payable 1,500 2,000
Dividends Payable 900 0
Accrued wages payable 10,000 13,000
Total Current Liabilities 47,900 30,000
Non-current Liabilities:
Bonds Payable, net 40,000 0
Total Liabilities: 87,900 30,000
Owners' Equity:
Paid-in Capital(Common Stock) 70,000 70,000
Retained Earnings 10,000 7,000
Total Owners' Equity 80,000 77,000
Total Liabs. and Equity 167,900 107,000
(15)supplemental(cashflow_statement_data).xlsx
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[ 51 ]
Prepare the Cash Flow Statements for September then October (Direct and Indirect).
Fancy Flavors
Comparative Balance Sheets
as of 8/31/2007 9/30/2007 10/31/2007
ASSETS
CASH 200,000 264,500 260,000
A/R, net 50,000 65,000 62,000
Merch Inventory 15,000 30,000 27,000
Suppy Inventory 15,000 10,000 11,500
Prepaid rent 40,000 20,000 25,000
Prepaid insurance 0 1,000 0
Equipment 600,000 660,000 660,000
Less: A/D (10,000) (19,500) (30,500)
TOTAL ASSETS 910,000 1,031,000 1,015,000
Fancy Flavors
Income Statements
For months ending: 9/30/2007 10/31/2007
Net Revenues 600,000 625,000
Less Expenses:
Cost of Goods Sold 200,000 208,000
Insurance exp 5,000 5,000
Rent exp 20,000 21,000
Depreciation exp 11,000 11,000
Interest exp 6,600 7,500
Wages exp 180,000 190,000
Supplies exp 20,000 19,000
TOTAL EXPENSES 442,600 461,500
Other gains and losses (3,000) 0
Net Income before Income tax expense 154,400 163,500
Income tax expense 30,000 31,000
NET INCOME 124,400 132,500
(15)supplemental(cashflow_statement_data).xlsx
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[ 52 ]
Financial Accounting
Instructor: Turck
Statement of Cash Flows
RazzleDazzle, Inc.
Income Statement
For the year ended June 30, 2011
Sales revenue, net 400,000
Cost of Goods Sold 240,000
Gross Profit 160,000
Selling, General and Administrative Expense* 120,000
Interest Expense 15,000
Loss on sale of land 700
Loss on sale of plant assets 10,000
Total expenses and losses 145,700
Income before Income Taxes 14,300
Income tax expense 5,000
Net Income 9,300
RazzleDazzle, Inc.
Comparative Balance Sheet
as of June 30 2011 2010 change
Cash 25,000 40,000 (15,000)
Accounts receivable, net 80,000 69,000 11,000
Inventory 75,000 50,000 25,000
Prepaid expenses 2,000 18,000 (16,000)
Total current assets 182,000 177,000
Land 60,000 150,000 (90,000)
Plant and Equipment 575,000 500,000 75,000
Accumulated depreciation (310,000) (250,000) (60,000)
Total Long-term assets 325,000 400,000
Total Assets 507,000 577,000
Dividends were declared and paid during the year. New plant assets were
purchased for $125,000 in cash during the year. A parcel of land was sold.
Plant assets were sold, the book value of the plant assets sold was $30,000.
A portion of the bank loan was repaid.
Required: Prepare the Cash Flow Statement
CkFigs: Operating Cash Flow 80,000
Investing Cash Flow (15,700)
(15)supplemental(cashflow_statement_data).xlsx
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