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Acc206 Week 2 Quiz Avatar Company

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1. Operating activities include activities that affect long-term liabilities and stockholders' equity. (Points : 1)
True
False

2. Peartree Company provides the following income statement for the year 2014:
Sales revenue $240,000
Cost of goods sold 110,000
Gross profit $130,000
Operating expenses
Salary expense 45,000
Depreciation expense 12,000
Other operating expenses 23,000
Total operating expenses 80,000
Operating income 50,000
Gain on sale of plant assets 5,000
Interest expense (1,000)
Net income before income tax $54,000
Income tax expense 5,000
Net income (loss) $49,000

How much is the times-interest-earned ratio? (Points : 1)
0.02
49.0
50.0
0.25
None of these is correct

3. Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.

Net cash flows from operating activities: $32,000 positive
Net cash flows from investing activities: $38,000 negative
Net cash flows from financing activities: $ 9,000 positive

If the beginning cash balance is $18,000, what would the ending cash balance be? (Points : 1)
$21,000
$18,000
$ 3,000
$15,000
None of these is correct

4. Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.

Net cash flows from operating activities: $32,000 positive
Net cash flows from investing activities: $38,000 negative
Net cash flows from financing activities: $ 9,000 positive

How much was the net change in cash during the year? (Points : 1)
$ 3,000 negative
$79,000 positive
$ 3,000 positive
$61,000 negative
None of these is correct

5. Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:
2014 2013 Increase/decrease
Accounts payable $ 4,000 $ 6,000 $(2,000)
Accrued liabilities 2,000 1,000 1,000
Long-term notes payable 84,000 90,000 (6,000)
Total liabilities $90,000 $97,000 $(7,000)

The change in accounts payable will be shown as a positive cash flow in the adjustments to Net income. (Points : 1)
True
False

6. Peartree Company provides the following data:
BALANCE SHEET Dec 31, 2014 Dec 31, 2013
Cash $ 21,000 $ 18,000
Accounts receivable, net 31,000 35,000
Inventory 53,000 25,000
PP&E, net 120,000 90,000
Total assets $225,000 $168,000

Accounts payable $4,000 $ 6,000
Accrued liabilities 2,000 1,000
Long-term notes payable 84,000 90,000
Total liabilities $ 90,000 $ 97,000

Common stock $ 30,000 $ 2,000
Retained earnings 113,000 74,000
Treasury stock (8,000) (5,000)
Total stockholders’ equity $135,000 $71,000
Total liabilities and stockholders’
equity $225,000 $168,000

How much is the current ratio at year-end 2014? (Points : 1)
17.5
16.1
3.5
0.5
None of these is correct

7. Which of the following signifies that a company may be unable to pay its current liabilities if they suddenly come due? (Points : 1)
Low current ratio
High current ratio
High earnings per share
Low gross profit percentage

8. A company has $510,000 in Average common stockholders’ equity, Net income of $312,000, and Preferred dividends paid of $15,000. What is the rate of return on common stockholders’ equity? (Points : 1)
58.2%
61.2%
59.3%
62.0%

9. The net income for the year ended was $300,000. The company has no preferred stock. Common stockholders’ equity was $1,400,000 at the beginning of the year and $1,600,000 at the end of the year. The return on common stockholders’ equity would be: (Points : 1)
18.75%.
20.00%.
21.43%.


87.5%
None of these is correct.

10. Harrison Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014:


Retained earnings, beginning balance: $125,000
Retained earnings, ending balance: $117,000
Company reported net loss of $8,000 for the year.

What was the amount of dividends paid during the year? (Points : 1)
$5,000
$2,000
Zero
$3,000
None of these is correct

ACC291 Kershaw Bookstore Reber Company

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1) The balance of a control account in the general ledger
must equal the composite balance of individual accounts in a related subsidiary ledger.
is always greater than the composite balance of individual accounts in a related subsidiary ledger.
must always be zero.
must equal the amount of total assets.

2) The Foreign Corrupt Practices Act requires that all U.S. corporations under the juris-diction of the Securities and Exchange Commission
maintain an adequate system of internal control.
maintain accounting records of foreign branches and subsidiaries in the local foreign currency.
must file reports with the National Commission on Fraudulent Financial Reporting.
have at least one foreign subsidiary.

3) Holliday Company's inventory records show the following data:
Units Unit Cost
Inventory, January 1 5,000 $9.00
Purchases: June 18 4,500 8.00
November 8 3,000 7.00

A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $12 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method.
Under the FIFO method, the December 31 inventory is valued at
$14,500.
$15,000.
$18,000.
$14,000.

4) A $100 petty cash fund has cash of $15 and receipts of $80. The journal entry to replenish the account would include a credit to
Cash for $80.
Cash for $85.
Petty Cash for $85.
Cash Over and Short for $5.

5) Lee Industries had the following inventory transactions occur during 2010:
Units Cost/unit
2/1/10 Purchase 18 $45
3/14/10 Purchase 31 $47
5/1/10 Purchase 22 $49

The company sold 51 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using FIFO? (rounded to whole dollars)
$772
$2,441
$848
$2,365

6) Wright sells softball equipment. On November 14, they shipped $1,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $600 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $100 of defective merchandise. Wright has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?
$1,000
$1,500
$900
$1,600

7) Two individuals at a retail store work the same cash register. You evaluate this situation as
a violation of establishment of responsibility.
supporting the establishment of responsibility.
supporting internal independent verification.
a violation of segregation of duties.

8) Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:
Date Purchases Sales
Jan. 14 375 @ $28
17 250 @ $20
25 250 @ $22
29 250 @ $32

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the LIFO method is:
$7,750.
$6,750.
$1,000.
$8,000.

9) A company has an average inventory on hand of $40,000 and the days in inventory is 73 days. What is the cost of goods sold?
$200,000
$2,920,000
$400,000
$1,460,000

10) An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a
debit to Bad Debts Expense for $7,900.
credit to Allowance for Doubtful Accounts for $9,000.
debit to Allowance for Doubtful Accounts for $7,900.
debit to Bad Debts Expense for $9,000.

11) The accountant at Reber Company has determined that income before income taxes amounted to $6,750 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $225 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?
$6,525
$6,975
$7,500
$6,090

12) Tyler, Inc. had the following bank reconciliation at March 31. 2010:
Balance per bank statement, 3/31/10 $37,200
Add: Deposit in transit 10,300
47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/10 $34,900

Data per bank for the month of April 2010 follow:
Deposits $46,700
Disbursements 49,700

All reconciling items at March 31, 2010 cleared the bank in April. Outstanding checks at April 30, 2010 totaled $6,000. There were no deposits in transit at April 30, 2010. What is the cash balance per books at April 30, 2010?
$28,200
$31,900
$38,500
$34,200


13) Which of the following is not an advantage of a subsidiary ledger?
Puts greater detail in the general ledger.
Helps locate errors in individual accounts.
Makes possible a division of labor.
Shows transactions affecting one customer or one creditor in a single account.

14) The use of special journals to record transactions
eliminates the need for a general journal.
can save time in the posting process.
eliminates the need for a general ledger.
should only be used if the volume of transactions is small.

15) On March 1, 2010, Joe Miles purchased a suit at Calvin's Fine Apparel Store. The suit cost $250 and Joe used his Calvin credit card. Calvin charges 2% per month interest if payment on credit charges is not made within 30 days. On April 30, 2010, Joe had not yet made his payment. What entry should Calvin make on April 30th?
Uncollectible Account 250
Accounts Receivable 250

Bad Debts Expense 245
Interest Expense 5
Accounts Receivable 250

Accounts Receivable 255
Interest Revenue 5
Sales 250

Accounts Receivable 5
Interest Revenue 5


16) A company just starting business made the following four inventory purchases in June:
June 1 150 units $390
June 10 200 units 585
June 15 200 units 630
June 28 150 units 495
$2,100

A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is
$575.
$1,500.
$600.
$2,100.

17) A sales journal is used to record
only credit sales of merchandise.
only cash sales of merchandise.
credit sales of merchandise, sales returns and allowances, and sales discounts.
sales of all assets on credit and for cash.

18) Assume the following sales data for a company:
2011 $945,000
2010 845,000
2009 650,000

If 2009 is the base year, what is the percentage increase in sales from 2009 to 2010?
130%
30%
23%
77%
19) Rodgers Company lends Lanier Company $30,000 on April 1, accepting a four-month, 9% interest note. Rodgers Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?
Interest Receivable 225
Interest Revenue 225

Interest Receivable 900
Interest Revenue 900

Notes Receivable 30,000
Cash 30,000

Cash 225
Interest Revenue 225

20) Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was
73 days.
30 days.
365 days.
146 days.

21) If a check correctly written and paid by the bank for $428 is incorrectly recorded on the company's books for $482, the appropriate treatment on the bank reconciliation would be to
deduct $54 from the bank's balance.
add $54 to the bank's balance.
deduct $428 from the book's balance.
add $54 to the book's balance.

22) The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is
.67 : 1
$150,000 ÷ $100,000.
1.5 : 1
150%.


23) Accounts Receivable and Accounts Payable are examples of
nominal accounts.
controlling accounts.
both nominal accounts and controlling accounts.
subsidiary ledger accounts.


24) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $500,000 and credit sales are $2,000,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?
Bad Debts Expense 20,000
Accounts Receivable 20,000

Bad Debts Expense 25,000
Accounts Receivable 25,000

Bad Debts Expense 25,000
Allowance for Doubtful Accounts 25,000

Bad Debts Expense 20,000
Allowance for Doubtful Accounts 20,000

25) A successful grocery store would probably have
low volume.
a low inventory turnover.
a high inventory turnover.
zero profit margin.

26) Richmond's Wholesale uses a sales journal. An entry in this journal represents a
debit to Accounts Payable; credit to Sales Returns and Allowances.
debit to Cash; credit to Sales.
debit to Sales Discounts; credit to Cash.
debit to Accounts Receivable; credit to Sales.

27) In the month of November, Coler Company Inc. wrote checks in the amount of $9,250. In December, checks in the amount of $12,658 were written. In November, $8,468 of these checks were presented to the bank for payment, and $10,883 were presented in December. What is the amount of outstanding checks at the end of November?
$1,775
$2,557
$782
$3,550

28) On February 1, Platt Company received a $9,000, 10%, four-month note receivable. The cash to be received by Platt Company when the note becomes due is
$9,000.
$300.
$9,300 .

29) Gold Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,650,000. The receivables turnover ratio was
9.3 times.
8.7 times.
9.0 times.

4.5 times.

30) Widner Company understated its inventory by $10,000 at December 31, 2010. It did not correct the error in 2010 or 2011. As a result, Widner's owner's equity was:
understated at December 31, 2010, and understated at December 31, 2011.
overstated at December 31, 2010, and overstated at December 31, 2011.
understated at December 31, 2010, and overstated at December 31, 2011.
understated at December 31, 2010, and properly stated at December 31, 2011.

BE4-7 Using the data in BE4-3, identify the accounts that would be included in a post-closing trial balance.

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BE4-7 Using the data in BE4-3, identify the accounts that would be included in a post-closing
trial balance.

BE4-6 Green Fee Revenue

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BE4-6 The income statement for Crestwood Golf Club for the month ending July 31 shows Green Fee Revenue $13,600, Salaries Expense $8,200, Maintenance Expense $2,500, and Net Income $2,900. Prepare the entries to close the revenue and expense accounts. Post the entries to the revenue and expense accounts, and complete the closing process for these accounts using the three-column form of account.

BE4-5 Using the data in BE4-4, enter the balances in T accounts, post the closing entries, and rule and balance the accounts.

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BE4-5 Using the data in BE4-4, enter the balances in T accounts, post the closing entries, and
rule and balance the accounts.

Swann Company December 31

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BE4-4 The ledger of Swann Company contains the following balances: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. Prepare the closing entries at December 31.

Batan Company

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BE4-3 The following selected accounts appear in the adjusted trial balance columns of the worksheet for Batan Company: Accumulated Depreciation; Depreciation Expense; Common Stock; Dividends; Service Revenue; Supplies; and Accounts Payable. Indicate the financial statement column (income statement Dr., balance sheet Cr., etc.) to which each balance should be extended.

Ley Company

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BE4-2 The ledger of Ley Company includes the following unadjusted balances: Prepaid Insurance $3,000, Service Revenue $58,000, and Salaries Expense $25,000. Adjusting entries are required for (a) expired insurance $1,200; (b) services provided $1,100, but unbilled and uncollected; and (c) accrued salaries payable $800.

Enter the unadjusted balances and adjustments into a worksheet and complete the worksheet for all accounts. Note:You will need to add the following accounts: Accounts Receivable, Salaries Payable, and Insurance Expense.

BE4-1 List in order

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BE4-1 The steps in using a worksheet are presented in random order below. List the steps in the proper order by placing numbers 1–5 in the blank spaces.
(a) _____ Prepare a trial balance on the worksheet.
(b) _____ Enter adjusted balances.
(c) _____ Extend adjusted balances to appropriate statement columns.
(d) _____ Total the statement columns, compute net income (loss), and complete the worksheet.
(e) _____ Enter adjustment data.

BYP3-6 Bluestem Company

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BYP3-6  Bluestem Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Bluestem’s chemical pesticides. In the coming year, Bluestem will have environmentally safe and competitive chemicals to replace these discontinued products. Sales in the next year are expected to greatly exceed any prior year’s. The decline in sales and profits appears to be a one-year aberration. But even so, the company president fears a large dip in the current year’s profits. He believes that such a dip could cause a significant drop in the market price of Bluestem’s stock and make the company a takeover target. To avoid this possibility, the company president calls in Cathi Bell, controller, to discuss this period’s year-end adjusting entries. He urges her to accrue every possible revenue and to
defer as many expenses as possible. He says to Cathi, “We need the revenues this year, and next year can easily absorb expenses deferred from this year.We can’t let our stock price be hammered down!” Cathi didn’t get around to recording the adjusting entries until January 17, but she dated the entries December 31 as if they were recorded then. Cathi also made every effort to comply with the president’s request.

Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical considerations of (1) the president’s request and (2) Cathi’s dating the adjusting entries December 31?
(c) Can Cathi accrue revenues and defer expenses and still be ethical?

P3-5B On November 1,2008, the account balances of Rondeli Equipment Repair were as follows.

Price: $ 3.99


P3-5B On November 1,2008, the account balances of Rondeli Equipment Repair were as follows.

:::TABLE:::

During November the following summary transactions were completed.
Nov.

8 Paid $1,100 for salaries due employees, of which $600 is for November.

10 Received $1,200 cash from customers on account.

12 Received $1,400 cash for services performed in November.

15 Purchased store equipment on account $3,000.

17 Purchased supplies on account $500.

20 Paid creditors on account $2,500.

22 Paid November rent $300.

25 Paid salaries $1,300.

27 Performed services on account and billed customers for services provided $400.

29 Received $550 from customers for future service.

Adjustment data consist of:
1. Supplies on hand $500.
2. Accrued salaries payable $500.
3. Depreciation for the month is $100.
4. Unearned service revenue of $1,150 is earned.

Instructions
(a) Enter the November 1 balances in the ledger accounts.

(b) Journalize the November transactions.

(c) Post to the ledger accounts. Use J1 for the posting reference. Use the following accounts: No.
407 Service Revenue, No. 615 Depreciation Expense, No. 631 Supplies Expense, No. 726 Salaries Expense, and No. 729 Rent Expense.

(d) Prepare a trial balance at November 30.

(e) Journalize and post adjusting entries.

(f) Prepare an adjusted trial balance.

(g) Prepare an income statement and a retained earnings statement for November and a balance sheet at November 30.

P3-4B Yoda Company

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P3-4B  A review of the ledger of Yoda Company at December 31, 2008, produces the following data pertaining to the preparation of annual adjusting entries.

1. Prepaid Insurance $8,600. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2007, for $6,000.The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2008, for $3,600.This policy has a term of 2 years.

2. Unearned Subscriptions $49,000.The company began selling magazine subscriptions in 2008 on an annual basis. The magazine is published monthly. The selling price of a subscription is $50. A review of subscription contracts reveals the following.

 Subscription Date -----Number oSubscriptions
October 1 ---------------------200
November 1 -------------------300
December 1 -------------------480
--------------------------------980

3. Notes Payable $60,000.This balance consists of a note for 6 months at an annual interest rate of 9%, dated September 1.

4. Salaries Payable $0.There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $500 each per week, and three employeesearn $750 each per week. December 31 is a Wednesday. Employees do not work weekends.Allemployees worked the last 3 days of December.

Instructions: Prepare the adjusting entries at December 31, 2008.

P3-2B The Elston Motel 05-01-08

Price: $ 3.99


P3-2B  The Elston Motel, Inc. opened for business on May 1, 2008. Its trial balance before adjustment on May 31 is as follows.

:::TABLE:::

In addition to those accounts listed on the trial balance, the chart of accounts for Elston Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation—Lodge, No. 150 Accumulated Depreciation—Furniture, No. 212 Salaries Payable,No. 230 Interest Payable,No. 320 Retained Earnings,No. 619 Depreciation Expense— Lodge, No. 621 Depreciation Expense—Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:
1. Insurance expires at the rate of $200 per month.
2. A count of supplies shows $500 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,500 has been earned.
6. Salaries of $800 are accrued and unpaid at May 31.

Instructions
(a) Journalize the adjusting entries on May 31.

(b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.)

(c) Prepare an adjusted trial balance on May 31.

(d) Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31.

P3-1B Linda Ace May 1 2008

Price: $ 3.99


P3-1B Linda Ace started her own consulting firm, Modine Consulting, Inc. on May 1, 2008. The trial balance at May 31 is as follows.

::TABLE::::

In addition to those accounts listed on the trial balance, the chart of accounts for Modine Consulting also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Office Furniture, No. 212 Salaries Payable, No. 229 Travel Payable, No. 631 Supplies Expense,No. 717 Depreciation Expense,No. 722 Insurance Expense, and No. 736 Travel Expense.

Other data:
1. $500 of supplies have been used during the month.

2. Travel expense incurred but not paid on May 31, 2008, $200.

3. The insurance policy is for 2 years.

4. $1,000 of the balance in the unearned service revenue account remains unearned at the end of the month.

5. May 31 is a Wednesday, and employees are paid on Fridays. Modine Consulting has two employees,
who are paid $700 each for a 5-day work week.

6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $160 per month for 60 months.

7. Invoices representing $1,000 of services performed during the month have not been recorded as of May 31.

Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for yourjournal.

(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.

(c) Prepare an adjusted trial balance at May 31, 2008.

P3-5A Rand Equipment Repair

Price: $3.99


P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.


During September the following summary transactions were completed.

Sept.

8 Paid $1,400 for salaries due employees, of which $900 is for September.

10 Received $1,200 cash from customers on account.

12 Received $3,400 cash for services performed in September.

15 Purchased store equipment on account $3,000.

17 Purchased supplies on account $1,200.

20 Paid creditors $4,500 on account.

22 Paid September rent $500.

25 Paid salaries $1,250.

27 Performed services on account and billed customers for services provided $1,500.

29 Received $650 from customers for future service.

Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.

Instructions
(a) Enter the September 1 balances in the ledger accounts.

(b) Journalize the September transactions.

(c) Post to the ledger accounts. Use J1 for the posting reference. Use the following accounts: No. 407 Service Revenue, No. 615 Depreciation Expense, No. 631 Supplies Expense, No. 726 Salaries Expense, and No. 729 Rent Expense.

(d) Prepare a trial balance at September 30.

(e) Journalize and post adjusting entries.

(f) Prepare an adjusted trial balance.

(g) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.

P3-4A Remington Company

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P3-4A A review of the ledger of Remington Company at December 31, 2008, produces the following data pertaining to the preparation of annual adjusting entries.

1. Salaries Payable $0.There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $800 each per week, and three employees earn $600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.

2. Unearned Rent $324,000. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.


3. Prepaid Advertising $15,000.This balance consists of payments on two advertising contracts.The contracts provide for monthly advertising in two trade magazines.The terms of the contracts are as follows.


The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $120,000.This balance consists of a note for one year at an annual interest rate of 9%, dated June 1.

Instructions : Prepare the adjusting entries at December 31, 2008. (Show all computations.)

P3-2A Neosho River Resort August 31

Price: $3.99


P3-2A Neosho River Resort, Inc. opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows.


In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation—Cottages, No. 150 Accumulated Depreciation—Furniture, No. 212 Salaries Payable,No. 230 Interest Payable,No. 320 Retained Earnings,No. 620 Depreciation Expense—Cottages, No. 621 Depreciation Expense—Furniture, No. 631 Supplies 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 $600 of supplies on hand.

3. Annual depreciation is $6,000 on cottages and $2,400 on furniture.

4. Unearned rent of $4,100 was earned prior to August 31.

5. Salaries of $400 were unpaid at August 31.

6. Rentals of $1,000 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.)

Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31.

(b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.)

(c) Prepare an adjusted trial balance on August 31.

(d) Prepare an income statement and a retained earnings statement for the 3 months ending August 31 and a balance sheet as of August 31.

P3-1A Tony Masasi

Price: $3.99


P3-1A Tony Masasi started his own consulting firm, Masasi Company, Inc., on June 1, 2008.The trial balance at June 30 is shown on page 129.


In addition to those accounts listed on the trial balance, the chart of accounts for Masasi Company, Inc. also contains the following accounts and account numbers:No. 158 Accumulated Depreciation— Office Equipment, No. 212 Salaries Payable,No. 244 Utilities Payable,No. 631 Supplies Expense, No. 711 Depreciation Expense,No. 722 Insurance Expense, and No. 732 Utilities Expense.

Other data:

1. Supplies on hand at June 30 are $600.

2. A utility bill for $150 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. $2,500 of unearned service revenue has been earned at the end of the month.

5. Salaries of $2,000 are accrued at June 30.

6. The office equipment has a 5-year life with no salvage value. It is being depreciated at $250 per month for 60 months.

7. Invoices representing $1,000 of services performed during the month have not been recorded as of June 30.


Instructions:
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at June 30, 2008.

E3-17 At Natasha Company

Price: $1.99


At Natasha Company, prepayments are debited to expense when paid, and unearned
revenues are credited to revenue when received. During January of the current year, the following
transactions occurred.
Jan. 2 Paid $1,800 for fire insurance protection for the year.
10 Paid $1,700 for supplies.
15 Received $6,100 for services to be performed in the future.
On January 31, it is determined that $2,500 of the services fees have been earned and that there
are $800 of supplies on hand.

Instructions
(a) Journalize and post the January transactions. (Use T accounts.)
(b) Journalize and post the adjusting entries at January 31.
(c) Determine the ending balance in each of the accounts.

E3-16 Colin Mochrie Company

Price: $1.99


Colin Mochrie Company has the following balances in selected accounts on December
31, 2008.

Consulting revenue  40,000
Insurance expense  2,100
Supplies expense  2,450

All the accounts have normal balances. Colin Mochrie Company debits prepayments to expense
accounts when paid, and credits unearned revenues to revenue accounts when received.The following
information below has been gathered at December 31, 2008.
1. Colin Mochrie Company paid $2,100 for 12 months of insurance coverage on June 1, 2008.
2. On December 1, 2008, Colin Mochrie Company collected $40,000 for consulting services to
be performed from December 1, 2008, through March 31, 2009.
3. A count of supplies on December 31, 2008, indicates that supplies of $800 are on hand.

Instructions
Prepare the adjusting entries needed at December 31, 2008.

E3-15 Girard Billiards Club

Price: $1.99


The following data are taken from the comparative balance sheets of Girard Billiards
Club, which prepares its financial statements using the accrual basis of accounting.

31-Dec 2008 2007
Fees receivable from members  14,000  9,000
Unearned fees revenue  17,000  25,000

Fees are billed to members based upon their use of the club’s facilities. Unearned fees arise
from the sale of gift certificates, which members can apply to their future use of club facilities
The 2008 income statement for the club showed that fees revenue of $153,000 was earned during
the year.

Instructions
(Hint: You will probably find it helpful to use T accounts to analyze these data.)
(a) Prepare journal entries for each of the following events that took place during 2008.
(1) Fees receivable from 2007 were all collected.
(2) Gift certificates outstanding at the end of 2007 were all redeemed.
(3) An additional $35,000 worth of gift certificates were sold during 2008. A portion of these
was used by the recipients during the year; the remainder was still outstanding at the end
of 2008.
(4) Fees for 2008 for services provided to members were billed to members.
(5) Fees receivable for 2008 (i.e., those billed in item [4] above) were partially collected.
(b) Determine the amount of cash received by the club, with respect to fees, during 2008.

E3-14 The adjusted trial balance for Garcia Company is given in E3-13. Instructions: Prepare the income statement and a retained earnings statement for the year and the balance sheet at August 31.

Price: $2.99


E3-14 The adjusted trial balance for Garcia Company is given in E3-13.

Instructions: Prepare the income statement and a retained earnings statement for the year and the balance sheet at August 31.

E3-13 Garcia Company Fiscal Year

Price: $2.99

E3-13 The trial balances before and after adjustment for Garcia Company at the end of its fiscal
year are presented below.


Instructions: Prepare the adjusting entries that were made.

E3-12 Tabor Company

Price: $1.99


E3-12 Selected accounts of Tabor Company are shown below and on page 127.



Instructions: After analyzing the accounts, journalize (a) the July transactions and (b) the adjusting entries that were made on July 31. (Hint: July transactions were for cash.)

E3-10 Benning Co.

Price: $2.99

E3-10 The income statement of Benning Co. for the month of July shows net income of $1,400 based on Service Revenue $5,500,Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $600. In reviewing the statement, you discover the following.
1. Insurance expired during July of $400 was omitted.
2. Supplies expense includes $200 of supplies that are still on hand at July 31.
3. Depreciation on equipment of $150 was omitted.
4. Accrued but unpaid wages at July 31 of $300 were not included.
5. Services provided but unrecorded totaled $500.

Instructions: Prepare a correct income statement for July 2008.

E3-9 Pioneer Advertising Agency

Price: $2.99

E3-9 The trial balance for Pioneer Advertising Agency is shown in Illustration 3-3, p. 98. In lieu of the adjusting entries shown in the text at October 31, assume the following adjustment data.

1. Advertising supplies on hand at October 31 total $500.
2. Expired insurance for the month is $100.
3. Depreciation for the month is $50.
4. Unearned revenue earned in October totals $600.
5. Services provided but not recorded at October 31 are $300.
6. Interest accrued at October 31 is $70.
7. Accrued salaries at October 31 are $1,500.


Instructions
Prepare the adjusting entries for the items above.

E3-8 Andy Wright DDS

Price: $2.99


E3-8 Andy Wright,D.D.S., opened a dental practice on January 1, 2008. During the first month of operations the following transactions occurred.

1. Performed services for patients who had dental plan insurance. At January 31, $875 of such services was earned but not yet recorded.
2. Utility expenses incurred but not paid prior to January 31 totaled $520.
3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable.The equipment depreciates $400 per month. Interest is $500 per month.
4. Purchased a one-year malpractice insurance policy on January 1 for $12,000.
5. Purchased $1,600 of dental supplies. On January 31, determined that $400 of supplies were on hand.

Instructions
Prepare the adjusting entries on January 31. Account titles are: Accumulated Depreciation— Dental Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.

E3-7 Piper Rental Agency

Price: $2.99


E3-7 The ledger of Piper Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.


An analysis of the accounts shows the following.
1. The equipment depreciates $400 per month.
2. One-third of the unearned rent was earned during the quarter.
3. Interest of $500 is accrued on the notes payable.
4. Supplies on hand total $700.
5. Insurance expires at the rate of $200 per month.

Instructions

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.

E3-6 Affleck Company

Price: $1.99


Affleck Company accumulates the following adjustment data at December 31.
1. Services provided but not recorded total $750.
2. Store supplies of $300 have been used.
3. Utility expenses of $225 are unpaid.
4. Unearned revenue of $260 has been earned.
5. Salaries of $900 are unpaid.
6. Prepaid insurance totaling $350 has expired.

Instructions
For each of the above items indicate the following.
(a) The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued
expense).
(b) The status of accounts before adjustment (overstatement or understatement).

E3-5 Drew Carey Company

Price: $2.99


E3-5 Drew Carey Company has the following balances in selected accounts on December 31, 2008.

Accounts Receivable $ -0-
Accumulated Depreciation—Equipment -0-

Equipment 7,000
Interest Payable -0-
Notes Payable 10,000

Prepaid Insurance 2,100
Salaries Payable -0-
Supplies 2,450
Unearned Consulting Revenue 40,000

All the accounts have normal balances.The information below has been gathered at December 31, 2008.

1. Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2008.

2. A count of supplies on December 31, 2008, indicates that supplies of $800 are on hand.

3. Depreciation on the equipment for 2008 is $1,000.

4. Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2008.

5. On December 1, 2008, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2008, through March 31, 2009.

6. Drew Carey performed consulting services for a client in December 2008. The client will be billed $4,200.

7. Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding
5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2008.

Instructions: Prepare adjusting entries for the seven items described on page 124.

E3-4 Emeril Corporation

Price: $1.99 


E3-4 Emeril Corporation encounters the following situations:

1. Emeril collects $1,000 from a customer in 2008 for services to be performed in 2009.

2. Emeril incurs utility expense which is not yet paid in cash or recorded.

3. Emeril’s employees worked 3 days in 2008, but will not be paid until 2009.

4. Emeril earned service revenue but has not yet received cash or recorded the transaction.

5. Emeril paid $2,000 rent on December 1 for the 4 months starting December 1.

6. Emeril received cash for future services and recorded a liability until the revenue was earned.

7. Emeril performed consulting services for a client in December 2008. On December 31, it billed the client $1,200.

8. Emeril paid cash for an expense and recorded an asset until the item was used up.

9. Emeril purchased $900 of supplies in 2008; at year-end, $400 of supplies remain unused.

10. Emeril purchased equipment on January 1, 2008; the equipment will be used for 5 years.

11. Emeril borrowed $10,000 on October 1, 2008, signing an 8% one-year note payable.

Instructions:
Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense, accrued revenue) is needed in each situation, at December 31, 2008.

E3-3 Conan Industries

Price: $1.99


E3-3 Conan Industries collected $100,000 from customers in 2008. Of the amount collected, $25,000 was from revenue earned on account in 2007. In addition, Conan earned $40,000 of revenue in 2008, which will not be collected until 2009. Conan Industries also paid $70,000 for expenses in 2008. Of the amount paid, $30,000 was forexpenses incurred on account in 2007. In addition, Conan incurred $42,000 of expenses in 2008, which will not be paid until 2009.

Instructions


(a) Compute 2008 cash-basis net income.

(b) Compute 2008 accrual-basis net income.

BE3-11 Duncan Company 04-30

Price: $1.99


BE3-11 Duncan Company records all prepayments in income statement accounts. At April 30, the trial balance shows Supplies Expense $2,800, Service Revenue $9,200, and zero balances in related balance sheet accounts.

Prepare the adjusting entries at April 30 assuming (a) $1,000 of supplies on hand and (b) $3,000 of service revenue should be reported as unearned.

BE3-8 The trial balance of Bair Company includes the following balance sheet accounts. Identify the accounts that may require adjustment.

Price: $1.99


BE3-8 The trial balance of Bair Company includes the following balance sheet accounts. Identify the accounts that may require adjustment.

For each account that requires adjustment, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues,and accrued expenses) and (b) the related account in the adjusting entry.
  • Accounts Receivable 
  • Interest Payable
  • Prepaid Insurance 
  • Unearned Service Revenue
  • Accumulated Depreciation—Equipment

BE3-7 The bookkeeper for Oglesby Company asks you to prepare the following accrued adjusting entries at December 31.

Price: $1.99
  

BE3-7 The bookkeeper for Oglesby Company asks you to prepare the following accrued adjusting entries at December 31.

1. Interest on notes payable of $400 is accrued.

2. Services provided but not recorded total $1,500.

3. Salaries earned by employees of $900 have not been recorded.

Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense,
Interest Payable, Salaries Expense, and Salaries Payable.

BE3-6 Using the data in BE3-5, journalize and post the entry on July 1 and the adjusting entry on December 31 for Randle Insurance Co.

Price: $1.99


BE3-6 Using the data in BE3-5, journalize and post the entry on July 1 and the adjusting entry on December 31 for Randle Insurance Co. Randle uses the accounts Unearned Insurance Revenue and Insurance Revenue.

BE3-5 On July 1, 2008, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31.

Price: $1.99


BE3-5 On July 1, 2008, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31.

For Spahn Co., journalize and post the entry on July 1 and the adjusting entry on December 31.

BE3-4 At the end of its first year, the trial balance of Denton Company shows Equipment $30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense.

Price: $1.99


BE3-4 At the end of its first year, the trial balance of Denton Company shows Equipment $30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $5,000.

Prepare the adjusting entry for depreciation at December 31, post the adjustments to T accounts, and indicate the balance sheet presentation of the equipment at December 31.

BE3-3 Windsor Advertising Company’s trial balance at December 31 shows Advertising Supplies $6,700 and Advertising Supplies Expense $0. On December 31, there are $2,700 of supplies on hand.

Price: $1.99


BE3-3 Windsor Advertising Company’s trial balance at December 31 shows Advertising Supplies $6,700 and Advertising Supplies Expense $0. On December 31, there are $2,700 of supplies on hand.

Prepare the adjusting entry at December 31, and using T accounts, enter the balances in the accounts, post the adjusting entry, and indicate the adjusted balance in each account.

BE3-2 Nunez Company accumulates the following adjustment data at December 31. Indicate (a) the type of adjustment (prepaid expense, accrued revenues and so on), and (b) the status of accounts before adjustment (overstated or understated).

Price: $1.99 


BE3-2 Nunez Company accumulates the following adjustment data at December 31. Indicate (a) the type of adjustment (prepaid expense, accrued revenues and so on), and (b) the status of accounts before adjustment (overstated or understated).

1. Supplies of $100 are on hand.

2. Services provided but not recorded total $900.

3. Interest of $200 has accumulated on a note payable.

4. Rent collected in advance totaling $800 has been earned.