Foundations of Accounting I
Accounting Project
Alli Co. is a merchandising business. The account balances for Alli Co. as of November 30, 2012 (unless otherwise indicated), are as follows:
110 Cash $ 73,920
112 Accounts Receivable 37,875
AND SO ON
Check Figures for Accounting Project:
Cash Receipts Journal; Cash Column: 90,411
Unadjusted Trial Balance Total: 1,075,455
Net Income: 254,829
Post Closing Trial Balance: 355,756
Click here for the SOLUTION
Friday, October 14, 2011
Tuesday, August 9, 2011
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system
ACCOUNTING
Comprehensive Problem: Chapters 3, 4, 5, 6, and 7
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.
General Ledger
Account Number Account Title January 1 Opening Balance
101 Cash $33,750
112 Accounts Receivable 13,000
115 Notes Receivable 39,000
120 Merchandise Inventory 20,000
125 Office Supplies 1,000
130 Prepaid Insurance 2,000
157 Equipment 6,450
158 Accumulated Depreciation 1,500
201 Accounts Payable 35,000
301 I. Packard, Capital 78,700
Accounts
Receivable Subsidiary Ledger
Accounts
Payable Subsidiary Ledger
Customer
January 1 Opening
Balance
Creditor
January 1 Opening
Balance
R. Draves $1,500 S. Kosko $ 9,000
B. Hachinski 7,500 R. Mikush 15,000
S. Ingles 4,000 D. Moreno 11,000
Jan. 3 Sell merchandise on account to B. Remy $3,100, invoice no. 510, and J. Fine $1,800, invoice no. 511.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
9 Issue credit of $300 to J. Fine for merchandise returned.
10 Summary cash sales total $15,500.
11 Sell merchandise on account to R. Draves for $1,900, invoice no. 512, and to S. Ingles $900, invoice no. 513.
Post all entries to the subsidiary ledgers.
12 Pay rent of $1,000 for January.
13 Receive payment in full from B. Remy and J. Fine.
15 Withdraw $800 cash by I. Packard for personal use.
16 Purchase merchandise on account from D. Moreno for $15,000, from S. Kosko for $13,900, and from S. Yost for $1,500.
17 Pay $400 cash for office supplies.
18 Return $200 of merchandise to S. Kosko and receive credit.
20 Summary cash sales total $17,500.
21 Issue $15,000 note to R. Mikush in payment of balance due.
21 Receive payment in full from S. Ingles.
Post all entries to the subsidiary ledgers.
22 Sell merchandise on account to B. Remy for $3,700, invoice no. 514, and to R. Draves for $800, invoice no. 515.
23 Send checks to D. Moreno and S. Kosko in full payment.
25 Sell merchandise on account to B. Hachinski for $3,500, invoice no. 516, and to J. Fine for $6,100, invoice no. 517.
27 Purchase merchandise on account from D. Moreno for $12,500, from D. Laux for $1,200, and from S. Yost for $2,800.
28 Pay $200 cash for office supplies.
31 Summary cash sales total $22,920.
31 Pay sales salaries of $4,300 and office salaries of $3,600.
Hint: AP, S
Instructions
(a) Record the January transactions in the appropriate journal—sales, purchases, cash receipts, cash payments, and general.
(b) Post the journals to the general and subsidiary ledgers. Add and number new accounts in an orderly fashion as needed.
(c) Prepare a trial balance at January 31, 2010, using a worksheet. Complete the worksheet using the following additional information.
1. Office supplies at January 31 total $700.
2. Insurance coverage expires on October 31, 2010.
3. Annual depreciation on the equipment is $1,500.
4. Interest of $30 has accrued on the note payable.
5. Merchandise inventory at January 31 is $15,000.
Trial balance totals $196,820;
Adj. T/B totals $196,975
(d) Prepare a multiple-step income statement and a statement of owner's equity for January and a classified balance sheet at the end of January.
Net income $9,685
Total assets $126,315
(e) Prepare and post the adjusting and closing entries.
(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
Post-closing T/B totals $127,940
Click here for the SOLUTION
Comprehensive Problem: Chapters 3, 4, 5, 6, and 7
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.
General Ledger
Account Number Account Title January 1 Opening Balance
101 Cash $33,750
112 Accounts Receivable 13,000
115 Notes Receivable 39,000
120 Merchandise Inventory 20,000
125 Office Supplies 1,000
130 Prepaid Insurance 2,000
157 Equipment 6,450
158 Accumulated Depreciation 1,500
201 Accounts Payable 35,000
301 I. Packard, Capital 78,700
Accounts
Receivable Subsidiary Ledger
Accounts
Payable Subsidiary Ledger
Customer
January 1 Opening
Balance
Creditor
January 1 Opening
Balance
R. Draves $1,500 S. Kosko $ 9,000
B. Hachinski 7,500 R. Mikush 15,000
S. Ingles 4,000 D. Moreno 11,000
Jan. 3 Sell merchandise on account to B. Remy $3,100, invoice no. 510, and J. Fine $1,800, invoice no. 511.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
9 Issue credit of $300 to J. Fine for merchandise returned.
10 Summary cash sales total $15,500.
11 Sell merchandise on account to R. Draves for $1,900, invoice no. 512, and to S. Ingles $900, invoice no. 513.
Post all entries to the subsidiary ledgers.
12 Pay rent of $1,000 for January.
13 Receive payment in full from B. Remy and J. Fine.
15 Withdraw $800 cash by I. Packard for personal use.
16 Purchase merchandise on account from D. Moreno for $15,000, from S. Kosko for $13,900, and from S. Yost for $1,500.
17 Pay $400 cash for office supplies.
18 Return $200 of merchandise to S. Kosko and receive credit.
20 Summary cash sales total $17,500.
21 Issue $15,000 note to R. Mikush in payment of balance due.
21 Receive payment in full from S. Ingles.
Post all entries to the subsidiary ledgers.
22 Sell merchandise on account to B. Remy for $3,700, invoice no. 514, and to R. Draves for $800, invoice no. 515.
23 Send checks to D. Moreno and S. Kosko in full payment.
25 Sell merchandise on account to B. Hachinski for $3,500, invoice no. 516, and to J. Fine for $6,100, invoice no. 517.
27 Purchase merchandise on account from D. Moreno for $12,500, from D. Laux for $1,200, and from S. Yost for $2,800.
28 Pay $200 cash for office supplies.
31 Summary cash sales total $22,920.
31 Pay sales salaries of $4,300 and office salaries of $3,600.
Hint: AP, S
Instructions
(a) Record the January transactions in the appropriate journal—sales, purchases, cash receipts, cash payments, and general.
(b) Post the journals to the general and subsidiary ledgers. Add and number new accounts in an orderly fashion as needed.
(c) Prepare a trial balance at January 31, 2010, using a worksheet. Complete the worksheet using the following additional information.
1. Office supplies at January 31 total $700.
2. Insurance coverage expires on October 31, 2010.
3. Annual depreciation on the equipment is $1,500.
4. Interest of $30 has accrued on the note payable.
5. Merchandise inventory at January 31 is $15,000.
Trial balance totals $196,820;
Adj. T/B totals $196,975
(d) Prepare a multiple-step income statement and a statement of owner's equity for January and a classified balance sheet at the end of January.
Net income $9,685
Total assets $126,315
(e) Prepare and post the adjusting and closing entries.
(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
Post-closing T/B totals $127,940
Click here for the SOLUTION
Monday, August 8, 2011
The comparative balance sheet of House Construction Co. for June 30, 2010 and 2009, is as follows
ACCOUNTING
The comparative balance sheet of House Construction Co. for June 30, 2010 and 2009, is as follows:
Assets June 30, 2010 June 30, 2009
Cash----- 41600 28200
A/R (Net) ----121900 110700
Inventories---------- 175600 170500
Investments---------- 0 60000
Land -------174000 0
Equipment---------- 258000 210600
Accumulated Depreciation--------- -58300 -49600
Total------------ 712800 530400
Liabilities & Stockholders Equity
A/P (Merchandise Creditors) ----------121000 114200
Accrued Expense Payable (Operating Expense)------------ 18000 15800
Dividends Payable--------------- 15000 12000
Common Stock, $1 Par--------------- 67200 60000
Paid-In Capital In Excess Of Par - Common Stock------- 264000 120000
Retained Earnings ------------227600 208400
Total---------- 712800 530400
The following additional information was taken from the records of House Construction Co.:
A. Equipment and land were acquired for cash.
B. There were no disposals of equipment during the year.
C. The investments were sold for $54,000 cash.
D. The common stock was issued for cash.
E. There was a $79,200 credit to Retained Earnings for net income.
F. There was a $60,000 debit to Retained Earnings for cash dividends declared.
A. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
B. Prepare ratios as required.
Check: Net Cash Flow from Operating Activities $86,600
Click here for the SOLUTION
The comparative balance sheet of House Construction Co. for June 30, 2010 and 2009, is as follows:
Assets June 30, 2010 June 30, 2009
Cash----- 41600 28200
A/R (Net) ----121900 110700
Inventories---------- 175600 170500
Investments---------- 0 60000
Land -------174000 0
Equipment---------- 258000 210600
Accumulated Depreciation--------- -58300 -49600
Total------------ 712800 530400
Liabilities & Stockholders Equity
A/P (Merchandise Creditors) ----------121000 114200
Accrued Expense Payable (Operating Expense)------------ 18000 15800
Dividends Payable--------------- 15000 12000
Common Stock, $1 Par--------------- 67200 60000
Paid-In Capital In Excess Of Par - Common Stock------- 264000 120000
Retained Earnings ------------227600 208400
Total---------- 712800 530400
The following additional information was taken from the records of House Construction Co.:
A. Equipment and land were acquired for cash.
B. There were no disposals of equipment during the year.
C. The investments were sold for $54,000 cash.
D. The common stock was issued for cash.
E. There was a $79,200 credit to Retained Earnings for net income.
F. There was a $60,000 debit to Retained Earnings for cash dividends declared.
A. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
B. Prepare ratios as required.
Check: Net Cash Flow from Operating Activities $86,600
Click here for the SOLUTION
Thursday, July 28, 2011
Each of the following situations occurred during 2011 for one of your audit clients
ACCOUNTING
Judgment Case 4-9 Income statement presentation
Each of the following situations occurred during 2011 for one of your audit clients:
1. The write-off of inventory due to obsolescence.
2. Discovery that depreciation expenses were omitted by accident from 2010's income statement.
3. The useful lives of all machinery were changed from eight to five years.
4. The depreciation method used for all equipment was changed from the declining-balance to the straight-line method.
5. Ten million dollars face value of bonds payable were repurchased (paid off) prior to maturity resulting in a material loss of $500,000. The company considers the event unusual and infrequent.
6. Restructuring costs were incurred.
7. The Stridewell Company, a manufacturer of shoes, sold all of its retail outlets. It will continue to manufacture and sell its shoes to other retailers. A loss was incurred in the disposition of the retail stores. The retail stores are considered components of the entity.
8. The inventory costing method was changed from FIFO to average cost.
Required:
1. For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material):
a. As an extraordinary item.
b. As an unusual or infrequent gain or loss.
c. As a prior period adjustment.
d. As a change in accounting principle.
e. As a discontinued operation.
f. As a change in accounting estimate.
g. As a change in accounting estimate achieved by a change in accounting principle.
2. Indicate whether each situation would be included in the income statement in continuing operations (CO) or below continuing operations (BC), or if it would appear as an adjustment to retained earnings (RE). Use the format shown below to answer requirements 1 and 2.
Click here for the SOLUTION
Judgment Case 4-9 Income statement presentation
Each of the following situations occurred during 2011 for one of your audit clients:
1. The write-off of inventory due to obsolescence.
2. Discovery that depreciation expenses were omitted by accident from 2010's income statement.
3. The useful lives of all machinery were changed from eight to five years.
4. The depreciation method used for all equipment was changed from the declining-balance to the straight-line method.
5. Ten million dollars face value of bonds payable were repurchased (paid off) prior to maturity resulting in a material loss of $500,000. The company considers the event unusual and infrequent.
6. Restructuring costs were incurred.
7. The Stridewell Company, a manufacturer of shoes, sold all of its retail outlets. It will continue to manufacture and sell its shoes to other retailers. A loss was incurred in the disposition of the retail stores. The retail stores are considered components of the entity.
8. The inventory costing method was changed from FIFO to average cost.
Required:
1. For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material):
a. As an extraordinary item.
b. As an unusual or infrequent gain or loss.
c. As a prior period adjustment.
d. As a change in accounting principle.
e. As a discontinued operation.
f. As a change in accounting estimate.
g. As a change in accounting estimate achieved by a change in accounting principle.
2. Indicate whether each situation would be included in the income statement in continuing operations (CO) or below continuing operations (BC), or if it would appear as an adjustment to retained earnings (RE). Use the format shown below to answer requirements 1 and 2.
Click here for the SOLUTION
Sunday, July 10, 2011
On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
ACCOUNTING
P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
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) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the SOLUTION
P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
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) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the SOLUTION
Saturday, July 9, 2011
Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies
Aunt Ethel's Fancy Cookie Company
Problem 1
Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:
Macaroon Sugar Buttercream
Projected sales in units
500,000 800,000 600,000
PER UNIT data:
Selling price $0.80 $0.75 $0.60
Direct materials $0.20 $0.15 $0.14
Direct labor $0.04 $0.02 $0.02 Hours per 1000-unit batch:
Direct labor hours 2 1 1
Oven hours 1 1 1
Packaging hours 0.5 0.5 0.5
Total overhead costs and activity levels for the year are estimated as follows:
Activity Overhead costs Activity levels
Direct labor 2,400 hours
Oven $210,000 1,900 oven hours
Packaging $150,000 950 packaging hours $360,000
Questions: 1. Determine the activity-cost-driver rate for packaging costs (3 points).
2. Using the ABC system, for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
3. Using the ABC system, for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
4. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
5. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
6. Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why? (3 points).
Problem 2:
What is activity-based management and how can it be used to improve the profitability of a company? (12 points).
Click here for the SOLUTION
Problem 1
Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:
Macaroon Sugar Buttercream
Projected sales in units
500,000 800,000 600,000
PER UNIT data:
Selling price $0.80 $0.75 $0.60
Direct materials $0.20 $0.15 $0.14
Direct labor $0.04 $0.02 $0.02 Hours per 1000-unit batch:
Direct labor hours 2 1 1
Oven hours 1 1 1
Packaging hours 0.5 0.5 0.5
Total overhead costs and activity levels for the year are estimated as follows:
Activity Overhead costs Activity levels
Direct labor 2,400 hours
Oven $210,000 1,900 oven hours
Packaging $150,000 950 packaging hours $360,000
Questions: 1. Determine the activity-cost-driver rate for packaging costs (3 points).
2. Using the ABC system, for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
3. Using the ABC system, for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
4. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
5. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
6. Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why? (3 points).
Problem 2:
What is activity-based management and how can it be used to improve the profitability of a company? (12 points).
Click here for the SOLUTION
The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity
ACCOUNTING
The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machine- hours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.
Required:
A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.
Click here for the SOLUTION
The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machine- hours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.
Required:
A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.
Click here for the SOLUTION
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