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
Tuesday, July 13, 2010
South Coast Boards Co: South Coast Boards Co: South Coast Boards Co: South Coast Boards Co: South Coast Boards Co: South Coast Boards Co
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
Monday, July 12, 2010
South Coast Boards Co: South Coast Boards: Comprehensive Problem 2
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
South Coast Boards: South Coast Boards: Comprehensive Problem 2
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 5, Chapter 6
Comprehensive Problem 2 (CP 2)
South Coast Boards Co. is a merchandising business. the account balances for south coast boards co. as of July 1, 2010 (unless otherwise indicated), are as follows:
Check: 8. Net Income 693,800
Click here for the SOLUTION
110 Cash $63600
112 A/R $153900
115 Merchandise Inventory $602400
116 Prepaid insurance $16800
117 Store supplies $11400
123 store equipment $469500
124 Accum. Depr. --Store equip $56700
210 A/P $96600
211 Salaries payable $-
310 capital stock $100000
311 retained earnings, Aug 1 2009 $455300
312 Dividends $135000
313 Income summary $-
410 Sales $3221100
411 Sales return and allowances $92700
412 Sales discounts $59400
510 Cost of merchandise sold $1623000
520 sales salaries expense $334800
521 advertising expense $81000
522 depreciation expense $-
523 store supplies expense $-
529 misc. selling expense $12600
530 Office salaries expense $182100
531 Rent Expense $83700
532 insurance expense $-
539 Misc. Administrative expense $7800
During July, the last month of the fiscal year, the following transactions were completed:
July
1, Paid rent for July, $5000.
3, Purchased merchandise on account from Belmont Co., Terms 2/10,n/30,POB shipping point, $40000.
4, Paid freight on purchase of July 3, $600.
6, Sold merchandise on account to Modesto Co., terms 2/10,n/30, FOB shipping point, $25000. The cost of the merchandise sold was $15000.
7, Received $26500 cash from Yuba Co. on account, no discount.
10, sold merchandise for cash $80000. The cost of the merchandise sold was $50000.
13, Paid for merchandise purchased on July 3, less discount.
14, Received merchandise returned on sale of July 6, $6000. The cost of the merchandise returned was $4500.
15, Paid advertising expense for last half of July, $7500
16, received cash from sale of July 6, less return of July 14 and discount.
19, purchased merchandise for cash, $36000.
19, Paid $18000 to Blakke Co. on account, no discount
20, sold merchandise on account to Reedley Co., terms 1/10,n/30, FOB shipping point, $40000. the cost of the merchandise sold was $25000.
21, for the convenience of the customer, paid freight on sale of July 20, $1100.
21, received $17600 cash from Owen co. on account, no discount.
21, purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB Destination, $20000.
24, Returned $2000 of damaged merchandise purchased on July 21, receiving credit from the seller.
26, Refunded cash on sales made for cash, $3000. The cost of the merchandise returned was $1800.
28, paid sales salaries of $22800 and office salaries of $15200.
29, purchased store supplies for cash, $2400.
30, Sold merchandise on account to Whitetail co., terms 2/10, n/30, FOB shipping point, $18750. The cost of the merchandise sold was $11250.
30, received cash from sale of July 20, less discount, plus freight paid on July 21.
31, Paid for purchase of July 21, less return of July 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (?) in the posting reference column. Journalize the transactions for July.
2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are no required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare and unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a) Merchandise inventory on July 31 $ 589850
b) Insurance expired during the year $ 12500
c) Store supplies on hand on July 31 $4700
d) Depreciation for the current year $18800
e) Accrued salaries on July 31: Sale salaries $4400 Office salaries $2700 ($7100)
5. Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work Sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Indicated closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
10. Prepare a post-closing trial balance.
Check: 8. Net Income 693,800
Click here for the SOLUTION
Friday, July 9, 2010
Advanced Accounting: Chapter 2 E2-2 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-2 (E2-2)
[AICPA adapted] General problems
1. Investor Company owns 40% of Alimand Corporation. During the calendar year, Alimand had net earnings of $100,000 and paid dividends of $10,000. Investor mistakenly recorded these transactions using the cost method rather than the equity method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively?
2. The corporation exercises control over an affiliate in which it holds a 40% common stock interest. If its affiliate completed a fiscal year profitably but paid no dividends, how would this affect the investor corporation?
3. An investor uses the cost method to account for an investment in common stock. A portion of the dividends received this year were in excess of the investor’s share of investee’s earnings after the date of the investment. The amount of dividends revenue that should be reported in the investor’s income statement for this year would be:
4. On January 1 Grade Company paid $300,000 for 20,000 shares of Medium Company’s common stock, which represents a 15% investment in Medium. Grade does not have the ability to exercise significant influence over Medium. Medium declared and paid a dividend of $1 per share to its stockholders during the year. Medium reported net income of $260,000 for the year ended December 31. The balance in Grade’s balance sheet account “Investment in Medium Company” at December 31 should be
5. On January 2, 2006, Troquel Corporation bought 15% of Zafacon Corporation’s capital stock for $30,000. Troquel accounts for this investment by the cost method. Zafacon’s net income for the years ended December 31, 2006, and December 31, 2007, were $10,000 and $50,000, respectively. During 2007 Zafacon declared a dividend of $70,000. No dividends were declared in 2006. How much should Troquel show on its 2007 income statement as income from this investment?
6. Pare purchased 10% of Tot Company’s 100,000 outstanding shares of common stock on January 2 for $50,000. On December 31, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional stock during the year. Tot reported earnings of $300,000 for the year. What amount should Pare report in its December 31 balance sheet as investment in Tot?
7. On January 1, Point purchased 10% of Iona Company’s common stock. Point purchased additional shares, bringing its ownership up to 40% of Iona’s common stock outstanding, on August 1. During October, Iona declared and paid a cash dividend on all of its outstanding common stock. How much income from the Iona investment should Point’s income statement report?
8. On January 2, Kean Company purchased a 30% interest in Pod Company for $250,000. On this date, Pod’s stockholders’ equity was $500,000. The carrying amounts of Pod’s identifiable net assets approximated their fair values, except for land, whose fair value exceeded its carrying amount by $200,000. Pod reported net income of $100,000 and paid no dividends. Kean accounts for this investment using the equity method. In its December 31 balance sheet, what amount should Kean report as investment in subsidiary?
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-2 (E2-2)
[AICPA adapted] General problems
1. Investor Company owns 40% of Alimand Corporation. During the calendar year, Alimand had net earnings of $100,000 and paid dividends of $10,000. Investor mistakenly recorded these transactions using the cost method rather than the equity method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively?
2. The corporation exercises control over an affiliate in which it holds a 40% common stock interest. If its affiliate completed a fiscal year profitably but paid no dividends, how would this affect the investor corporation?
3. An investor uses the cost method to account for an investment in common stock. A portion of the dividends received this year were in excess of the investor’s share of investee’s earnings after the date of the investment. The amount of dividends revenue that should be reported in the investor’s income statement for this year would be:
4. On January 1 Grade Company paid $300,000 for 20,000 shares of Medium Company’s common stock, which represents a 15% investment in Medium. Grade does not have the ability to exercise significant influence over Medium. Medium declared and paid a dividend of $1 per share to its stockholders during the year. Medium reported net income of $260,000 for the year ended December 31. The balance in Grade’s balance sheet account “Investment in Medium Company” at December 31 should be
5. On January 2, 2006, Troquel Corporation bought 15% of Zafacon Corporation’s capital stock for $30,000. Troquel accounts for this investment by the cost method. Zafacon’s net income for the years ended December 31, 2006, and December 31, 2007, were $10,000 and $50,000, respectively. During 2007 Zafacon declared a dividend of $70,000. No dividends were declared in 2006. How much should Troquel show on its 2007 income statement as income from this investment?
6. Pare purchased 10% of Tot Company’s 100,000 outstanding shares of common stock on January 2 for $50,000. On December 31, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional stock during the year. Tot reported earnings of $300,000 for the year. What amount should Pare report in its December 31 balance sheet as investment in Tot?
7. On January 1, Point purchased 10% of Iona Company’s common stock. Point purchased additional shares, bringing its ownership up to 40% of Iona’s common stock outstanding, on August 1. During October, Iona declared and paid a cash dividend on all of its outstanding common stock. How much income from the Iona investment should Point’s income statement report?
8. On January 2, Kean Company purchased a 30% interest in Pod Company for $250,000. On this date, Pod’s stockholders’ equity was $500,000. The carrying amounts of Pod’s identifiable net assets approximated their fair values, except for land, whose fair value exceeded its carrying amount by $200,000. Pod reported net income of $100,000 and paid no dividends. Kean accounts for this investment using the equity method. In its December 31 balance sheet, what amount should Kean report as investment in subsidiary?
Click here for the SOLUTION
Advanced Accounting: Chapter 2 E2-1 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-1 (E2-1)
General questions
1. Indicators of an investor company’s inability to exercise significant influence over an investee are provided in FASB Interpretation No. 35. Which of the following is not included among those indicators?
2. A 20% common stock interest in an investee company:
3. The cost of a 25% interest in the voting stock of an investee that is recorded in the investment account includes:
4. The underlying equity of an investment at acquisition:
5. Jarret Corporation is a 25%-owned equity investee of Marco Corporation. During the current year, Marco receives $12,000 in dividends from Jarret. How does the $12,000 dividend affect Marco’s financial position and results of operations?
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-1 (E2-1)
General questions
1. Indicators of an investor company’s inability to exercise significant influence over an investee are provided in FASB Interpretation No. 35. Which of the following is not included among those indicators?
2. A 20% common stock interest in an investee company:
3. The cost of a 25% interest in the voting stock of an investee that is recorded in the investment account includes:
4. The underlying equity of an investment at acquisition:
5. Jarret Corporation is a 25%-owned equity investee of Marco Corporation. During the current year, Marco receives $12,000 in dividends from Jarret. How does the $12,000 dividend affect Marco’s financial position and results of operations?
Click here for the SOLUTION
Advanced Accounting: Chapter 1 E1-2 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 1
Exercise 1-2 (E1-2)
[AICPA adapted] General Problems
1. Fast Corporation paid $50,000 cash for the net assets of Agge Company, which consisted of the following:
Book Value Fair Value
Current assets $10,000 $14,000
Plant and equipment 40,000 55,000
Liabilities assumed (10,000) (9,000)
$40,000 $60,000
The plant and equipment acquired in this business combination should be recorded at:
2. On April 1, Jack Company paid $800,000 for all the issued and outstanding common stock of Ann Corporation in a transaction properly accounted for as a purchase. The recorded assets and liabilities of Ann Corporation on April 1 follow:
Cash $ 80,000
Inventory 240,000
Property and equipment (net of accumulated depreciation of $320,000) 480,000
Liabilities (180,000)
On April 1, it was determined that the inventory of Ann had a fair value of $190,000 and the property and equipment (net) had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 1
Exercise 1-2 (E1-2)
[AICPA adapted] General Problems
1. Fast Corporation paid $50,000 cash for the net assets of Agge Company, which consisted of the following:
Book Value Fair Value
Current assets $10,000 $14,000
Plant and equipment 40,000 55,000
Liabilities assumed (10,000) (9,000)
$40,000 $60,000
The plant and equipment acquired in this business combination should be recorded at:
2. On April 1, Jack Company paid $800,000 for all the issued and outstanding common stock of Ann Corporation in a transaction properly accounted for as a purchase. The recorded assets and liabilities of Ann Corporation on April 1 follow:
Cash $ 80,000
Inventory 240,000
Property and equipment (net of accumulated depreciation of $320,000) 480,000
Liabilities (180,000)
On April 1, it was determined that the inventory of Ann had a fair value of $190,000 and the property and equipment (net) had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?
Click here for the SOLUTION
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