ACC 281 Final Exam / ACC281 Final Exam

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 FINAL EXAM

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Answer

PART I — MULTIPLE CHOICE (90 points)

Instructions
Designate the best answer for each of the following questions.

Questions 1 and 2 are based on the following information:
Bono Company recently incurred the following costs:
AND SO ON

1. The building should be recorded on Bono's books at
2. Land should be recorded on Bono's books at
3. Carson Supply bought equipment at a cost of $72,000 on January 2, 2005. It originally had an estimated life of ten years and a salvage value of $12,000. Carson uses the straight-line depreciation method. On December 31, 2008, Carson decided the useful life likely would end on December 31, 2012, with a salvage value of $6,000. The depreciation expense recorded on December 31, 2008, should be
4. In order to be relevant, accounting information must
5. Riodan Company sold old equipment for $35,000. The equipment had a cost of $70,000 and accumulated depreciation of $42,000. The entry to record the sale of the equipment would include a
6. The cost of intangible assets should be
7. In a period of rising prices, the inventory method that results in the lowest income tax payment is
8. On November 30, Thatcher Company issued a $6,000, 6%, 4-month note to the National Bank. The entry on Thatcher's books to record the payment of the note at maturity will include a credit to Cash for
9. The inventory methods that result in the most current costs in the income statement and balance sheet are
10. The following information is available for Lighten Company:
11. If ending inventory is understated, net income and assets will be
12. One of the two constraints in accounting is
13. The assumption that assumes a company will continue in operation long enough to carry out its existing objectives is the
14. All of the following are intangible assets except
15. A daily cash count of register receipts made by a cashier department supervisor demonstrates an application of which of the following internal control principles?
16. When the allowance method is used for bad debts, the entry to write off an individual account known to be uncollectible involves a
17. Shipping terms of FOB destination mean that the
18. Bates Company has a $300,000 balance in Accounts Receivable and a $2,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bates uses a percentage of receivables basis (at 10%)?
19. The constraint of conservatism is best expressed as
20. If merchandise is sold for $2,000 subject to credit terms of 2/10, n/30, the entry to record collection in full within the discount period would include a
21. Barker Company's records show the following for the month of January:
22. Jetson Company's financial information is presented below.
23. The necessity of making adjusting entries relates mostly to the
24. The preparation of closing entries
25. Allowance for Doubtful Accounts is reported in the
26. Current liabilities are obligations that are reasonably expected to be paid from
27. Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account was
28. The primary accounting standard-setting body in the United States is the
29. Lawford Company's equipment account increased $600,000 during the period; the related accumulated depreciation increased $45,000. New equipment was purchased at a cost of $1,050,000 and used equipment was sold at a loss of $30,000. Depreciation expense was $150,000. Proceeds from the sale of the used equipment were
30. Which of the following would not be included in the operating activities section of a statement of cash flows?
31. Which of the following combinations presents correct examples of liquidity, profitability, and solvency ratios, respectively?
32. Nadine Manufacturing declared a 10% stock dividend when it had 200,000 shares of $5 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to
33. Which of the following pairs of terms in the area of financial statement analysis are synonymous?
34. Which of the following statements is true?
35. Dividends received are credited to what account under the equity method and cost method, respectively?
36. In accounting for available-for-sale securities, the Unrealized Loss—Equity account should be classified as a
37. Carr Corporation has the following stock outstanding:
38. The statement of cash flows is a(n)
39. The directors of Chandler Corp. are trying to decide whether they should issue par or no par stock. They are considering two alternatives for their new stock, which they are assuming will be issued at $8 per share. The alternatives are: (A) $5 par value and (B) no par, no stated value. If 100,000 shares are issued, what amount will be credited to the common stock account in each of these cases?
40. Fison Corp. purchased 20,000 shares of its $2 par common stock at a cost of $13 per share on April 30, 2008. The stock was originally issued at $11 per share. The entry to record the purchase of the stock should include a debit to
41. What is the effect on total paid-in capital of a stock dividend and a stock split, respectively?
Stock Dividend Stock Split
42. Which of the following should be classified as an extraordinary item?
43. A Discount on Bonds Payable account
44. In order to be considered extraordinary, an item must be
45. If the market rate of interest is lower than the stated rate, bonds will sell at an amount

PART II — MATCHING (50 points)

Instructions
Designate the terminology that best represents the definition or statement given below by placing the identifying letter(s) in the space provided. No letter should be used more than once.

1. The periodic write-off of an intangible asset.
2. The total amount subject to depreciation.
3. The principle that efforts be matched with accomplishments.
4. An expenditure charged against revenues as an expense when incurred.
5. The inventory costing method that assumes that the costs of the earliest goods purchased are the first to be recognized as cost of goods sold.
6. Use of the same accounting principles and methods from period to period by the same business enterprise.
Consistency
7. A measure of solvency calculated as cash provided by operating activities divided by average total liabilities.
8. An inventory costing method that assumes that the latest units purchased are the first to be allocated to cost of goods sold.
9. An assumption that economic events can be identified with a particular unit of accountability.
10. A characteristic of information that means it is capable of making a difference in a decision.
11. An assumption that the economic life of a business can be divided into artificial time periods.
12. This method of accounting for uncollectible accounts is required when bad debts are significant in size.
13. An accounting method in which cash dividends received are credited to Dividend Revenue.
14. Used by a bank when a previously deposited customer’s check “bounces” because of insufficient funds.
15. The assumption that the enterprise will continue in operation long enough to carry out its existing objectives and commitments.
16. A system in which detailed records are not maintained and cost of goods sold is determined only at the end of an accounting period.
17. The difference between inventory reported using LIFO and inventory reported using FIFO.
18. The methods and measures adopted within a business to safeguard its assets and enhance the accuracy and reliability of its accounting records.
19. Revenue, expense, and dividends accounts whose balances are transferred to retained earnings at the end of an accounting period.
20. A technique for evaluating financial statements that expresses the relationship among selected financial statement data.
21. A depreciation method that applies a constant rate to the declining balance book value of the asset and produces a decreasing annual depreciation expense over the useful life of the asset.
22. A pro rata distribution of a corporation’s own stock to its stockholders.
23. Events and transactions that are unusual in nature and infrequent in occurrence.
24. The disposal of a significant segment of a business.
25. The net income earned by each share of outstanding common stock.


PART III — INVENTORY (5 points)

Elston Company had a beginning inventory of 200 units at a cost of $12 per unit on August 1. During the month, the following purchases and sales were made.

Purchases Sales
August 4 250 units at $13 August 7 150 units
August 15 350 units at $15 August 11 100 units
August 28 200 units at $14 August 17 250 units
August 24 200 units

Elston uses a periodic inventory system.

Instructions
Determine ending inventory and cost of goods sold under (a) average cost, (b) FIFO, and (c) LIFO.


PART IV — DEPRECIATION (5 points)

Thomas Company purchased equipment for $640,000 cash on January 1, 2007. The estimated life is 5 years or 1,000,000 units; salvage value is estimated at $40,000. Actual activity was 180,000 units in 2007, and 200,000 units in 2008.

Instructions: Compute the annual depreciation expense for 2007 and 2008, and book value at December 31, 2008, under the following depreciation methods: (a) units-of-activity, (b) straight-line, and (c) double-declining-balance.

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Continuing Cookie Chronicle 4: CCC4: Cookie Creations is gearing up for the winter holiday season

Accounting Tools for Business Decision Making
Weygandt, Kimmel, Kieso

Continuing Cookie Chronicle 4: CCC4
Chapter 4
CCC4 Cookie Creations is gearing up for the winter holiday season. During the month of December 2009, the following transactions occur. AND SO ON

Instructions
Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 3, plus the new information above, do the following.
(a) Journalize the above transactions.
(b) Post the December transactions. (Use the general ledger accounts prepared in Chapter 3.)
(c) Prepare a trial balance at December 31, 2009.
(d) Prepare and post adjusting journal entries for the month of December.
(e) Prepare an adjusted trial balance as of December 31, 2009.
(f) Prepare an income statement and a retained earnings statement for the 2-month period ending December 31, 2009, and a classified balance sheet as of December 31, 2009.
(g) Prepare and post closing entries as of December 31, 2009.
(h) Prepare a post-closing trial balance

(c) Totals $8,160
(e) Totals $8,804
(f) Net income $3,211
(h) Totals $6,065

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Continuing Cookie Chronicle 3: CCC3: In November 2009 after having incorporated Cookie Creations Inc

Accounting Tools for Business Decision Making
Weygandt, Kimmel, Kieso

Continuing Cookie Chronicle 3: CCC3
Chapter 3
CCC3 In November 2009 after having incorporated Cookie Creations Inc., Natalie begins operations. She has decided not to pursue the offer to supply cookies to Biscuits. Instead she will focus on offering cooking classes. The following events occur. AND SO ON

Instructions
(a) Prepare journal entries to record the November transactions.
(b) Post the journal entries to the general ledger accounts.
(c) Prepare a trial balance at November 30, 2009.

(c) Trial balance total $3,910

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Comprehensive Problems: Williams Haka Bettner: Financial and Managerial Accounting

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEMS

1 - Susquehanna Equipment Rentals SOLUTION

2 - Guitar Universe, Inc SOLUTION

3 - McMinn Retail, Inc SOLUTION

4 - The Home Depot SOLUTION

5 - The Gilster Company SOLUTION

6 - Utease Corporation SOLUTION

Utease Corporation: COMPREHENSIVE PROBLEM 6: Utease Corporation Utease Corporation Utease Corporation Utease Corporation Utease Corporation

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEM 6 (CP6): Utease Corporation

Utease Corporation has many production plants across the midwestern United States. A newly opened plant, the Bellingham plant, produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows:

AND SO ON

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The Gilster Company: COMPREHENSIVE PROBLEM 5: The Gilster Company The Gilster Company The Gilster Company

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEM 5 (CP5): The Gilster Company

The Gilster Company, a machine tooling firm, has several plants. One plant located in St. Falls, Minnesota, uses a job order costing system for its batch production processes.

AND SO ON

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The Home Depot, Inc: COMPREHENSIVE PROBLEM 4 : The Home Depot, Inc The Home Depot, Inc The Home Depot, Inc The Home Depot, Inc The Home Depot, Inc

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEM 4 (CP4): The Home Depot, Inc

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Instructions: Answer each of the following questions and briefly explain where in the statements, notes, or other sections of the annual report you located the information used in your answer.

a. How many years are covered in each of the primary comparative financial statements? Were all of these statements audited? Name the auditors. What were the auditors' conclusions concerning these statements?
b. Home Depot combines its statement of retained earnings with another financial statement. Where are details about changes in the amount of retained earnings fund?
c. Over the three years presented, have the company's annual net cash flows been positive or negative from 1) operating activities, 2) investing activities, and 3) financing activities? Has the company's cash balance increased or decreased during each of these three years?

Part II

Home Depot wants to make credit purchases from your company, with payment due in 60 days assuming you are a credit manager of a medium sized supplier.

a. read the first note to the financial statements, "Summary of Significant Accounting Policies". Compute the following for the fiscal years ending feb. 3, 2008, and jan. 28, 2007 (round percentages to the nearest tenth of 1 percent, and other computations to one decimal place):
1. Current Ratio
2. Quick Ratio
3. Amount of Working Capital
4. Percentage change in working capital from the prior year
5. Percentage change in cash and cash equivalents from the prior year.

B. Based upon your analysis in part a, does teh company's liquidity appear to have increased or decreased during the most recent fiscal year? Explain.

C. Other than the ability of Home Depot to pay for it's purchases, do you see any major considerations that should enter into your company's decision? Explain.

D. Your company assigns each customer one of the four credit ratings listed below. Assign a credit rating to Home Depot and write a memorandum explaining your decision.

Possible Credit Ratings:

A- Outstanding
B- Good
C- Marginal
D- Unacceptable

Part III
a. compute the following for the fiscal years ending Feb. 3, 2008 and jan. 28, 2007 (round percentages to the nearest tenth):

1. percentage change in net sales (relative to the prior year)
2. Percentage change in net earnings
3. Gross profit rate.
4. Net income as a percentage of sales.
5. Return on average total assets.
6. Return on average total equity.

B. Write a statement that describes your conclusion(s) concerning rends in Home Depot's profitability during the period covered in your analysis in part a above2009, following these guidelines:

AND SO ON

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Guitar Universe, Inc: COMPREHENSIVE PROBLEM 2: Guitar Universe, Inc

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEM 2 (CP2): Guitar Universe, Inc

Guitar Universe, Inc., is a popular source of musical instruments for professional and amateur musicians. The company's accountants make necessary adjusting entries monthly, and they make all closing entries annually. Guitar Universe is growing rapidly and prides itself on having no long-term liabilities.

The company has provided the following trial balance dated December 31, 2009:

AND SO ON

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McMinn Retail, Inc: COMPREHENSIVE PROBLEM 3: McMinn Retail, Inc

Financial and Managerial Accounting
Williams Haka Bettner

COMPREHENSIVE PROBLEM 3 (CP3): McMinn Retail, Inc

McMinn Retail, Inc., is a retailer that has engaged you to assist in the preparation of its financial statements at December 31, 2009. Following are the correct adjusted account balances, in alphabetical order, as of that date. Each balance is the “normal” balance for that account. (Hint: The “normal” balance is the same as the debit or credit side that increases the account.)

Instructions

1. Prepare an income statement for the year ended December 31, 2009, which includes amounts for gross profit, income before income taxes, and net income. List expenses (other than cost of goods sold and income tax expense) in order, from the largest to the smallest dollar balance. You may ignore earnings per share.
2. Prepare a statement of retained earnings for the year ending December 31, 2009.
3. Prepare a statement of financial position (balance sheet) as of December 31, 2009, following these guidelines:

AND SO ON

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Advanced Accounting: Chapter 4 E4-5 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 4

Exercise 4-5 (E4-5)
General questions on statement of cash flows
1. In preparing a statement of cash flows, the cost of acquiring a subsidiary is reported:

2. In computing cash flows from operating activities under the direct method, the following item is an addition:

3. In computing cash flows from operating activities under the indirect method, the following item is an addition to consolidated net income:

4. In computing cash flows from operating activities under the direct method, the following item is an addition:

5. Dividends paid as presented in a consolidated cash flow statement are:

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Advanced Accounting: Chapter 4 E4-3 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 4

Exercise 4-3 (E4-3)
General Problems
1. Peggy Corporation owns a 70% interest in Sandy Corporation, acquired several years ago at book value. On December 31, 2006, Sandy mailed a check for $10,000 to Peggy in part payment of a $20,000 account with Peggy. Peggy had not received the check when its books were closed on December 31. Peggy Corporation had accounts receivable of $150,000 (including the $20,000 from Sandy), and Sandy had accounts receivable at $220,000 at year-end. In the consolidated balance sheet of Peggy Corporation and Subsidiary at December 31, 2006, accounts receivable will be shown in the amount of:


Use the following information in answering questions 2 and 3.
Primrose Corporation purchased a 70% interest in Starman Corporation on January 1, 2006, for $15,000, when Starman’s stockholders’ equity consisted of $3,000 common stock, $10,000 additional paid-in capital, and $2,000 retained earnings. Income and dividend information for Starman for 2006, 2007, and 2008 is as follows:
2006 2007 2008
Net income (or loss) $1,000 $200 $(500)
Dividends 400 100 —

2. Primrose reported separate income of $12,000 for 2008. Consolidated net income for 2008 is:

3. Primrose’s Investment in Starman balance at December 31, 2008, under the equity method is:

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Advanced Accounting: Chapter 4 E4-1 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 4

Exercise 4-1 (E4-1)
General questions
1. Working paper entries normally:

2. Working paper techniques assume nominal accounts are:

3. Most errors made in consolidating financial statements will appear when:

4. Net income on consolidation working papers is:

5. On consolidation working papers, individual stockholders’ equity accounts of a subsidiary are:

6. On consolidation working papers, investment income from a subsidiary is:

7. On consolidation working papers, the investment in consolidated subsidiary account balances are:

8. On consolidation working papers, consolidated net income is determined by:

9. On consolidation working papers, consolidated end-of-the-period retained earnings is determined by:

10. Under the trial balance approach to consolidation working papers, which of the following is used?

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QS 2-5 Identify whether the normal balances

ACC 225

Axia College of University of Phoenix (UoP)

Financial Accounting

Larson, K. D., Wild, J. J., & Chiappetta B. (2005). Fundamental accounting principles (17th ed.)

Quick Study 2-5 (QS 2-5) Identify whether the normal balances (in parentheses) assigned to the following accounts are correct or incorrect:
a. To increase Store Equipment f. To decrease Unearned Revenue
b. To increase Owner Withdrawals g. To decrease Prepaid Insurance
c. To decrease Cash h. To increase Notes Payable
d. To increase Utilities Expense i. To decrease Accounts Receivable
e. To increase Fees Earned j. To increase Owner Capital

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QS 2-4 Identify whether a debit or credit yields the indicated change for each of the following accounts

ACC 225

Axia College of University of Phoenix (UoP)

Financial Accounting

Larson, K. D., Wild, J. J., & Chiappetta B. (2005). Fundamental accounting principles (17th ed.)

Quick Study 2-4 (QS 2-4) Identify whether a debit or credit yields the indicated change for each of the following accounts:
a. To increase Store Equipment f. To decrease Unearned Revenue
b. To increase Owner Withdrawals g. To decrease Prepaid Insurance
c. To decrease Cash h. To increase Notes Payable
d. To increase Utilities Expense i. To decrease Accounts Receivable
e. To increase Fees Earned j. To increase Owner Capital

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QS 2-3 Indicate whether a debit or credit decreases the normal balance of each of the following accounts

ACC 225

Axia College of University of Phoenix (UoP)

Financial Accounting

Larson, K. D., Wild, J. J., & Chiappetta B. (2005). Fundamental accounting principles (17th ed.)

Quick Study 2-3 (QS 2-3) Indicate whether a debit or credit decreases the normal balance of each of the following accounts:
a. Office Supplies e. Salaries Expense i. Interest Revenue
b. Repair Services Revenue f. Owner Capital j. Owner Withdrawals
c. Interest Payable g. Prepaid Insurance k. Unearned Revenue
d. Accounts Receivable h. Buildings l. Accounts Payable

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Compute the following ratios for 2002 and 2003 Landry’s Restaurants

Fundamentals of Financial Accounting 1st ed.
by Phillips, Libby, and Libby

Landry’s Restaurants
Compute the following ratios for 2002 and 2003. Use the Landry’s Restaurants financial statements located in Appendix A of Fundamentals of Financial Accounting:
a. Earnings per share
b. Return on assets
c. Current ratio
d. Times interest earned
e. Asset turnover
f. Debt to total assets
g. Current cash debt coverage
h. Cash debt coverage
i. Free cash flow

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At December 31, 2010, Rijo Corporation reported the following plant assets

ACCOUNTING
Warren, Reeve and Duchac

Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 9
Problem 9-2A (P9-2A) At December 31, 2010, Rijo Corporation reported the following plant assets.
Land $ 3,000,000
Buildings $26,500,000
Less: Accumulated depreciation—buildings 12,100,000 14,400,000
Equipment 40,000,000
Less: Accumulated depreciation—equipment 5,000,000 35,000,000
Total plant assets $52,400,000
During 2011, the following selected cash transactions occurred.
Apr. 1 Purchased land for $2,200,000.
May 1 Sold equipment that cost $600,000 when purchased on January 1, 2004. The equipment was sold for $170,000.
June 1 Sold land for $1,800,000. The land cost $1,000,000.
July 1 Purchased equipment for $1,300,000.
Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2001. No salvage value was received.
Instructions
(a) Journalize the transactions. (Hint: You may wish to set up T accounts, post beginning balances, and then post 2011 transactions.) Rijo uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.
(b) Record adjusting entries for depreciation for 2011.
(c) Prepare the plant assets section of Rijo’s balance sheet at December 31, 2011.

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Lorenz Company closes its books on July 31

ACCOUNTING
Warren, Reeve and Duchac

Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 8
Problem 8-8A (P8-8A) Lorenz Company closes its books on July 31. On June 30 the Notes Receivable account balance is $23,800. Notes Receivable include the following.
Date Maker Face Value Term Maturity Date Interest Rate
May 21 Agler Inc. $ 6,000 60 days July 20 8%
May 25 Girard Co. 7,800 60 days July 24 10%
June 30 LSU Corp. 10,000 6 months December 31 9%
During July the following transactions were completed.
July 5 Made sales of $5,100 on Lorenz credit cards.
14 Made sales of $600 on Visa credit cards. The credit card service charge is 3%.
20 Received payment in full from Agler Inc. on the amount due.
24 Received payment in full from Girard Co. on the amount due.
Instructions
(a) Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable. (Interest is computed using 360 days.)
(b) Enter the balances at July 1 in the receivable accounts and post the entries to all of the receivable accounts. (Use T accounts.)
(c) Show the balance sheet presentation of the receivable accounts at July 31.

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On July 31, 2010, Fenton Company had a cash balance per books of $6,140

ACCOUNTING
Warren, Reeve and Duchac

Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 7
Problem 7-3A (P7-3A) On July 31, 2010, Fenton Company had a cash balance per books of $6,140. The statement from Jackson State Bank on that date showed a balance of $7,695.80. A comparison of the bank statement with the cash account revealed the following facts.
1. The bank service charge for July was $25.
2. The bank collected a note receivable of $1,500 for Fenton Company on July 15, plus $30 of interest. The bank made a $10 charge for the collection. Fenton has not accrued any interest on the note.
3. The July 31 receipts of $1,193.30 were not included in the bank deposits for July. These receipts were deposited by the company in a night deposit vault on July 31.
4. Company check No. 2480 issued to H. Coby, a creditor, for $384 that cleared the bank in July was incorrectly entered in the cash payments journal on July 10 for $348.
5. Checks outstanding on July 31 totaled $1,980.10.
6. On July 31 the bank statement showed an NSF charge of $690 for a check received by the company from P. Figura, a customer, on account.
Instructions
(a) Prepare the bank reconciliation as of July 31.
(b) Prepare the necessary adjusting entries at July 31

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South Coast Boards Co: 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: AND SO ON

Check: 8. Net Income 693,800

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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).

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South Coast Boards Co. is a merchandising business

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

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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

Aunt Ethel's Fancy Cookie Company: Aunt Ethel's Fancy Cookie Company

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).

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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

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

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

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?

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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?

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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?


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BE 11-1 Cardinal Company Cardinal Company Cardinal Company has the following obligations at December 31

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Brief Exercise 11-1 (BE 11-1) Cardinal Company has the following obligations at December 31: (a) a note payable for $100,000 due in 2 years, (b) a 10-year mortgage payable of $300,000 payable in ten $30,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability.(Assume an operating cycle of less than one year.)

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P10-3A: Solomon Company: Solomon Company purchased the following two machines

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Problem 10-3A (P10-3A) On January 1, 2006, Solomon Company purchased the following two machines for use in its production process.
Machine A: The cash price of this machine was $38,500. Related expenditures included: sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period.
Machine B: The recorded cost of this machine was $100,000. Solomon estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.

Instructions
(a) Prepare the following for Machine A. (1) The journal entry to record its purchase on January 1, 2006. (2) The journal entry to record annual depreciation at December 31, 2006, assuming the straight-line method of depreciation is used.
(b) Calculate the amount of depreciation expense that Solomon should record for machine B each year of its useful life under the following assumption. (1) Solomon uses the straight-line method of depreciation. (2) Solomon uses the declining-balance method.The rate used is twice the straight-line rate. (3) Solomon uses the units-of-activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2006, 6,500 units; 2007, 7,500 units; 2008, 6,000 units; 2009, 5,000 units.
(c) Which method used to calculate depreciation on machine B reports the lowest amount of depreciation expense in year 1 (2006)? The lowest amount in year 4 (2009)? The lowest total amount over the 4-year period?

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BE 11-1 Cardinal Company Cardinal Company has the following obligations

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Brief Exercise 11-1 (BE 11-1) Cardinal Company has the following obligations at December 31: (a) a note payable for $100,000 due in 2 years, (b) a 10-year mortgage payable of $300,000 payable in ten $30,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability.(Assume an operating cycle of less than one year.)

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P10-3A On January 1, 2006, Solomon Company Solomon Company Solomon Company purchased the following two machines for use

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Problem 10-3A (P10-3A) On January 1, 2006, Solomon Company purchased the following two machines for use in its production process.
Machine A: The cash price of this machine was $38,500. Related expenditures included: sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period.
Machine B: The recorded cost of this machine was $100,000. Solomon estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.

Instructions
(a) Prepare the following for Machine A. (1) The journal entry to record its purchase on January 1, 2006. (2) The journal entry to record annual depreciation at December 31, 2006, assuming the straight-line method of depreciation is used.
(b) Calculate the amount of depreciation expense that Solomon should record for machine B each year of its useful life under the following assumption. (1) Solomon uses the straight-line method of depreciation. (2) Solomon uses the declining-balance method.The rate used is twice the straight-line rate. (3) Solomon uses the units-of-activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2006, 6,500 units; 2007, 7,500 units; 2008, 6,000 units; 2009, 5,000 units.
(c) Which method used to calculate depreciation on machine B reports the lowest amount of depreciation expense in year 1 (2006)? The lowest amount in year 4 (2009)? The lowest total amount over the 4-year period?

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E10-8: Yosuke Corporation: The following are selected 2006 transactions of Yosuke Corporation

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Exercise 10-8 (E10-8) The following are selected 2006 transactions of Yosuke Corporation.
Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $60,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.
Instructions
Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

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E10-6 Thomas Company Thomas Company Thomas Company

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Exercise 10-6 (E10-6) Presented below are selected transactions at Thomas Company for 2006.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 1996. The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2003. The computer cost $35,000. It had a useful life of 5 years with no salvage value. The computer was sold for $12,000.
Dec. 31 Discarded a delivery truck that was purchased on January 1, 2002. The truck cost $33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Instructions
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Thomas Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2005.)

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E9-2 The ledger of Elburn Company Elburn Company Elburn Company

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Exercise 9-2 (E9-2) The ledger of Elburn Company at the end of the current year shows Accounts Receivable $110,000, Sales $840,000, and Sales Returns and Allowances $28,000.
Instructions
(a) If Elburn uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Elburn determines that Copp’s $1,400 balance is uncollectible.
(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be
(1) 1% of net sales, and (2) 10% of accounts receivable.
(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable

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E9-8 Mexico Supply Co. has the following transactions related to notes receivable during the last 2 months of 2005

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Exercise 9-8 (E9-8) Mexico Supply Co. has the following transactions related to notes receivable during the last 2 months of 2005.
Nov. 1 Loaned $18,000 cash to Norma Hanson on a 1-year, 10% note.
Dec. 11 Sold goods to John Countryman, Inc., receiving a $6,750, 90-day, 8% note.
16 Received a $4,000, 6-month, 9% note in exchange for Bob Shabo's outstanding accounts receivable.
31 Accrued interest revenue on all notes receivable.
Instructions
(a) Journalize the transactions for Mexico Supply Co.
(b) Record the collection of the Hanson note at its maturity in 2006.

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P9-7A On January 1, 2006, Bettendorf Company had Accounts Receivable $56,900

ACC 363

Axia College of University of Phoenix (UoP)

Financial Accounting
Weygandt, Kieso, and Kimmel, 5th Edition

Financial Accounting II

Problem 9-7A (P9-7A) On January 1, 2006, Bettendorf Company had Accounts Receivable $56,900 and Allowance for Doubtful Accounts $4,700. Bettendorf Company prepares financial statements annually. During the year the following selected transactions occurred.

Jan. 5 Sold $6,900 of merchandise to John Yockey Company, terms n/30.
Feb. 2 Accepted a $6,900, 4-month, 10% promissory note from John Yockey Company for the balance due.
Feb.12 Sold $7,800 of merchandise to Skosey Company and accepted Skosey's $7,800, 2-month, 10% note for the balance due.
Feb. 26 Sold $3,000 of merchandise to Platz Co., terms n/10.
Apr. 5 Accepted a $3,000, 3-month, 8% note from Platz Co. for the balance due.
Apr.12 Collected the Skosey Company note in full.
June 2 Collected the John Yockey Company note in full.
July 5 Platz Co. dishonors its note of April 5. It is expected that Platz will eventually pay the amount owed.
July 15 Sold $7,000 of merchandise to King Co. and accepted King's $7,000, 3-month, 12% note for the amount due.
Oct.15 King Co.'s note was dishonored. King Co. is bankrupt, and there is no hope of future settlement.
Journalize the transactions.

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21. The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense.

FIN 200

Axia College of University of Phoenix (UoP)

Foundations of Financial Management
Block Hirt Danielsen

Introduction to Finance: Harvesting the Money Tree

Fin 200 Week One (Week 1) Solution

Assignment: Cash Flow Preparation
Chapter 2
21. The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company .
Given that the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms.

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20. Nova Electrics anticipated cash flow from operating activities of $6 million in 2008. It will need to spend $1.2 million on capital investments

FIN 200

Axia College of University of Phoenix (UoP)

Foundations of Financial Management
Block Hirt Danielsen

Introduction to Finance: Harvesting the Money Tree

Fin 200 Week One (Week 1) Solution

Assignment: Cash Flow Preparation
Chapter 2
20. Nova Electrics anticipated cash flow from operating activities of $6 million in 2008. It will need to spend $1.2 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $.4 million and preferred stock dividends at $.55 million.
a. What is the firm’s projected free cash flow for the year 2008?
b. What does the concept of free cash flow represent?

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