Test 1
Problem 1. At the
beginning of 2010, Gonzales Company’s accounting records had the general ledger
accounts and balances shown in the table below. During 2010, the following
transactions occurred:
1. received $80,000 cash for providing
services to customers
2. paid rent expense, $10,000
3. purchased land for $9,000 cash
4. paid $5,000 on note payable
5. paid operating expenses, $52,000
6. paid cash dividend, $6,000
Required:
1) Record the transactions in the
appropriate general ledger accounts. Record the amounts of revenue, expense,
and dividends in the Retained Earnings column, providing appropriate titles for
these accounts in the last column of the table.
2) What is the amount of total assets as
of December 31, 2010?
3) What is the amount of total stockholders’ equity as of
December 31, 2010?
Problem 2.
Given are the amounts of assets, liabilities, owner’s equity, revenues, and
expenses of AQUA Inc. at 12/31/10. The beginning amount of Retained Earnings at
1/1/10 was $20,000, and during the year Dividends of $60,000 were taken out by
the owners of Aqua Inc. Prepare the yearend Balance Sheet and Income Statement
for AQUA LLP at the end of the year.
(Include Correct Headings)
Accounts Payable $59,000 Land $78,000
Accounts Receivable 15,000 Unearned
Revenue 45,000
Advertising Expense
13,000 Utilities
Expense
5,000
Building 160,000 Rent Expense 13,000
Cash 140,000 Operating
Expenses 23,000
Supplies 10,000 Common
Stock 240,000
Salary payable
2,000 Accumulated
Depreciation 10,000
Prepaid Insurance Expense 20,000 Service
Revenue 170,000
Interest Expense
9,000 Retained Earnings ?
Test 2
Problem 1. The May 31, 2012, balance per bank statement for
Upton Company was $7,200. The cash balance per books was $9,500. Outstanding
checks amounted to $800, and deposits in transit were $2,400. The bank
statement contained an NSF check for $500, a service charge for $25, and a
debit memo for direct payment of the telephone bill of $175.
Required:
1) Prepare a bank reconciliation to determine the true cash balance at May 31,
2012.
Problem 2. Scott
Company is a merchandising business that was started in 2012. Scott uses the
perpetual inventory system. It experienced the following events during 2012.
1. Acquired $25,000 cash by issuing common stock
2. Purchased inventory on account that cost $14,000, terms 2/10, n/30
3. Sold inventory that had cost $8,400 for $15,000 cash
4. Paid for the merchandise referred to in event 2, within the discount period
Required:
1) Record the events in the financial statements model below; include column
totals.
2) Prepare an income statement for 2012.
3) What is the amount of total assets at the end of 2012?
Test 3
Problem 1. Maple Company started the year with no inventory.
During the year, it purchased two identical inventory items at different times.
The first unit cost $800 and the second, $700. One of the items was sold during
the year.
Required:
Based on this information, how
much product cost would be allocated to cost of goods sold and ending
inventory, assuming use of:
a. LIFO
b. FIFO
c. Weighted average
Problem 2. Teague Company purchased a new machine on January 1,
2012, at a cost of $150,000. The machine is expected to have an eight-year life
and a $15,000 salvage value. The machine is expected to produce 675,000
finished products during its eight-year life. Smith produced 70,000 units in
2012 and 110,000 units during 2013.
Required:
1) Determine the amount of depreciation expense to be recorded on the machine
for the years 2012 and 2013 under each of the following methods:
Test 4
Problem 1. Villarente Company issued 5-year $200,000 face value
bonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%,
and the effective interest rate is 10.33%. Use the effective interest rate
method to complete the amortization schedule below.
Problem 2. Allen Corporation was organized on July 15, 2012. It was
authorized to issue 150,000 shares of $25 par value common stock and 50,000
shares of 6% cumulative preferred stock. The preferred stock had a stated value
of $50 per share. The following stock transactions relate to Allen Corporation.
·
Issued
55,000 shares of common stock for $33 per share.
·
Issued
2,750 shares of the class A preferred stock for $62 per share.
·
Issued
27,500 shares of common stock for $35 per share.
Required:
1) Indicate the effect of each of these transactions on Allen’s financial
statements. Include dollar amounts in the model, below. After recording the
three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of
stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock
are outstanding?
Test 5
Problem 1. The following information applies to Barnhart Company:
Additional information:
- Net
Credit Sales = $220,000 - Beginning
Accounts Receivable = $10,000
Required:
1) Compute Barnhart’s:
a) Quick ratio
b)
Current ratio
c) Working capital
d) Accounts receivable turnover
e)
Average days to collect receivables
Problem 2. The Jiffy Manufacturing Company started operations in 2012
when it acquired $100,000 from its owners. During the year, the company incurred
the following costs:
The company placed 12,000 units into production, completed 10,000 units, and
sold 8,000 units. The average selling price was $17 per unit.
Required:
1) Prepare a schedule of cost of goods manufactured and sold for the year ended
December 31, 2012.
2) Prepare an income statement for the year ended December
31, 2012.
Test 6
Problem 1. The following information is for a product manufactured and
sold by Rivera Corporation:
- Sales
price per unit, $30 - Variable
cost per unit, $20 - Total
fixed costs, $200,000 - Last
year, Rivera earned a profit of $60,000
Required:
1) How many units did Rivera sell last year?
2)
Rivera’s managers are considering decreasing the sales price to $28 in an
effort to increase market share. Also, the company wants a profit of $80,000.
How many units would it have to sell at the lower selling price to achieve this
target?
Problem 2. The management accountant at Melrose, Inc. provided the
following estimated costs for producing 5,000 units of a specialty product manufactured
by the firm:
The company believes that direct labor hours are the most appropriate cost
driver for assigning overhead costs to its product.
Required:
1) Compute the predetermined overhead rate for this company.
2) Compute the
specialty product’s total estimated cost per unit.
3) Why do firms assign overhead costs using a predetermined
overhead rate instead of assigning actual costs?
Test 7
Problem 1. Ortiz Manufacturing is considering developing and
marketing one of two new products, A and B. It has accumulated the following
information about the two products:
Required:
1) Which of these items are relevant to Ortiz’s
decision about which of these products it will launch?
Problem 2. Mae Lee owns a small retail store in Cairo, Georgia. The
following summary information regarding expectations for the month of January
is provided: As of December 31 there is $500 in the bank and the balance in
accounts receivable is $2,500. Budgeted cash and credit sales for January are $3,000
and $2,000, respectively. Ninety percent of credit sales are collected in the
month of sale and the remainder is collected in the following month. Mae’s
suppliers do not extend credit. Cash payments for January are expected to be
$12,000. Mae has a line of credit that enables the store to borrow funds on
demand. However, funds must be borrowed on the first day of the month and
interest paid in cash on the last day of the month. Mae desires to maintain a
$500 cash balance before consideration is given to the payment of interest.
Mae’s bank charges annual interest of 12% per year.
Required:
1) Compute the amount of funds that needs to be borrowed.
2) Compute the amount of interest expense that will appear
on the January 31 pro forma income statement.
Test 8
Problem 1. Creighton Company’s balance sheet and income statement are
provided below:
Required:
1) Compute the margin, turnover, and return on investment for Creighton
Company.
2)
What is the advantage of expanding the ROI formula to measure margin and
turnover separately?
Problem 2. Delta Company is evaluating two different capital
investments, Project X and Y. Either X or Y would cost $100,000, and the
company cannot afford to do both. The company expects that Project X would
provide net cash inflows of $30,000 per year for 5 years. For Project Y, the
net cash inflows are expected to be as follows:
Delta’s cost of capital is 12%
Required:
1) Calculate the present value index for Project X and for Project Y.
2) Indicate whether each of the projects is an acceptable
investment.
3) Which of the two projects should Delta implement?
