1. Hans Albert Enterprises purchased computer equipment on May 1, 2006 for $5,000. The company expects to use the equipment for 3 years, using straight line. It has no salvage value.
· What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (round answer to the nearest dollar)?
· What is the book value of the equipment at May 31, 2006?
2. On June 1, during its first month of operations, Eggemeister Enterprises purchased supplies for $3,500 and debited the supplies account for that amount. At January 30, an inventory of supplies showed $1,200 of supplies on hand. What adjusting journal entry should be made for January?
3. Better Publications sold annual subscriptions to their magazine for $24,000 in December, 2006. The magazine is published monthly. The new subscribers received their first magazine in January, 2007.
· What adjusting entry should be made in January if the subscriptions were originally recorded as a liability?
· What amount will be reported on the January 2007 balance sheet for Unearned Revenue?
4. Flynn Company purchased merchandise inventory with an invoice price of $3,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Flynn Company pays within the discount period?
5. CMP Inc. maintains perpetual inventory records. During January, the company made purchases of $40,000 and sold goods with a cost of $42,000 for $104,000. Cost of goods sold for the month is:
6. The income statement of Miller, Inc. includes the items listed below:
Net sales $900,000
Gross profit 350,000
Beginning inventory 100,000
Purchase discounts 15,000
Purchase returns and allowances 8,000
Freight-in 10,000
Operating expenses 300,000
Purchases 540,000
7. The following information is available for Olson Company:
Beginning inventory
$45,000
Ending inventory
70,000
Freight-in
10,000
Purchases
300,000
Purchase returns and allowances
8,000
8. The cost of goods available for sale is allocated to the cost of goods sold and the
9. Adler Department Store prepares monthly financial statements but only takes a physical count of merchandise inventory at the end of the year. The following information has been developed for the month of July:
10. The inventory of Snider Company was destroyed by fire on April 1. From an examination of the accounting records, the following data for the first three months of the year are obtained:
Sales
$225,000
Sales Returns and Allowances
5,000
Purchases
90,000
Freight-In
3,500
Purchase Returns and Allowances
4,000
Instructions
Determine the merchandise lost by fire, assuming a beginning inventory of $60,000 and a gross profit rate of 40% on net sales.
11. Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.
12. Trade accounts receivable are valued and reported on the balance sheet
A) in the investment section.
B) at gross amounts less sales returns and allowances.
C) at net realizable value.
D) only if they are not past due.
13. King Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $500,000 and credit sales are $2,000,000. Management estimates that 2% is the sales percentage to use. What adjusting entry will King Company make to record the bad debts expense?
14. Seely Company receives a $4,000, 3-month, 8% promissory note from Dodd Company in settlement of an open accounts receivable. What entry will Seely Company make upon receiving the note?
15. All plant assets (fixed assets) must be depreciated for accounting purposes.
A) TRUE
B) FALSE
16. General Molding is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?
A) Excavation fees are capitalized but building permit fees are not.
B) Architect fees are capitalized but building permit fees are not.
C) Interest is capitalized during the construction as part of the cost of the building.
D) The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.
17. Tanner Company purchased equipment on January 1, 2006 for $60,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Answer the following independent questions.
18. A current liability is a debt that can reasonably expected to be paid
A) within one year.
B) between 6 months and 18 months.
C) out of currently recognized revenues.
D) out of cash currently on hand.
19. Chase County Bank agrees to lend Agler Brick Company $300,000 on January 1. Agler Brick Company signs a $300,000, 8%, 9-month note.
· What is the adjusting entry required if Agler Brick Company prepares financial statements on June 30?
20. Three plans for financing a $20,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount and the income tax rate is estimated at 30%.It is estimated that income before interest and taxes will be $6,000,000.
· Determine for each plan, the expected net income and the earnings per share on common stock.
21. Neutron Company issued $1,500,000, 10%, 20-year bonds on December 31, 2005, for $1,460,000. Interest is payable semiannually on June 30 and December 31. Neutron uses the straight-line method of amortization and has a calendar year end.
· Prepare the appropriate journal entries on
22. Ann Welch’s regular hourly wage is $18 an hour. She receives overtime pay at the rate of time and a half. The FICA tax rate is 8%. Ann is paid every two weeks. For the first pay period in January, Ann worked 86 hours of which 6 were overtime hours. Ann’s federal income tax withholding is $400 and her state income tax withholding is $170. Ann has authorized that $50 be withheld from her check each pay period for savings bonds.
· Compute Barb Welch’s gross earnings and net pay for the pay period showing each payroll deduction in arriving at net pay.
23. Cash equivalents do not include
24. Financing activities involve
A) the day-to-day operations of the company.
B) acquiring investments in the stocks and bonds of other companies.
C) issuing debt and equity.
D) acquiring long-lived assets.
25. Utley Company had an increase in inventory of $40,000. The cost of goods sold was $90,000. There was a $5,000 decrease in accounts payable from the prior period. What were Utley’s cash payments to suppliers?
26. Benton Corporation shows income tax expense of $70,000. There has been a $5,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year. What was Benton’s cash payment for income taxes?
27. Dolan Company’s income statement showed revenues of $270,000 and operating expenses of $160,000. Accounts receivable decreased by $60,000 and accounts payable increased by $50,000 during the year.
· Compute (a) cash receipts from customers and (b) cash payments for operating expenses using the direct method.