I. (12 points);Determine whether each of the following is true or false.;1. If the period revenues are less than the period expenses;and there are no gains or losses, then Retained Earnings;must decrease during the period.;2. In a post-closing trial balance, revenue and expense;accounts must have a zero balance..;3. If debits equal credits on the trial balance, you still;cannot know with certainty that your records are correct.;4. At the end of the first year of ownership of a long-term;asset, if an accelerated depreciation method is used, the;net book value of the asset will always be equal to or less;than the market value of the asset.;5. If prices are decreasing then FIFO, compared with LIFO;will show a higher net income for the period.;6. At the end of the second year of ownership of a long-term;asset, before the closing entry is made, the balance in the;accumulated depreciation account must be equal to or greater;than the balance in the depreciation expense account.;II. (16 points);For each numbered item place the letter(s) that best;describes its category from the following possibilities;(A)Assets, (L)Liabilities, (SE)Stockholders? Equity;(R)Revenue, and (E)Expense.;1. Accounts Payable 5. Dividends;2. Patents 6. Unearned revenue;3. Buildings 7. Accumulated depreciation;4. Salary expense 8. Cost of Goods Sold;III. (16 points);Sarah Jones started a new business in January, 2012. The;following are selected events that occurred in the business;during the first year of operation. Please provide journal;entries for these events (explanations are not necessary).;1. Sarah invested $95,000 to start the business, SaJon Inc.;and received 200 shares of stock from the business.;2. Purchased inventory of $40,000 on account.;3. Signed a lease for two years for $36,000. The company paid;$5,000 immediately, this was two month's rent in advance;plus a security deposit.;4. Sold inventory, which cost $25,000, on account for $55,000;(recognize both the revenue and the expense).;5. Paid for the inventory purchased in 2).;6. Received payment for the amount billed in 4).;7. Paid $3,000 in salaries.;8. Recognized the rent expense for the first month.;2;IV. (18 points);The ABC Company has the following inventory records.;2/1 Beginning balance 15@ $60 $ 900;2/5 Purchase 20@ 50 1,000;2/10 Sale 23;2/17 Purchase 27@ 40 1,080;2/23 Sale 30;2/25 Purchase 18@ 30 540;3/10 Purchase 52@ 20 1,040;3/15 Sale 75;3/19 Purchase 21@ 10 210;Required;For the above data set please answer the following questions.;Use the periodic inventory method. Compute, for each month;separately, the cost of goods sold, using;a) FIFO;b) LIFO;c) Weighted-average;V. (18 points);Assume the following events for the year 2011.;1. Credit sales $600,000;2. Cash sales 300,000;3. Accounts receivable balance 1/1/11 50,000;4. Accounts written off during the year were 9,000;5. Allowance for Uncollectibles balance 1/1/11 2,000;6. Sixty percent (60%) of this year's credit sales are;collected during the year.;Required;Scenario One;Use the above data set. Assume that the company estimates its;annual bad debt expense at 2% of total sales.;1. Compute the Bad Debt Expense and provide the journal entry;to show its recognition.;2. Provide the journal entry showing the write-off of bad;debts.;3. Show the balance sheet presentation of net accounts;receivable.;Scenario Two;Use the above data set. Ignore Scenario One. Assume that;the company estimates that 4% of its accounts receivable will not;get collected.;1. Compute the Bad Debt Expense and provide the journal entry;to show its recognition.;2. Provide the journal entry showing the write-off of bad;debts.;3. Show the balance sheet presentation of net accounts receivable.;3;VI. (12 points);The ABC Company, located in Boston, purchases a piece of;equipment from a dealer in Chicago for $75,000. The cost of;shipping the equipment, $6,000, will be paid for by ABC Co. It;is estimated that the asset will last ten years and at the end of;its useful life will have a salvage value of $13,000. When the;equipment arrives it has to be set up and adjusted, at a cost of;$12,000.;Required;Compute the depreciation expense for year one and year two (do;each year separately) using;1. Straight-line;2. Double-declining balance;3. This part is independent of parts one and two. Assume;that a company purchased an asset for $500,000. At the;end of four years the balance in the accumulated;depreciation account is $100,000, at which time the;asset is sold for $355,000.;Required;Provide the journal entry for the sale of the asset.;VII. (8 points).;Consider each of the following scenarios independently.;1. If the ending balance in Salaries Payable was $12,500, during;the year the cash paid for salaries (earned both last year and;this year) was $150,000, and the Salary Expense for the year was;$70,000, what was the beginning balance in Salaries Payable?;2. On July 1, 2012 a four year insurance policy was purchased;for $96,000. By mistake this entire cost was expensed;immediately and this error was never corrected. Ignore taxes.;At the end of 2015 is the Retained Earnings correctly stated and;if not, is it overstated or understated and by how much?;3. Assume the following. Net assets (assets minus liabilities);at the beginning of the year were $80,000 and at the end of the;year they were $95,000, common stock increased (some were issued);during the year by $20,000, dividends declared for the year were;$ 30,000. What must have been the net income for the year?;4. The MNH Company purchased an asset on January 1, 1965, for;$120,000. The estimated life of the asset is twenty years, the;company uses straight-line depreciation. On December 31, 1967;the net book value of the asset is $105,000. What was the;estimated salvage value?
Paper#23618 | Written in 18-Jul-2015Price : $22