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Accounting Test- If the period revenues are less than the period expenses, and there are no gains or losses

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Question;I.;Determine whether each of the following is true or false;and briefly explain.;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 pre-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 increasing then LIFO, compared with FIFO, 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 -;2. Patents -;3. Buildings -;4. Salary expense -;5. Dividends;? If you receive a dividend from your investment, it is an asset. If you pay A dividend;to those who invested with you, it is a liability.;6. Unearned revenue ?;7. Accumulated depreciation ?;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 business. 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;one month's rent in advance plus a security deposit.;4. Sold inventory, costing $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.;IV. (18 points);The ABC Company has the following inventory records.;2/1 Beginning balance 15@ $60 $ 9000;2/5 Purchase 20;50 1000;2/10 Sale 23;2/17 Purchase 27@ 40 1000;2/23 Sale 30;2/25 Purchase 18@ 30 540;3/10 Purchase 52;20 1040;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 Uncollectible 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 accountsreceivable.;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.;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 through three. 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 March 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, and;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#37849 | Written in 18-Jul-2015

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