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ACG 340 Case 2: Fargo

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Question;The adjusted trial balance of Fargo Company as of July 31, 2014 is presented below. (Read that again,think about what that means about where Fargo is in the accounting cycle.) Notice that the total debitsand credits for each account are indicated (including the beginning balances) rather than the usual accountbalance. For example, the cash account had transactions which resulted in a total of $67,700 debits(including the beginning balance) and a total of $55,400 credits.All adjusting entries have been made for the month of July 2014, except the adjustment for inventory.Fargos fiscal year end is June 30.AccountDebitCredit$67,700$55,400Cash58,00054,400Accounts Receivable7001,100Allowance for Doubtful Accounts60,000Inventory1,200400Prepaid Advertising1,7001,300Office Supplies on Hand22,0001,500Office Equipment4007,600Accumulated Depreciation31,90040,000Accounts Payable800Salaries Payable100Interest Payable4,0008,200Dividends Payable3,00030,000Notes Payable12,600Common Stock20,000Paid-In Capital in Excess of Par19,900Retained Earnings7,200Dividends Declared61,000Sales2,200Sales Returns500Sales Discounts42,000Purchases900Purchase Returns and Allowances400Purchase Discounts9,200Salaries Expense1,300Office Supplies Expense700Insurance Expense600Advertising Expense500Bad Debt Expense400Miscellaneous Expense300Depreciation Expense300Interest Expense200Gain on Sale of Office Equipment$315,800$315,800Totals0You are only allowed to work with your group members and your professor. No tutors or other groups.Using the trial balance of gross balances for Fargo and the additional information given below, answer thefollowing questions about the operations of Fargo. Put answers in box when given. Each question isworth half a point.1. Compute the amount of interest paid in July. At June 30, 2012, $20 was payable. (Hint: Think ofconverting from accrual basis to cash basis.)2. How much of Accounts Receivable were written off the month? (Hint: Run the ADA t-account)3. What is Fargos Net Realizable Value of Accounts Receivable at the end of July?4. What was the amount of cash received on the sale of office equipment?5. Assuming that the office equipment has a five year estimated life, no estimated salvage value, and nodepreciation is taken during the month of purchase or sale, how much office equipment was acquiredduring the month?6. How old is the office equipment that was neither sold nor acquired during the month?7. How much cash was paid on Accounts Payable during the month? Assume the beginning balance ofAccounts Payable in July was zero.1You are only allowed to work with your group members and your professor. No tutors or other groups.8. If the beginning balance in Note Payable was $20,000, what amount of Notes Payable did Fargo issuein in July?9. How much of the Note Payable was paid off during July?10. If all vendors sell to Fargo on terms 2/10, n/30, what was the total amount of purchases discountswhich were allowed to lapse. No purchases were made in the last 10 days of July.11. If there was no prepaid advertising at the beginning of the period, what was the total cash outlay foradvertising in July?12. How much cash was used to pay salaries during the month? Assume the balance in Salaries Payableon July 1 was zero.13. What was the balance of Retained Earnings at the beginning of the fiscal year?14. If office supplies valued at $300 were on hand at the beginning of the month, what were the totalpurchases of office supplies during the month?15. What journal entry does Fargo make to record the purchase of office supplies? Good journal entryformat required.2You are only allowed to work with your group members and your professor. No tutors or other groups.16. How much cash dividends were paid during the month? Assume that the beginning balance inDividends Payable at June 30 was $1,000.17. Of the cash dividends paid, how much related to the current period?18. What are net sales for July?19. If 90% of sales are made on credit and all returns were related to credit sales, what was the beginningbalance in Accounts Receivable on July 1? (Hint: Run the AR t-account)20. How much cash received on accounts receivable in July? (Hint: Run the AR t-account)21. Does the company use gross or net method to record purchases? How do you know?22. What is the beginning balance in inventory on July 1?23. What are net purchases for July?24. Assume that the company did a count of ending inventory and found that they had 70,000 ofinventory remaining at the end of July. What is the cost of goods sold for the month of July?3You are only allowed to work with your group members and your professor. No tutors or other groups.25. Provide the journal entry to adjust inventory at July 31. Good journal entry format is required.26. Provide the journal entry to close revenues at July 31. Good journal entry format is required.27. Provide the journal entry to close expenses at July 31. Good journal entry format is required.28. Provide the journal entry to close dividends at July 31. Good journal entry format is required.29. Provide the journal entry to close income summary at July 31. Good journal entry format is required.30. After you have adjusted inventory and done your closing entries for the month, what is the endingbalance in Retained Earnings on July 31?

 

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