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Ashford ACC205 full course (all discussion +assignments + final paper)




Question;Week 1 discussion 1;Accounting Equation;As you have learned in this week?s readings the;Accounting Equation is Assets = Liabilities + Owners? Equity. Is the;accounting equation true in all instances? Provide sample transactions;from your own experiences to demonstrate the validity of the Accounting;Equation.;Guided Response;Review several of your peers? postings and;identify some core components that you feel should be included in every;transaction. Respond to at least two of your peers and provide;recommendations to extend their thinking. Challenge your peers by asking;a question that may cause them to reevaluate or add components to their transactions.;Accounts;What does the term accountmean?;What are the different classifications of accounts? How do the rules for;debits and credits impact accounts? Please provide an example of how;debits and credits impact accounts.;Guided Response;Analyze several of your peers? posts. Let;at least two of your peers know if this knowledge could be used in their;everyday lives. Is so, how? If not, why not?;Week 2;Accounting Cycle;1. Financial;statements are a product of the accounting cycle. Think about two;different companies: a manufacturing company, and a retail company. Why;would different companies have different accounting cycles? Would you;expect the steps of the accounting cycle to be the same for each company?;Why or why not?;Guided Response;Review several of your peers? posts and identify;what steps of the accounting cycle that you feel are the most critical.;Respond to at least two of your peers and provide recommendations to extend;their thinking. Challenge your peers by asking a question that may cause;them to reevaluate their position on the accounting cycle.;Bank Reconciliation;What is the purpose of a bank reconciliation? What are the reasons for;differences between the cash reported in the accounting records and the cash;balance in the bank statements?;Analyze several of your peers? posts. Let at least two of your peers know;what happens to the discrepancies between the book balance and the bank;balance. Could these differences just be written off.;Guided Response;A bank reconciliation reconciles the bank;account balance per the books to the actual bank balance. Outstanding;checks, deposits in transit, and bank errors are reasons there are differences;between the cash reported in the accounting records and the cash balance in the;bank statements.;Week 3;LIFO vs. FIFO;The controller of Sagehen Enterprises believes that the company should switch;from the LIFO method to the FIFO method. The controller?s bonus is based;on the net income. It is the controller?s belief that the switch in;inventory methods would increase the net income of the company. What are;the differences between the LIFO and FIFO methods?;Guided Response;Analyze several of your peers? posts. Let at least two of your peers know;if a company is better off if it switches from a LIFO method to a FIFO method?;Explain your reasoning.;Depreciation;A variety of depreciation methods are used to;allocate the cost of an asset to all of the accounting periods benefited by the;use of the asset. Your client has just purchased a piece of equipment for;$100,000. Explain the concept of depreciation. Which of the;following depreciation methods would you recommend: straight-line depreciation;double declining balance method, or an alternative method?;Guided Response;Let at least two of your peers know if a company would use an accelerated;depreciation method for their financial statements or their tax returns.;Why do you believe this would be the case?;Week 4;Current Liability;What is a current liability? From the perspective of a user of financial;statements, why do you believe current liabilities are separated from long-term;liabilities? Based on your current experience as well as any additional;research you may have done provide two examples of situations where businesses;collect monies from customers and employees and reports these amounts as a;current liability.;Guided Response;Review several of your peers? posts and identify the core components of a;current liability. Respond to at least two of your peers and provide;recommendations to extend their thinking. Challenge your peers by asking;a question that may cause them to reevaluate if their example is a current;liability.;Client Recommendations;A client comes to you thinking about starting a;consulting business. Your client is specifically interested in what type;of entity should be created for this new business. Based on your readings;or any additional research you may have done, discuss the advantages and;disadvantages of the following: sole proprietorship, partnership, and;corporation. Based on these advantages and disadvantages provide a clear;recommendation to your client.;Guided Response;Let at least two of your peers posts know if an;alternative choice of entity would be possible?. What would be the;benefits of this new entity choice? Would there be any disadvantages;associated with this new entity selection?;Week 5;Ratios;Ratios provide the users of financial statements with a great deal of;information about the entity. Do ratios tell the whole story? How;could liquidity ratios be used by investors to determine whether or not to;invest in a company?;Guided Response;Let at least two of your peers know how debt service ratios can be used by a;lender in determining whether or not to lend money to a company.;Profit Margin;Year Ending December 2012;Year Ending December 2011;Year Ending December 2010;Revenues;40,000;35,000;33,000;Operating;Expenses;Salaries;15,000;10,000;9,000;Maintenance;and Repairs;6,000;9,000;10,000;Rental;Expense;2,500;2,500;2,500;Depreciation;2,000;2,000;2,000;Fuel;4,000;3,500;2,500;Total;Operating Expenses;29,500;27,000;26,000;Operating;Income;10,500;8,000;7,000;Sales;and Administrative Expenses;6,000;4,000;3,000;Interest;Expense;2,500;2,000;1,000;Net;Income;2,000;2,000;3,000;Above is a comparative income statement for;Cecil, Inc. for the years 2010, 2011, and 2012. Calculate the net-profit;margin for each of these years. Comment on the profit margin;trend.;Guided Response;Let at least two of your peers posts know what;you changes you would recommend to improve the net margin of the company.Week One Exercise Assignment;Basic Accounting Equations;1. Recognition of normal balances;The following items appeared in the accounting;records of Triguero's, a retail music store that also sponsors concerts.;Classify each of the items as an asset, liability, revenue, or expense from the;company's viewpoint. Also indicate the normal account balance of each item.;a. Amounts;paid to a mall for rent.;b. Amounts;to be paid in 10 days to suppliers.;c. A;new fax machine purchased for office use.;d. Land;held as an investment.;e. Amounts;due from customers.;f. Daily;sales of merchandise sold.;g. Promotional;costs to publicize a concert.;h. A;long-term loan owed to Citizens Bank.;i. The;albums, tapes, and CDs held for sale to customers.;2.Basic journal entries;The;following transactions pertain to the Jennifer Royall Company;May 1;Jenni?fer Royall invested cash of $25,000;and land valued at $15,000 into the business.;5;Provided $1,000 of services to Jason;Ratchford, a client, on account.;9;Paid $1,250 of salaries to an employee.;14;Acquired a new computer for $4,200, on;account.;20;Collected $800 from Jason Ratchford for;services provided on May 5.;24;Borrowed $2,500 from BestBanc by securing a;six-month loan.;Prepare;journal entries (and explanations) to record the preceding transactions and;events.;3.;Balance sheet preparation.The;following data relate to Preston Company as of December 31, 20XX;Building $40,000 Accounts;receivable $24,000;Cash 21,000 Loan payable 30,000;J. Preston, Capital 65,000 Land 21,000;Accounts payable?;Prepare a balance sheet as of December 31, 20XX.;(See Exhibit 1.1 and 1.4);4. Basic;transaction processing. On November;1 of the current year, Richard Simmons established a sole proprietorship. The;following transactions occurred during the month;1: Simmons invested;$32,000 into the business for $32,000 in common stock.;2: Paid $5,000 to;acquire a used minivan.;3: Purchased $1,800 of;office furniture on account.;4: Performed $2,100 of;consulting services on account.;5: Paid $300 of repair;expenses.;6: Received $800 from;clients who were previously billed in item 4.;7: Paid $500 on;account to the supplier of office furniture in item 3.;8: Received a $150;electric bill, to be paid next month.;9: Simmons withdrew $800;from the business.;10: Received $250 in;cash from clients for consulting services rendered.;Instructions;a. Arrange the following asset, liability, and;owner?s equity elements of the account?ing equation: Cash, Accounts Receivable, Office Furniture, Van;Accounts Payable, Common Stock/Dividends, and Revenues/Expenses. (See Exhibit;1.5);b. Record each transaction on a separate line.;After all transactions have been recorded, compute the balance in each of the;preceding items.;c. Answer the following questions for Simmons.;(1) How much does the company owe to its;creditors at month-end? On which financial statement(s) would this information;be found?;(2) Did the company have a ?good? month from;an accounting viewpoint? Briefly explain.;5. Transaction analysis and statement preparation. The transactions;that follow;relate to Burton;Enterprises for March 20X1, the company?s first month of activity.;3/1;Joanne Burton, the owner, invested $20,000 cash into the;business.;3/4;Performed $2,400 of services on account.;3/7;Acquired a small parcel of land by paying $6,000 cash;3/12;Received $500 from a client who was billed previously on March;4.;3/15;Paid $200 to the Journal Herald for advertising expense.;3/18;Acquired 9,000 of equipment from Park Central Outfitters by;Paying;$7,000 down and agreeing to remit the balance owed within two;weeks (A/P).;3/22;Received $300 cash from clients for services.;3/24;Paid $1,500 on account to Park Central Outfitters in partial;settlement of;the balance due from the transaction on March 18.;3/28;Rented a car from United Car Rental for use on March 28. Total charges;amounted to $125, with United billing Burton for the amount due.;3/31;Paid $600 for March wages;3/31;Processed a $600 cash withdrawal (dividend) from the business;for Joanne Burton;Instructions;a. Determine the impact of each of;the preceding transactions on Burton?s assets;liabilities, and owner?s equity. See;exhibit 1.5. Use the following format;Assets;= Liabilities;+ Owner?s Equity;Cash, Accounts Receivable;Land, Equipment Accounts;Payable (+)Common Stock (+) Revenues;(-) Dividends (-) Expenses;a. Record each transaction on a;separate line. Calculate balances only after the last transaction has been;recorded.;b. Prepare an income statement, a;statement of retained earnings, and a balance sheet, (See Exhibit 1.2, 1.3 and;1.4);6.Entry and trial balance preparation.;Lee Adkins is a portrait artist. The following schedule represents Lee?s;combined chart of accounts and trial balance as of May 31.;Account number Account name Debit Credit;110;Cash;$ 2,700;120;Accounts;Receivable;12,100;130;Equipment;and Supplies;2,800;140;Studio;45,000;210;Accounts;Payable;$2,600;310;Lee;Adkins, Capital;57,400;320;Lee;Adkins, Drawing;30,000;410;Professional;Fee Revenue;39,000;510;Advertising;Expense;2,300;520;Salaries;Expense;2,100;540;Utilities;Expense;2,000;$99,000;$99,000;The;general ledger also revealed account no. 530, Legal and Accounting Expense. The;following transactions occurred during June;6/2;Collected $3,000 on account from customers;6/7;Sold 25% of the equipment and supplies to a young artist for;$700 cash;6/10;Received a $300 invoice from the accountant for preparing last;quarter's financial Statements.;6/15;Paid $1,900 to creditors on account.;6/27;Adkins withdrew $2,000 cash for personal use.;6/30;Billed a customer $3,000 for a portrait painted this month.;a.;Record the necessary journal entries for June on page 2 of the company?s;general journal. (See Exhibit 2.6);b. Open running balance;ledger ?T? accounts by entering account titles, account num?bers, and May 31;balances. (See exhibit 2.3 and 2.4);c. Post the journal;entries to the ?T? accounts.;d.;Prepare a trial balance as of June 30. (See exhibit 2.9);7.;Journal entry preparation.On January 1 of the current;year, Peter Houston invested $80,000 cash into his company MuniServ. The cash;was obtained from an owner investment by Peter Houston of $50,000 and a $30,000;bank loan. Shortly thereafter, the company ac?quired selected assets of a;bankrupt competitor. The acquisition included land ($10,000), a building;($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the;transaction and agreed to remit the remaining balance due of $15,000 (an;account payable) by February 15.;During;January, the company had additional cash outlays for the follow?ing items;Purchases of store equipment;$4,600;Note payment;500;Salaries expense;2,300;Advertising expense;700;The January utility bill of $200 was received on;January 31 and will be paid next month. MuniServ rendered services to clients;on account amounting to $9,400. All;customers have been billed, by month end, $3,700 had been received in;settlement of account balances.;Instructions;a.;Present journal entries that reflect;MuniServ's January transactions, including the $80,000 raised from the owner;investment and loan. (See exhibit 2.6);b.;Compute the total debits, total credits, and;ending balance that would be found in the;company's Cash account. (Post to ?T? Accounts, see exhibit 2.3 and 2.4);c. Determine the amount that would;be shown on the January 31 trial balance for Accounts;Payable. Is the balance a debit;or a credit?;Week Two Exercise Assignment;Revenue and Expenses;1. Recognition of concepts.;Jim Armstrong operates a small company that books enter?tainers for theaters;parties, conventions, and so forth. The company?s fiscal year ends on June 30.;Consider the following items and classify each as either (1) pre?paid expense;(2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of;the foregoing.;a Interest owed on the company's;bank loan, to be paid in early July;b Professional fees earned but not;billed as of June 30;c Office supplies on hand at;year-end;d An advance payment from a client;for a performance next month at a convention;e The payment in part (d) from the;client's point of view;f Amounts paid on June 30 for a;1-year insurance policy;g The bank loan payable in part (a);h Repairs to the firm's copy machine;incurred and paid in June;2. Understanding the closing process. Examine the;following list of accounts;Note Payable;Accumulated Depreciation: Building;Alex Kenzy, Drawing;Accounts Payable;Product Revenue;Cash;Accounts Receivable;Supplies Expense;Utility Expense;Which of the preceding;accounts;a. appear on a post-closing trial;balance?;b. are commonly known as temporary;or nominal, accounts?;c. generate a debit to Income Summary;in the closing process?;d. are closed to;the capital account in the closing process?;3. Adjusting entries and;financial statements. The following information pertains to Sally;Corporation;?;The company previously collected $1,500 as an;advance payment for services to be rendered in the future. By the end of;December, one half of this amount had been earned.;?;Sally Corporation provided $1,500 of services to;Artech Corporation, no billing had been made by December 31.;?;Salaries owed to employees at year-end amounted;to $1,000.;?;The Supplies account revealed a balance of;$8,800, yet only $3,300 of supplies were actually on hand at the end of the;period.;?;The company paid $18,000 on October 1 of the;current year to Vantage Property Management. The payment was for 6 months? rent;of Sally Corporation?s headquarters, beginning on November 1.;Sally Corporation?s accounting year ends on December 31.;Instructions;Analyze the;five preceding cases individually and determine the following;a. The typeof;adjusting entry needed at year-end (Use the following codes: A, adjust?ment of;a prepaid expense, B, adjustment of an unearned revenue, C, adjustment to;record an accrued expense, or D, adjustment to record an accrued revenue.);b. The year-end;journal entry to adjust the accounts;c. The income;statement impact of each adjustment (e.g., increases total revenues by $500);4. Adjusting entries. You;have been retained to examine the records of Mary?s Day Care Center as of;December 31, 20X3, the close of the current reporting period. In the course of;your examination, you discover the following;?;On January 1, 20X3, the Supplies account had a;balance of $1,350. During the year, $5,520 worth of supplies was purchased, and;a balance of $1,620 remained unused on December 31.;?;Unrecorded interest owed to the center totaled;$275 as of December 31.;?;All clients pay tuition in advance, and their;payments are credited to the Unearned Tuition Revenue account. The account was;credited for $65,500 on August 31. With the exception of $15,500 all amounts;were for the current semester ending on December 31.;?;Depreciation on the school?s van was $3,000 for;the year.;?;On August 1, the center began to pay rent in;6-month installments of $24,000. Mary wrote a check to the owner of the;building and recorded the check in Pre?paid Rent, a new account.;?;Two salaried employees earn $400 each for a;5-day week. The employees are paid every Friday, and December 31 falls on a;Thursday.;?;Mary?s Day Care paid insurance premiums as;follows, each time debiting Pre?paid Insurance;Date;Paid;Policy;No.;Length;of Policy;Amount;Feb. 1;20X2;1033MCM19;1 year;$540;Jan. 1;20X3;7952789HP;1 year;912;Aug. 1;20X3;XQ943675ST;2 years;840;Instructions;The center?s accounts were last;adjusted on December 31, 20X2.;Prepare the adjusting entries necessary under the accrual basis of accounting.;5. Bank reconciliation and;entries. The following information was taken from the accounting records of;Palmetto Company for the month of January;Balance per bank;$6,150;Balance per company records;3,580;Bank service charge for January;20;Deposits in transit;940;Interest on note collected by bank;100;Note collected by bank;1,000;NSF check returned by the bank with the bank statement;650;Outstanding checks;3,080;Instructions;a.;Prepare Palmetto?s January bank reconciliation.;b.;Prepare any necessary journal entries for Palmetto.;6. Direct write-off method.;Harrisburg Company, which began business in early 20X7, reported $40,000 of;accounts receivable on the December 31, 20X7, balance sheet. Included in this;amount was $550 for a sale made to Tom;Mattingly in July. On January 4, 20X8, the company learned that Mattingly had;filed for personal bankruptcy. Harrisburg uses the direct write-off method to;account for uncollectibles.;a. Prepare the journal entry needed;to write off Mattingly?s account.;b. Comment on the ability of the direct write-off method to value;receivables on the year-end balance sheet.;7. Allowance method: analysis of;receivables. At a January 20X2 meeting, the presi?dent of Sonic Sound;directed the sales staff ?to move some product this year.? The president noted;that the credit evaluation department was being disbanded be?cause it had;restricted the company?s growth. Credit decisions would now be made by the;sales staff.;By the end of the year, Sonic had;generated significant gains in sales, and the president was very pleased. The;following data were provided by the accounting department;20X2;20X1;Sales;$23,987,000;$8,423,000;Accounts Receivable, 12/31;12,444,000;1,056,000;Allowance for Uncollectible Accounts, 12/31;?;23,000 cr.;The $12,444,000 receivables balance was aged as follows;Age of Receivable;Amount;Percentage of Accounts Expected to Be Collected;Under 31 days;$4,321,000;99%;31-60 days;4,890,000;90;61-90 days;1,067,000;80;Over 90 days;2,166,000;60;Assume;that no accounts were written off during 20X2.;Instructions;a. Estimate;the amount of Uncollectible Accounts as of December 31, 20X2.;b. What is;the company?s Uncollectible Accounts expense for 20X2?;c. Compute;the net realizable value of Accounts Receivable at the end of 20X1 and 20X2.;d. Compute the net realizable value at;the end of 20X1 and 20X2 as a percentage of respective year-end receivables;balances. Analyze your findings and comment on the president?s decision to;close the credit evaluation department.Week Three Exercise Assignment;Inventory;1. Specific identification;method. Boston Galleries uses the specific identification method for;inventory valuation. Inventory information for several oil paintings follows.;Painting;Cost;1/2 Beginning inventory;Woods;$21,000;4/19 Purchase;Sunset;21,800;6/7 Purchase;Earth;31,200;12/16 Purchase;Moon;4,000;Woodsand Moonwere;sold during the year for a total of $35,000. Determine the firm?s;a.;cost of goods sold.;b.;gross profit.;c. ending inventory.;2. Inventory valuation methods: basic;computations. The January beginning inven?tory of the White Company;consisted of 300 units costing $40 each. During the first quarter, the company;purchased two batches of goods: 700 Units at $44 on February 21 and 800 units;at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per;unit. The White Company uses a periodic inventory system. Using the White;Company data, fill in the following chart to compare the results obtained under;the FIFO, LIFO, and weighted-average inventory methods.;FIFO;LIFO;Weighted Average;Goods;available for sale;$;$;$;Ending;inventory, March 31;Cost of;goods sold;3.Perpetual inventory system: journal;entries. At the beginning of 20X3, Beehler Company implemented a;computerized perpetual inventory system. The first transactions that occurred;during 20X3 follow;?;1/2/20X3 Purchases on account: 500 units @$6 = $3,000;?;1/15/20X3 Sales on account: 300 units @ $8.50 = $2,550;?;1/20/20X3 Purchases on Account: 200 units @ 5 = $1,000;?;1/25/20X3 Sales on;Account: 300 units @ $8.50 = $2,550;The company president examined the;computer-generated journal entries for these transactions and was confused by;the absence of a Purchases account.;a.;Duplicate the journal entries that would have appeared on the computer printout;under FIFO & LIFO;b. Calculate the balance;in the firm?s Inventory account under each method.;c. Briefly explain the absence of the Purchases account to;the company president.;4. Inventory valuation;methods: computations and concepts.;Wild Riders Surfboard Company began business on January 1 of;the current year. Purchases of surfboards were as follows;Date;Quantity;Unit Cost;Total Cost;1/3;100;$125;$12,500;4/3;200;$135;$27,000;6/3;100;$145;$14,500;7/3;100;$155;$15,500;Total;500;$69,500;Wild Riders sold 400 boards at $250 per board on the dates;listed below. The company uses a;perpetual inventory system.;Date;Quantity Sold;Unit Price;Total Sales;3/17;50;$250;$12,500;5/17;75;$250;$18,750;8/10;275;$250;$68,750;Total;400;$100,000;Instructions;a. Calculate;cost of goods sold, ending inventory, and gross profit under each of the;following inventory valuation methods;?;First-in, first-out;?;Last-in, first-out;?;Weighted average;b.;Which of the three methods would be chosen if management?s goal is to;(1) produce an up-to-date inventory;valuation on the balance sheet?;(2) show the;lowest net income for tax purposes?;5. Depreciation methods.Mike;Davis Enterprises purchased a delivery van for $40,000 in January 20X7. The van;was estimated to have a service life of 5 years and a resid?ual value of;$6,000. The company is planning to drive the van 20,000 miles annually. Compute;depreciation expense for 20X8 by using each of the following methods;a.;Units-of-output, assuming 17,000 miles were driven during 20X8;b. Straight-line;c.;Double-declining-balance;6. Depreciation computations.Alpha;Alpha Alpha, a college fraternity, purchased a new heavy-duty washing machine;on January 1, 20X3. The machine, which cost $2,000, had an estimated residual;value of $100 and an estimated service life of 4 years (1,800 washing cycles).;Calculate the following;a. The machine?s;book value on December 31, 20X5, assuming use of the straight-line depreciation;method;b. Depreciation;expense for 20X4, assuming use of the units-of-output depreciation method.;Actual washing cycles in 20X4 totaled 500.;c. Accumulated;depreciation on December 31, 20X5, assuming use of the double-declining-balance;depreciation method.;7. Depreciation computations;change in estimate.Aussie Imports purchased a specialized piece of;machinery for $50,000 on January 1, 20X3. At the time of acquisition, the;machine was estimated to have a service life of 5 years (25,000 operating;hours) and a residual value of $5,000. During the 5 years of operations (20X3 -;20X7), the machine was used for 5,100, 4,800, 3,200, 6,000, and 5,900 hours;respectively.;Instructions;a. Compute;depreciation for 20X3 - 20X7 by using the following methods: straight line;units of output, and double-declining-balance.;b. On January 1;20X5, management shortened the remaining service life of the machine to 15;months. Assuming use of the straight-line method, compute the company?s;depreciation expense for 20X5.;c. Briefly;describe what you would have done differently in part (a) if Aussie Imports had;paid $47,800 for the machinery rather than $50,000 In addition, assume that the;company incurred $800 of freight charges $1,400 for machine setup and testing;and $300 for insurance during the first year of use.Week Four Exercise Assignment;Liability;1. Payroll accounting. Assume that the following tax;rates and payroll information pertain to Brookhaven Publishing;?;Social Security taxes: 4% on the first $55,000;earned per employee;?;Medicare taxes: 1.5% on the first $130,000;earned per employee;?;Federal income taxes withheld from wages: $7,500;?;State income taxes: 4% of gross earnings;?;Insurance withholdings: 1% of gross earnings;?;State unemployment taxes: 5.4% on the first;$7,000 earned per employee;?;Federal unemployment taxes: 0.8% on the first;$7,000 earned per employee;The company incurred a salary expense of $50,000 during;February. All employees had earned less than $5,000 by month-end and no wages;have been paid during the month.;a. Prepare the necessary entry to;record Brookhaven?s February payroll. The entry will include deductions for the;following;?;Social Security taxes;?;Medicare taxes;?;Federal income taxes withheld;?;State income taxes;?;Insurance withholdings;b. Prepare the journal entry to;record Brookhaven?s payroll tax expense. The entry will include the following;?;Matching Social Security taxes;?;Matching Medicare taxes;?;State unemployment taxes;?;Federal unemployment taxes;2. Current;liabilities: entries and disclosure.A review of selected financial;activities of Visconti?s during 20XX disclosed the following;1-Dec: Borrowed $10,000 from the First City Bank by signing a;3-month, 15% note payable.;Interest and principal are due at maturity.;10-Dec: Established a warranty liability for the XY-80, a new;product. Sales are expected to;total 1,000 units during the month. Past experience with similar products;indicates;that 3% of the units will require repair, with warranty costs;averaging $27 per unit (parts only).;22-Dec: Purchased $16,000 of merchandise on account from Oregon;Company, terms 2/10, n/30.;26-Dec: Borrowed $5,000 from First City Bank, signed a 15% note;payable due in 60 days. (Assume 360 day year for interest);31-Dec: Repaired six XY-80s during the month at a total cost of;$162;31-Dec: Accrued three days of salaries at a total cost of;$1,400.;Instructions;a. Prepare journal entries to;record the transactions.;b. Prepare adjusting entries on;December 31 to record accrued interest for each of the notes payable.;3.Notes;payable. Red Bank Enterprises was involved in;the following transactions during the fiscal year ending October 31;2-Aug: Borrowed $55,000 from the Bank of Kingsville by signing a;90-day, 12% note.;20-Aug: Issued a $50,000 note to Harris Motors for the purchase;of a $50,000 delivery truck. The note is due in 180 days and carries a 12%;interest r ate.;10-Sep: Purchased merchandise from Pans Enterprises in the;amount of $15,000. Issued;a 30-day, 12% note in settlement of the balance owed.;11-Sep: Issued a $60,000 note to Datatex Equipment in settlement;of an overdue account;payable of the same amount.;The note is due in 30 days and carries a 14% interest rate.;10-Oct: The note to Pans Enterprises was paid in full.;11-Oct: The note to Datatex Equipment was paid in full.;30-Oct: Paid note to Bank of Kingsville.;Instructions;a. Prepare;journal entries to record the transactions.;b. Prepare;adjusting entries on December 31 to record accrued interest. (Daily interest is;calculated utilizing the 360 day method).;c.;Prepare the Current Liability section of Red Bank?s balance sheet as of;December 31. Assume that the Accounts Payable account totals $203,600 on this;date.;Week Five Exercise Assignment;Financial Ratios;1.;Liquidity ratios.Edison, Stagg, and Thornton;have the following financial information at the close of business on July 10;Edison;Stagg;Thornton;Cash;$6,000;$5,000;$4,000;Short-term investments;3,000;2,500;2,000;Accounts receivable;2,000;2,500;3,000;Inventory;1,000;2,500;4,000;Prepaid expenses;800;800;800;Accounts payable;200;200;200;Notes payable: short-term;3,100;3,100;3,100;Accrued payables;300;300;300;Long-term liabilities;3,800;3,800;3,800;Compute the current and;quick ratios for each of the three companies. (Round calculations to two;decimal places.) Which firm is the most liquid? Why?;2. Computation and evaluation of;activity ratios.The following data relate to Alaska Products, Inc;20X5;20X4;Net;credit sales;$832,000;$760,000;Cost;of goods sold;530,000;400,000;Cash;Dec. 31;125,000;110,000;Average;Accounts receivable;205,000;156,000;Average;Inventory;70,000;50,000;Accounts;payable, Dec. 31;115,000;108,000;Instructions;a.;Compute the accounts receivable and inventory turnover ratios;for 20X5. Alaska rounds all calculations to two decimal places.;3. Profitability;ratios, trading on the equity.Digital Relay has both;preferred and common stock outstanding. The com?pany reported the following;information for 20X7;Net sales;$1,750,000;Interest expense;120,000;Income tax expense;80,000;Preferred dividends;25,000;Net income;130,000;Average assets;1,200,000;Average common stockholders;equity;500,000;Compute the profit;margin on sales ratio, the return on equity and the return on assets;rounding calculations to two decimal places.Does the firm have;positive or negative financial leverage? Briefly ex?plain.;4. Horizontal analysis. Mary Lynn Corporation has;been operating for several years. Selected data from the 20X1 and 20X2;financial statements follow.;20X2;20X1;Current Assets;$86,000;$80,000;Property, Plant, and Equipment;(net);99,000;90,000;Intangibles;25,000;50,000;Current Liabilities;40,800;48,000;Long-Term Liabilities;153,000;160,000;Stockholders? Equity;16,200;12,000;Net Sales;500,000;500,000;Cost of Goods Sold;322,500;350,000;Operating Expenses;93,500;85,000;a.;Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment;on the results of your work.;5.Vertical analysis. Mary Lynn Corporation has been operating for several;years. Selected data from the 20X1 and 20X2 financial statements follow.;20X2;20X1;Current Assets;$86,000;$80,000;Property, Plant, and Equipment (net);99,000;80,000;Intangibles;25,000;50,000;Current Liabilities;40,800;48,000;Long-Term Liabilities;153,000;150,000;Stockholders? Equity;16,200;12,000;Net Sales;500,000;500,000;Cost of Goods Sold;322,500;350,000;Operating Expenses;93,500;85,000;a. Prepare a vertical analysis for 20X1 and;20X2. Briefly comment on the results of your work.;6. Ratio computation.The financial statements of the Lone;Pine Company follow.;LONE PINE COMPANY;Comparative Balance Sheets;December 31, 20X2 and 20X1;($000 Omitted);20X2;20X1;Assets;Current Assets;Cash and Short-Term Investments;$400;$600;Accounts Receivable (net);3,000;2,400;Inventories;3,000;2,300;Total Current Assets;$6,400;$5,300;Property, Plant, and Equipment;Land;$1,700;$500;Buildings and Equipment (net);1,500;1,000;Total Property, Plant, and Equipment;$3,200;$1,500;Total Assets;$9,600;$6,800;Liabilities and Stockholders?;Equity;Current Liabilities;Accounts Payable;$2,800;$1,700;Notes Payable;1,100;1,900;Total Current Liabilities;$3,900;$3,600;Long-Term Liabilities;Bonds Payable;4,100;2,100;Total Liabilities;$8,000;$5,700;Stockholders? Equity;Common Stock;$200;$200;Retained Earnings;1,400;900;Total Stockholders? Equity;$1,600;$1,100;Total Liabilities and Stockholders? Equity;$9,600;$6,800;LONE PINE COMPANY;Statement of I


Paper#41071 | Written in 18-Jul-2015

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