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Kaplan AC501 Midterm Exam




Question;P3-3(Adjusting Entries);A review of the ledger of Oklahoma Company at December 31;2008, produces the following data pertaining to the preparation of annual;adjusting entries.;(1);Salaries;Payable $0. There are eight salaried employees. Salaries are paid every Friday;for the current week. Five employees receive a salary of $700 each per week;and three employees earn $500 each per week. December 31 is a Tuesday.;Employees do not work weekends. All employees worked the last 2 days of;December.;(2);Unearned;Rent Revenue $ 369,000. The company began subleasing office space in its new;building on November 1. Each tenant is required to make a $ 5,000 security;deposit that is not refundable until occupancy is terminated. At December 31;the company had the following rental contracts that are paid in full for the;entire term of the lease.;Date;Term;(in months);Monthly Rent;Number of;Leases;Nov. 1;6;$ 4,000;5;Dec. 1;6;$ 8,500;4;(3);Prepaid;Advertising $ 13,200. This balance consists of payments on two advertising;contracts. The contracts provide for monthly advertising in two trade;magazines. The term of the contracts are shown at the top of page 135.;Contract;Date;Amount;Number of;A650;May 1;$ 6,000;12;B974;Oct. 1;$ 7,200;24;The first advertisement runs in the month in which the;contract is signed.;(4);Notes;Payable $ 80,000. This balance consists of a note for one year at an annual;interest rate of 12%, dated June 1.;Instructions;Prepare;the adjusting entries at December 31, 2008. (Show all computations).;P4-2(Balance Sheet Preparation);Presented;below are a number of balance sheet items for Letterman Inc., for the current;year, 2008.;Goodwill;$;125,000;Accumulated depreciation-equipment;$;292,000;Payroll taxes payable;177;591;Inventories;239,800;Bonds payable;300,000;Rent payable?short-term;45,000;Discount on bonds payable;15,000;Taxes payable;98,362;Cash;360,000;Long-term rental obligations;480,000;Land;480,000;Common stocks, $ 1 par value;200,000;Notes receivable;545,700;Preferred stock, $ 10 par value;150,000;Notes payable to banks;265,000;Prepaid expenses;87,920;Accounts payable;590,000;Equipment;1,470,000;Retained earnings;?;Trading securities;121,000;Income taxes receivable;97,630;Accumulated depreciation-building;170,200;Unsecured notes payable;(long-term);1,600,000;Building;1,640,000;Instructions;Prepare;a classified balance sheet in good form. Common stock authorized was 400,000;shares, and preferred stock authorized was 20,000 shares. Assume that notes;receivable and notes payable are short-term, unless stated otherwise. Cost and;fair value of trading securities are the same.;P5-1(Multiple-Step Income, Retained;Earnings);Presented;below is information related to P. J. Harvey Company for 2008.;Retained earnings balance, January;1, 2008;$;980,000;Sales for the year;25,000,000;Cost of goods sold;17,000,000;Interest revenue;70,000;Selling and administrative expense;4,700,000;Write-off of goodwill (not tax;deductible);820,000;Income taxes for 2008;905,000;Gain on the sale of investments;(normal recurring);110,000;Loss due to flood;damage-extraordinary item (net of tax);390,000;Loss on the disposition of the;wholesale division (net of tax);440,000;Loss on operations of the;wholesale division (net of tax);90,000;Dividends declared on common stock;250,000;Dividends declared on preferred;stock;70,000;Instructions;Prepare;a multiple-step income statement and a retained earnings statement. P. J.;Harvey Company decided to discontinue its entire wholesale operations and to;retain its manufacturing operations. On September 15, P. J. Harvey sold the;wholesale operations to Rogers Company. During 2008, there were 300,000 shares;of common stock outstanding all year.;P8-2(Bad-Debt Reporting);Presented;below are a series of unrelated situations.;(1) Spock Company?s unadjusted trial;balance at December 31, 2008, included the following accounts.;Debit;Credit;Allowance;for doubtful accounts;$ 4,000;Net;Sales;$ 1,5000,000;Spock Company estimates its bad debt expense to be 1 ?% of;net sales. Determine its bad debt expense for 2008.;(2) An analysis and aging of Scotty;Corp. accounts receivable at December 31, 2008, disclosed the following;Amounts;estimated to be uncollectible;$ 180,000;Accounts;receivable;1,750,000;Allowance;for doubtful accounts (per Books);125,000;What is the net realizable value of Scotty?s receivable at;December 31, 2008?;(3);Uhura;Co. provides for doubtful account based on 3% of credit sales. The following;data are available for 2008.;Credit;sales during 2008;$ 2,100,000;Allowance;for doubtful accounts 1/1/08;17,000;Collection;of accounts written off in prior years;(customer credit was reestablished);8,000;Customer;accounts written off as uncollectible during 2008;30,000;What is the balance in the Allowance for Doubtful Accounts;at December 31, 2008?;(4);At;the end of the first year of operations, December 31, 2008, Chekov Inc.;reported the following information.;Accounts;receivable, net of allowance for doubtful accounts;$ 950,000;Customer;accounts written off as uncollectible during 2008;24,000;Bad;debt expense for 2008;84,000;What should be the balance in accounts receivable at;December 31, 2008, before subtracting the allowance for doubtful accounts?;(5);The;following accounts were taken from Chappel Inc.?s trial balance at December 31;2008.;Debit;Credit;Net;credit sales;$ 750,000;Allowance;for doubtful accounts;$ 14,000;Accounts;receivable;410,000;If;doubtful accounts are 3% of accounts receivable, determine the bad debt expense;to be reported for 2008.;Instructions;Answer;the questions related to each of the five independent situations as requested.;P9-6(Dollar-Value LIFO);Falcon?s Televisions Produces;television sets in three categories: portable, mid-size, and flatscreen. On;January 1, 2007, Falcon adopted dollar-value LIFO and decided to use a single;inventory pool. The company?s January 1 inventory consists of;Category;Quantity;Cost;per Unit;Total;Cost;Portable;6,000;$ 100;$ 600,000;Midsize;8,000;250;2,000,000;Flatscreen;3,000;400;1,200,000;17,000;$;3,800,000;During 2007, the company had the;following purchases and sales.;Category;Quantity;Purchased;Cost;per Unit;Quantity;Sold;Selling Price;Per Unit;Portable;15,000;$ 120;14,000;$ 150;Midsize;20,000;300;24,000;405;Flatscreen;10,000;460;6,000;600;45,000;44,000;Instructions;(Round;to four decimals.);(a) Compute;ending inventory, cost of goods sold, and gross profit.;(b) Assume;the company uses three inventory pools instead of one, Repeat instruction (a).


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