Question 1. 1. (TCO 7) Franko Company. was incorporated on 2/01/14. Their corporate charter authorized the following capital stock;Preferred Stock:...
Question 1. 1. (TCO 7) Franko Company. was incorporated on 2/01/14. Their corporate charter authorized the following capital stock;Preferred Stock: 7%, par value $105 per share, 120,000 shares.;Common Stock: $5 par value, 1,000,000 shares.;The following transactions occurred during the year;3/15/14 ? Issued 200,000 shares of common stock for $18 cash per share.;4/25/14 ? Issued 7,000 shares of preferred stock for $125 cash per share.;8/16/14 ? Repurchased 40,000 shares of common stock for $25 cash per share.;10/5/14 ? Declared dividend of $150,000.;Required;1. Prepare the journal entry for each transaction listed above.;2. In your own words, explain the main differences between common and preferred stock.;(Points: 25);Question 2. 2.;4.3-44 Prepare a bank reconciliation using Bobby Barnacles? Restaurant Supply Inc?s information for August 31.;? A NSF check from Johnny Jones for $3,164.;? Two deposits made on August 31 were not on the bank statement, totaling $2,897.;? The bank collected an EFT payment for Rent for $2,600.;? August 31 balance in Cash was $1,905.;? The owner had written check # 1598 for $500 and recorded this check as $5,000.;? The balance on the bank statement as of August 31 was $5,216.;? Bank service charge of $28 was shown on the bank statement.;? Checks #1572, 1606, 1116, and 1242 for $419, $126, $650, and $1,105, respectively, were not shown on the bank statement, even though the company had sent the checks. (Points: 25);Question 3. 3. (TCO 2) Below are the accounts of ABC, Inc. The accounts have normal balances on June 30, 2014. The accounts are listed in no particular order.;Account Balance;Money Market Account $5,200;Unearned Revenue $4,400;Sales $18,100;Building $26,800;Bonds payable $5,500;Preferred Stock $5,100;Prepaid insurance $4,100;Rent expense $2,100;Notes receivable $6,600;Depreciation expense $2,700;Retained earnings $22,600;Salary Payable $8,200;Long term investments $16,400;Prepare the company?s trial balance as of June 30, 2014, listing accounts in proper sequence, as illustrated in the chapter. For example, Accounts Receivable comes before Building. List the expense with the largest balance first, the expense with the next largest balance second, and so on. (Points: 25);Question 4. 4. Charles Scrab Inc has beginning inventory of $15,000, purchases of $25,000, and ending inventory of $10,000, sales of $75,000, operating expenses of $30,000, and a tax rate of 40% for 2010. An accounting clerk input the ending inventory as $12,000. What is the effect on 2011 net income?;A) Net income for 2011 will be $1,200 higher than 2010.;B) Net income for 2011 will be $1,200 lower than 2010.;C) Net income for 2011 will be $10,200.;D) Net income for 2011 cannot be calculated with the information given.;Please show the computations to support your answer. (Points: 25);Question 5. 5. Martin Motors purchased a machine that will help diagnose problems with engines. The machine cost $210,000 on January 10, 2010 and a residual value of $10,000 was anticipated, with a useful life of 5 years. These statistics are available;DDB;Gross Profit;400,000;Operating expenses;180,000;Income before depreciation and taxes;220,000;Depreciation;84,000;Income before taxes;136,000;Taxes (35%);47,600;Net Income;88,400;Martin Motors realized at the beginning of 1012 that the machine would last an additional 8 years. Martin Motors uses the DDB method.;Prepare the appropriate journal entry to record the depreciation expense for 2012 (Points: 25)
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