Accounting Questions

1. (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $9,000. During 2010 rent payments of $110,000 were made and charged to "rent expense." The 2010 income statement shows as a general expense the item "rent expense" in the amount of $111,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points: 10) Question 2. 2. (TCO B) Adjusting Entries: Retained Earnings at 1/1/10 was $0 and at 12/31/10 was $400,000. During 2010, cash dividends of $50,000 were paid and a stock dividend of $100,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr for debit and Cr for credit. (Points : 10) Question 3. 3. (TCO C) Presented below is information related to Big Blast Company. Retained earnings, December 31, 2010 $ 2,350,000 Sales 2,600,000 Selling and administrative expenses 240,000 Earthquake loss (pre-tax) on plant (extraordinary item) 250,000 Cash dividends declared on common stock 53,600 Cost of good sold 1,000,000 Gain resulting from computation error on depreciation charge in 2009 (pre-tax) 520,000 Other revenue 80,000 Other expenses 50,000 Instructions: Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year. (Points: 40) Question 4. 4. (TCO D) The following balance sheet was prepared by the bookkeeper for Blue Company as of December 31, 2011 Blue Company. Balance Sheet as of December 31, 2011 is as follows. Cash $90,000 Accounts payable $75,000 Accounts receivable (net) 42,200 Long-term liabilities 100,000 Inventories 57,000 Stockholders' equity 218,500 Investments 76,300 Equipment (net) 96,000 Patents 32,000 $393,500 $393,500 The following additional information is provided: (1) Cash includes the cash surrender value of a life insurance policy $5,000 and a bank overdraft of $4,000 has been deducted. (2)The net accounts receivable balance includes: (a) accounts receivable debit balances $50,000; (b) accounts receivable credit balances $0; and (c) allowance for doubtful accounts $3,800. (3) Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods. (4) Investments include investments in common stock, trading $13,000, available-for-sale $46,300, and franchises $17,000. (5) Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000. Instructions: Prepare a balance sheet in good form (stockholders' equity details can be omitted). Do not worry about balancing the statement but rather use your time to compute the account balances properly for presentation purposes. (Points : 40) Question 5. 5. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $3,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors. 9 Periods 10 Periods 11 Periods Future Value of 1 1.99900 2.15892 2.33164 Present Value of 1 .50025 .46319 .42888 Future Value of 12.48756 14.48656 16.64549 Ordinary Annuity of 1 Present Value of 6.24689 6.71008 7.13896 Ordinary Annuity of 1 Present Value of 6.74664 7.24689 7.71008 Annuity Due of 1 Instructions (a) Assuming the computer has an 11-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John? (b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period? (Points: 25) ? Question 6. 6. (TCO F) Daniels Company deposits all receipts and makes all payments by check. The following information is available from the cash records. MARCH 31 BANK RECONCILIATION Balance per bank $26,746 Add: Deposits in transit 2,100 Deduct: Outstanding checks (3,800) Balance per books $25,046 Month of April Results Per Bank Per Books Balance April 30 $27,995 $24,355 April deposits 8,864 13,889 April checks 13,100 14,080 April note collected 3,000 -0- (not included in April deposits) April bank service charge 35 -0- April NSF check of a customer returned by the bank (recorded by bank as a charge) 900 -0- Instructions Calculate the amount of the April 30 (1) deposits in transit; and (2) outstanding checks. Show all your work for potential partial credit. (Points: 25) Question 7. 7. (TCO G) Rye Company was formed on December 1, 2010. The following information is available from Rye's inventory record for Product Bread. Units Unit Cost January 1, 2011 (beginning inventory) 1,700 $17.00 Purchases: January 5, 2011 2,600 $20.00 January 25, 2011 2,400 $21.00 February 16, 2011 1,000 $22.00 March 15, 2011 2,100 $25.00 A physical inventory on March 31, 2011, shows 3,000 units on hand. Instructions: Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods. (a) FIFO (b) LIFO (c) Weighted-average Show supporting computations in good form. (Points : 40) Question 8. 8. (TCO H) A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is 8 years. Instructions: Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used. (a) Straight-line for 2010 (b) Double-declining balance for 2011 (c) Sum-of-the-years'-digits for 2011 (Points : 40)