ACG3103 ACG 340 Case 4: Fargo

You are only allowed to work with your group members and your professor. No tutors or other groups. ACG 340 Case 4: Fargo

 

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 debits and credits for each account are indicated (including the beginning balances) rather than the usual account balance. 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.

 

Fargo’s fiscal year end is June 30.

 

Account		Debit				Credit
Cash	$67,700				$55,400
Accounts Receivable	58,000				54,400
Allowance for Doubtful Accounts	700				1,100
Inventory	60,000
Prepaid Advertising	1,200				400
Office Supplies on Hand	1,700				1,300
Office Equipment	22,000				1,500
Accumulated Depreciation	400				7,600
Accounts Payable	31,900				40,000
Salaries Payable					800
Interest Payable					100
Dividends Payable	4,000				8,200
Notes Payable	3,000				30,000
Common Stock					12,600
Paid-In Capital in Excess of Par					20,000
Retained Earnings					19,900
Dividends Declared	7,200
Sales					61,000
Sales Returns	2,200
Sales Discounts	500
Purchases	42,000
Purchase Returns and Allowances					900
Purchase Discounts					400
Salaries Expense	9,200
Office Supplies Expense	1,300
Insurance Expense	700
Advertising Expense	600
Bad Debt Expense	500
Miscellaneous Expense	400
Depreciation Expense	300
Interest Expense	300
Gain on Sale of Office Equipment					200
Totals	$315,800				$315,800

 

 

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You 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 the following questions about the operations of Fargo. Put answers in box when given. Each question is worth half a point.

 

1. Compute the amount of interest paid in July. At June 30, 2014, $20 was payable. (Hint: Think of converting from accrual basis to cash basis.)

 

 

 

 

 

1. How much of Accounts Receivable were “written off” the month? (Hint: Run the ADA t-account)

 

 

 

 

 

 

1. What is Fargo’s Net Realizable Value of Accounts Receivable at the end of July?

 

 

 

 

 

 

1. What was the amount of cash received on the sale of office equipment?

 

 

 

 

 

 

 

 

1. Assuming that the office equipment has a five year estimated life, no estimated salvage value, and no depreciation is taken during the month of purchase or sale, how much office equipment was acquired during the month?

 

 

 

 

 

 

 

 

1. How old is the office equipment that was neither sold nor acquired during the month?

 

 

 

 

 

 

1. How much cash was paid on Accounts Payable during the month? Assume the beginning balance of Accounts Payable in July was zero.

 

 

 

 

 

 

 

 

1

 

You are only allowed to work with your group members and your professor. No tutors or other groups.

 

 

1. If the beginning balance in Note Payable was $20,000, what amount of Notes Payable did Fargo issue in in July?

 

 

 

 

 

1. How much of the Note Payable was paid off during July?

 

 

 

 

 

1. If all vendors sell to Fargo on terms 2/10, n/30, what was the total amount of purchases discounts which were allowed to lapse. No purchases were made in the last 10 days of July.

 

 

 

 

 

 

 

 

1. If there was no prepaid advertising at the beginning of the period, what was the total cash outlay for advertising in July? (Hint: Think of converting from accrual basis to cash basis.)

 

 

 

 

 

 

 

1. How much cash was used to pay salaries during the month? Assume the balance in Salaries Payable on July 1 was zero. (Hint: Think of converting from accrual basis to cash basis.)

 

 

 

 

 

1. What was the balance of Retained Earnings at the beginning of the fiscal year?

 

 

 

 

1. If office supplies valued at $300 were on hand at the beginning of the month, what were the total purchases of office supplies during the month?

 

 

 

 

 

1. What journal entry does Fargo make to record the purchase of office supplies? Good journal entry format required.

 

 

 

 

 

2

 

You are only allowed to work with your group members and your professor. No tutors or other groups.

 

 

1. How much cash dividends were paid during the month? Assume that the beginning balance in Dividends Payable at June 30 was $1,000.

 

 

 

 

 

1. Of the cash dividends paid, how much related to the current period?

 

 

 

 

 

1. What are net sales for July?

 

 

 

 

 

 

1. If 90% of sales are made on credit and all returns were related to credit sales, what was the beginning balance in Accounts Receivable on July 1? (Hint: Run the AR t-account)

 

 

 

 

 

 

 

1. How much cash received on accounts receivable in July?  (Hint: Run the AR t-account)

 

 

 

 

 

 

1. Does the company use gross or net method to record purchases? How do you know?

 

 

 

1. What is the beginning balance in inventory on July 1?

 

 

 

 

 

 

23. What are net purchases for July?

 

 

 

 

 

1. Assume that the company did a count of ending inventory and found that they had 70,000 of inventory remaining at the end of July. What is the cost of goods sold for the month of July?

 

 

 

 

 

 

 

3

 

You are only allowed to work with your group members and your professor. No tutors or other groups.

 

 

1. Provide the journal entry to adjust inventory at July 31. Good journal entry format is required.

 

 

 

 

 

 

 

 

 

 

1. Provide the journal entry to close revenues at July 31. Good journal entry format is required.

 

 

 

 

 

 

 

 

1. Provide the journal entry to close expenses at July 31. Good journal entry format is required.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Provide the journal entry to close dividends at July 31. Good journal entry format is required.

 

 

 

 

 

 

1. Provide the journal entry to close income summary at July 31. Good journal entry format is required.

 

 

 

 

 

 

1. After you have adjusted inventory and done your closing entries for the month, what is the ending balance in Retained Earnings on July 31?

 

 

 

 

 

 

 

 

 

 

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