Devry ACCT550 final exam 2017

3 (TCO B) Adjusting entries: Wizard Industries purchase $12,000 of merchandise on February 1, 2010, subject to a trade discount of 10% and with credit terms of 3/15/, n/60. It returned $3,000 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. Assuming that Wizard uses the perpetual method for recording merchandise transactions, prepare the necessary journal entries to record the purchase, return, and payment using the gross method. For each journal entry write DR for debit and CR for credit.

4 (TCO B) Adjusting entries: When the accounts of Upside Down Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of annual fiscal period. The prepaid insurance account shows a debit of $12,000, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. On November 1, Rental Revenue was credited for $3,000, representing revenue from a sub-rental for a 3-month period beginning on that date. Interest of $3,000 has accrued on notes payable. You are to prepare the missing adjusting entry. For each journal entry write DR for debit and CR for credit.

5(TCO C) Presented below is information related to Square Company.

Retained earnings, December 31, 20X2	$2,750,000
Sales	2,000,000
Selling and administrative expenses	240,000
Hurricane loss (pre-tax) on plant (extraordinary item)	250,000
Cash dividends declared on common stock	33,600
Cost of goods sold	960,000
Gain resulting from computation error on depreciation charge in 20X1 (pre-tax)	2,000,000
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.

6(TCO D) The following balance sheet was prepared by the bookkeeper for Diamone Company as of December 31, 201x Diamond Company.
Balance Sheet as of December 31, 201X 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).

7(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?

8(TCO F) Northville Paper and Paint deposits all receipts and makes all payments by check. The following information is available from the cash records.
April 30
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 May Results	Per Bank	Per Books
Balance May 31	$27,995	$24,355
May deposits	10,000	12,889
May checks	11,100	16,080
May note collected	3,000	-0-
(not included in April deposits)
May bank service charge	35	-0-
May NSF check of a customer	900	-0-
returned by the bank
(recorded by bank as a charge)

Calculate the following amounts.
(1) Deposits in transit on May 31
(2) Outstanding checks on May 31

9(TCO G) Steve Company was formed on December 1, 2010. The following information is available from Steve's inventory record for Product X.

	Units	Unit Cost
January 1, 2011 (beginning inventory)	1,500	$19.00
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	2,300	$24.00

A physical inventory on March 31, 2011, shows 2,800 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.

10-(TCO G) In your audit of Garza Company, you find that a physical inventory on December 31, 2010, showed merchandise with a cost $471,000 was on hand at that date. You also discover the following items were all excluded from the inventory count.
•Merchandise of $61,000, which was shipped by Garza as f.o.b. shipping point. The buyer is the Bontemps Company.
•Merchandise costing $33,000, which was on consignment. The consignee is the Proctor Company.
•Merchandise costing $95,000, which was shipped by Garza f.o.b. destination to a customer on December 29, 2010. The customer was scheduled to receive the merchandise on January 2, 2011.
•Merchandise costing $103,000 shipped by a vendor f.o.b. destination on December 30, 2010, and received by Garza on January 4, 2011.
•Merchandise costing $85,000 shipped by a vendor f.o.b. shipping point on December 31, 2010, and received by Garza on January 5, 2011.
Based on the above information, calculate the amount that should appear on Garza’s balance sheet at December 31, 2010, for inventory.

11-(TCO H) On January 2, Year 1, Logan Co. purchased a manufacturing machine for $864,000. The machine has an 8 ­year estimated life and a $144,000 estimated salvage value. Logan expects to manufacture 1,800,000 units over the life of the machine. During Year 2, Logan manufactured 300,000 units.
Instructions:
Calculate the Year 2 depreciation expense using (1) straight-line depreciation and (2) sum-of-the-years’-digits depreciation depreciation.