Finance questions

Problem #1

A parcel of land that was originally purchased for $170,000 is offered for sale at $300,000, is assessed for tax purposes at $190,000, is recognized by its purchasers as easily being worth $280,000, and is sold for $274,000. At the time of the sale, assume that the seller still owed $60,000 to the bank on the land that was purchased for $170,000. Immediately after the sale, the seller paid off the loan to the bank. What is the effect of the sale and the payoff of the loan on the accounting equation, i.e. what are the dollar increases and/or decreases in assets, liabilities, and owners’ equity?

Problem #2

Match each of the following transactions and events to the accounting principle applicable to recording and reporting them.

a. Business entity principle
b. Objectivity principle
c. Cost principle
d. Going concern principle
e. Monetary unit principle
f. Revenue recognition principle

_____1. An insurance company receives insurance premiums for six future month's worth of coverage.
_____2. Mr Jones, a sole proprietor, pays for his daughter's preschool out of business funds.
_____3. To make the balance sheet look better, Mr Jones added several thousand dollars to the Equipment account that he believed was undervalued.
_____4. A building is for sale at $480,000. An appraisal is given for $450,000.
_____5. Mayan Imports receives a shipment from Mexico. The invoice is stated in pesos.

Problem #3

Classify the following activities according to the appropriate section of the statement of cash flows.

a. Operating activity
b. Investing activity
c. Financing activity

_____1. Cash paid for dividends to stockholders.
_____2. Cash received from customers.
_____3. Cash received from owners contributions.
_____4. Cash paid for a delivery van to be used in the business.
_____5. Cash received from a one-time sale of used office equipment.
_____6. Cash paid from utilities.

Problem #4

a. Prepare an income statement for the adjusted trial balance of Hanson Storage.

b. Prepare a statement of owner's equity from the adjusted trial balance of Hanson Storage. Ms. Hanson's capital account balance of $40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment during the current year.

c. Prepare a balance sheet from the adjusted trial balance of Hanson Storage.

Problem #5

The following year-end adjusted trial balance is for Tom Jones Co. at the end of December 31. The credit balance in Tom Jones, Capital at the beginning of the year, January 1, was $320,000. The owner, Tom Jones, invested an additional $300,000 during the current year. The land held for future expansion was also purchased during the current year.

Required:
Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note payable is due within one year.)

Problem #6

Prepare journal entries to record the following merchandising transactions of Dean Company, which applies the perpetual inventory system. Dean Company offers all of its credit customers credit terms of 2/10, n/30.

Problem #7

Target Store uses the periodic inventory system and had the following transactions during the month of May:

Prepare the required journal entries that Target Store must make to record these transactions.

Problem #8

A company made the following merchandise purchases and sales during the month of May:



There was no beginning inventory. If the company uses the weighted average inventory valuation method and the perpetual inventory system, what would be the cost of its ending inventory?

Problem #9

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.

Problem #10

A company's warehouse was destroyed by a tornado on October 15. The following information was the only information that was salvaged:



The company's average gross profit ratio is 40%. What is the estimated cost of the lost inventory?