Assignment 5
Assignment 5
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Question 1
On December 31, before any year-end adjusting entries are made, Falcon Companys Insurance Expense account
had a balance of 925 and its Prepaid Insurance account had a balance of 1,900. It was determined that 1,500
of insurance had expired by year end. How much is the adjusted balance for Insurance Expense for the year?
925
1,500
975
2,425
Question 2
The balance of the Allowance for Doubtful Accounts account at January 1 of the current year was HK$6,800.
During the year, accounts receivable in the amount of HK$9,000 were written off. Estimated uncollectible accounts
expense for the year amounts to HK$7,200, based on the percentage-of-sales approach. How much is the balance
of the Allowance for Doubtful Accounts account to be reported on the statement of financial position at year-end?
HK$14,000
HK$7,200
HK$8,600
HK$5,000
Question 3
If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the
accounting period, then failure to make an adjusting entry will cause
Question 4
KidsRUs paid HK$630 cash on account to a creditor. The transaction was incorrectly recorded as a debit to Cash of
HK$360 and a credit to Accounts Receivable of HK$360. The correcting entry is
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Question 5
Dynacare recorded estimated bad debts totaling 35,000, and wrote-off accounts receivable of 20,000 during the
current year. What net effect do these two transactions have on net income?
A decrease of 55,000
A decrease of 35,000
A decrease of 20,000
No effect
Question 6
A company purchased land for HK$70,000 cash. Real estate brokers commission was HK$5,000. The company
paid a salvage company HK$7,000 to demolish an old building on the land before construction of a new building
could start. Under the historical cost principle, the cost of land would be recorded at
HK$77,000
HK$70,000
HK$75,000
HK$82,000
Question 7
Jefferson Company purchased a piece of equipment on January 1, 2013. The equipment cost 60,000 and had an
estimated life of 8 years and a residual value of 8,000. What was the depreciation expense for the asset for 2014
under the double-declining-balance method?
6,500.
11,250.
15,000.
6,562.
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Question 8
ABC Corporation issues 1,000 shares of 10 par value ordinary shares at 12 per share. In recording the
transaction, credits are made to
Question 9
XYZ, Inc. sells 100 shares of its 5 par value treasury shares at 13 per share. If the cost of acquiring the shares
was 10 per share, the entry for the sale should include credits to
Question 10
Adana Inc. reported net income of $186,000 during 2014 and paid dividends of $ 26,000 on ordinary shares. It
also has 10,000 shares of 6%, $100 par value, non-cumulative preference shares outstanding. Ordinary
shareholders equity was $1,200,000 on January 1, 2014, and $1,600,000 on December 31, 2014. The companys
return on ordinary equity for 2014 is
10.0%.
9.0%.
7.1%.
13.3%.
Question 11
Net income is 132,000, accounts payable increased 10,000 during the year, inventory decreased 6,000 during
the year, and accounts receivable increased 12,000 during the year. Under the indirect method, what is net cash
provided by operations?
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102,000
112,000
124,000
136,000
Question 12
If sales are CHF130,000, beginning accounts receivable CHF12,000, and ending accounts receivable CHF15,000,
what is the amount of cash receipts from customers?
CHF127,000
CHF133,000
CHF130,000
CHF142,000
Question 13
Bainbridge Company uses the direct method in determining net cash provided (used) by operating activities. The
income statement shows income tax expense of 60,000. Income taxes payable were 25,000 at the beginning of
the year and 18,000 at the end of the year. Cash payments for income taxes are
53,000.
60,000.
67,000.
78,000.
Question 14
Metz Incorporated issued 8%, 10-year 2,000,000 bonds that pay interest semiannually on October 1 and April 1.
The bonds are dated April 1, 2014 and are sold on that date. The discount rate of interest for such bonds on the
April 1, 2014 was 10%. How much are the cash proceeds CityplaceMetz received from the issuance of the bonds?
2,000,000
1,750,757
1,754,209
3,600,000
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Question 15
Kaya Abbas, D.D.S., opened a dental practice on January 1, 2014. During the first month of operations, the
following transactions occurred.
1.
Performed services for patients who had dental plan insurance. At January 31,
performed but not yet recorded.
2.
3.
Purchased dental equipment on January 1 for 87,000, paying 29,600 in cash and signing a 57,400,
3-year note payable. (a) The equipment depreciates 435 per month. (b) Interest is 574 per month.
4.
5.
Purchased
593.
26,076.
672 of supplies were on hand.
Prepare the adjusting entries on January 31. (Credit account titles are automatically indented when the
amount is entered. Do not indent manually.)
No.
Debit
Credit
1.
2.
3(a).
3(b).
4.
5.
Question 16
Natal Co. was organized on April 1, 2014. The company prepares quarterly financial statements. The adjusted trial
balance amounts at June 30 are shown below.
Debits
Cash
Credits
R$ 6,231
Accumulated
DepreciationEquipment
R$ 632
Accounts Receivable
465
Notes Payable
Prepaid Rent
651
Accounts Payable
763
Supplies
983
375
Equipment
Dividends
12,516
Interest Payable
3,564
66
438
335
7,715
Share CapitalOrdinary
12,923
Rent Expense
1,316
Service Revenue
11,632
Depreciation Expense
Supplies Expense
632
137
Rent Revenue
Total credits
1,248
R$31,538
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Utilities Expense
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388
66
Interest Expense
R$31,538
Total debits
Determine the net income for the quarter April 1 to June 30.
Net income
R$
Determine the total assets and total liabilities at June 30, 2014, for Natal Company.
Natal Company
Total assets
R$
Total liabilities
R$
Determine the amount that appears for Retained Earnings at June 30, 2014.
Retained Earnings, June 30
R$
Question 17
Eastland Company reports the following for the month of June.
Date
Explanation
Units
Unit Cost
Total Cost
June 1
Inventory
310
$6
$1,860
June 12
Purchase
465
3,255
June 23
Purchase
775
6,200
June 30
Inventory
248
Calculate the cost of the ending inventory and the cost of goods sold for FIFO, using a perpetual inventory system.
Assume a sale of 620 units occurred on June 15 for a selling price of $9 and a sale of 682 units on June 27 for $10.
(Round answers to 0 decimal places, e.g. $2,120.)
FIFO
The cost ending inventory
The cost of goods sold
$
$
Calculate the cost of the ending inventory and the cost of goods sold for moving-average cost, using a perpetual
inventory system. Assume a sale of 620 units occurred on June 15 for a selling price of $9 and a sale of 682 units
on June 27 for $10. (Round answers to 0 decimal places, e.g. $2,120.)
Moving-Average Cost
The cost ending inventory
The cost of goods sold
$
$
Question 18
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Prepare journal entries to record the following. (Credit account titles are automatically indented when
amount is entered. Do not indent manually.)
(a)
(b)
Matterhorn Company retires its delivery equipment, which cost CHF 40,220. Accumulated depreciation is
also CHF 40,220 on this delivery equipment. No residual value is received.
Assume the same information as (a), except that accumulated depreciation is CHF 34,280, instead of
CHF 40,220, on the delivery equipment.
Debit
Credit
(a)
(b)
Question 19
Otto Electronics issues a R$ 835,100 , 10 %, 10-year mortgage note on December 31, 2013. The proceeds from
the note are to be used in financing a new research laboratory. The terms of the note provide for semiannual
installment payments, exclusive of real estate taxes and insurance, of R$ 67,011 . Payments are due June 30 and
December 31.
Prepare an installment payments schedule for the first 2 years. (Round answers to 0 decimal places, e.g.
$15,250.)
Semiannual
Interest
Period
Cash Payment
Interest Expense
Reduction of
Principal
Principal Balance
R$
Issue Date
1
R$
R$
R$
2
3
4
Prepare the entries for (1) the loan and (2) the first two installment payments. (Credit account titles are
automatically indented when amount is entered. Do not indent manually.)
Date
Debit
Credit
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Show how the total mortgage liability should be reported on the statement of financial position at December 31,
2014.
Otto Electronics
Statement of Financial Position
December 31, 2014
R$
R$
Question 20
Elston Corporation had the following equity accounts on January 1, 2014: Share CapitalOrdinary ($5 par)
$426,085, Share PremiumOrdinary $190,300, and Retained Earnings $112,300. In 2014, the company had the
following treasury share transactions.
Mar. 1
June 1
Sept. 1
Dec. 1
Elston Corporation uses the cost method of accounting for treasury shares. In 2014, the company reported net
income of $27,700.
Journalize the treasury share transactions, and prepare the closing entry at December 31, 2014, for net income.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Debit
Credit
Mar. 1
June 1
Sept. 1
Dec. 1
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Dec. 31
Question 21
On December 1, Discount Electronics Ltd. has three DVD players left in stock. All are identical, all are priced to sell
at $172. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $110.
Another, with serial #1045, was purchased on November 1 for $99. The last player, serial #1056, was purchased
on November 30 for $85.
Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players
were sold by the end of December, Discount Electronics year-end.
The cost of goods sold
If Discount Electronics used the specific identification method instead of the FIFO method, how might it alter its
earnings by selectively choosing which particular players to sell to the two customers? What would Discounts
cost of goods sold be if the company wished to minimize earnings? Maximize earnings?
Cost of goods sold would be
Question 22
On December 31, 2013, Russell Co. estimated that 2% of its net sales of $404,000 will become uncollectible. The
company recorded this amount as an addition to Allowance for Doubtful Accounts. On May 11, 2014, Russell Co.
determined that the B. Vetter account was uncollectible and wrote off $2,020. On June 12, 2014, Vetter paid the
amount previously written off.
Prepare the journal entries on December 31, 2013, May 11, 2014, and June 12, 2014. (Credit account titles are
automatically indented when amount is entered. Do not indent manually.)
Date
Debit
Credit
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Question 23
At the beginning of 2012, Mansen Company acquired equipment costing $172,400. It was estimated that this
equipment would have a useful life of 6 years and a residual value of $17,240 at that time. The straight-line
method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to
be recorded at the end of each year.
During 2014 (the third year of the equipments life), the companys engineers reconsidered their expectations, and
estimated that the equipments useful life would probably be 7 years (in total) instead of 6 years. The estimated
residual value was not changed at that time. However, during 2017 the estimated residual value was reduced to
$9,482.
Indicate how much depreciation expense should be recorded each year for this equipment, by completing the
following table. (Round answers to 0 decimal places, e.g. $2,150.)
Depreciation
Expense
Year
2012
Accumulated
Depreciation
$
2013
2014
2015
2016
2017
2018
Question 24
Condensed financial data of Jhutti Company appear below.
Jhutti Company
Comparative Statements of Financial Position
December 31
Assets
2014
Equipment
$249,240
Accumulated depreciationequipment
Investments
(49,010 )
2013
$205,360
(39,520 )
84,700
86,450
120,100
101,400
Accounts receivable
79,000
57,450
Cash
91,680
47,880
$575,710
$459,020
Inventory
$240,600
$198,010
Retained earnings
168,550
125,170
Bonds payable
101,090
69,070
Accounts payable
53,440
47,810
12,030
18,960
$575,710
$459,020
Jhutti Company
Income Statement
For the Year Ended December 31, 2014
Sales revenue
Gain on Disposal of Equipment
$298,280
8,440
306,720
Less:
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98,880
14,320
Depreciation expense
46,770
7,240
Interest expense
2,300
169,510
$137,210
Net income
Additional information:
1.
2.
3.
4.
Equipment costing $91,490 was purchased for cash during the year.
Investments were sold at cost.
Equipment costing $47,610 was sold for $18,770, resulting in gain of $8,440.
A cash dividend of $93,830 was declared and paid during the year.
Prepare a worksheet for the statement of cash flows using the indirect method. Enter the reconciling items directly
in the worksheet columns. (List components of retained earnings separately in the debit and credit
columns. Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
Statement of
Financial Position
Debits
JHUTTI COMPANY
WorksheetStatement of Cash Flows
For the Year Ended December 31 , 2014
Reconciling Items
Balance 12/31/13
Debit
Credit
Balance 12/31/14
Equipment
Investments
Inventory
Accounts receivable
Cash
Totals
Credits
Share capitalordinary
Retained earnings
Bonds payable
Accumulated
depreciationequipment
Accounts payable
Accrued expenses
payable
Totals
Statement of Cash
Flow Effects
Operating activities
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Investing activities
Financing activities
Totals
Totals
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