Solutions to Accounting Principles Final Exam
Question 1 Solution:
Giolito Company sells equipment on June 30, 2023, for $30,000 cash. The equipment originally cost
$90,000 and as of January 1, 2023, had accumulated depreciation of $45,000. Depreciation for the
first 6 months of 2023 is $4,500.
a. Journal entry to update depreciation to June 30, 2023:
Debit Depreciation Expense: $4,500
Credit Accumulated Depreciation: $4,500
Updated Accumulated Depreciation = $45,000 + $4,500 = $49,500.
b. Calculation of Gain on Disposal:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $90,000 - $49,500 = $40,500
Proceeds from Sale = $30,000
Gain/Loss on Disposal = Proceeds - Book Value = $30,000 - $40,500 = ($10,500) Loss.
Therefore, the company incurs a loss of $10,500 on the disposal.
Question 2 Solution:
Adjusted Trial Balance Columns of Asia Company for the year ended December 31, 2023:
a. Income Statement Preparation:
1. Sales Revenue: $600,000
2. Sales Discounts: $6,000
3. Net Sales = Sales Revenue - Sales Discounts = $600,000 - $6,000 = $594,000
4. Cost of Goods Sold: $350,000
5. Gross Profit = Net Sales - Cost of Goods Sold = $594,000 - $350,000 = $244,000
6. Freight-Out: $7,000
7. Advertising Expense: $10,000
8. Salaries and Wages Expense: $70,000
9. Utilities Expense: $12,000
10. Rent Expense: $30,000
11. Depreciation Expense: $9,000
12. Total Expenses = Freight-Out + Advertising Expense + Salaries and Wages Expense +
Utilities Expense + Rent Expense + Depreciation Expense = $7,000 + $10,000 + $70,000 + $12,000
+ $30,000 + $9,000 = $138,000
13. Earnings Before Tax = Gross Profit - Total Expenses = $244,000 - $138,000 = $106,000
14. Tax (20%) = $106,000 x 20% = $21,200
15. Earnings After Tax = Earnings Before Tax - Tax = $106,000 - $21,200 = $84,800
b. Net Value of Equipment at December 31, 2023:
Equipment Cost = $95,000
Accumulated Depreciation = $18,000
Net Value of Equipment = Equipment Cost - Accumulated Depreciation
Net Value = $95,000 - $18,000 = $77,000.
