Financial & Managerial Accounting. Fall Exam 1

Transcription

1 Financial & Managerial Accounting Fall 2010 Exam 1 General Instructions. Make sure you write answers clearly. For the recording transactions using the financial statement approach make sure to indicate with (+) and (-) signs whether the account is increasing or decreasing in addition to the amount. Finally, the work you do on this exam must be your own and performed without any additional materials (i.e., notes, etc.) except for a calculator. Cheating will be dealt with by following Earlham policy unconditionally. Please take a moment to PRINT your name below. PRINT Name:.

2 PART I (60 points). The following transactions occurred at a small retail book store ( BookNook ). Record each transaction for the store using the approach indicated by the format. Make sure to be clear in your answers --- if I cannot determine with a glance what you have done then it will be marked wrong. 1. BookNook made a $40 cash sale to a customer. The books had cost BookNook $ BookNook purchased $300 worth of books from its supplier. BookNook has asked to be billed for the purchase. 3. BookNook pays its supplier $300 for the purchase that occurred in question 2.

3 4. BookNook pays its sales clerks their weekly salary of $ BookNook purchases two new couches in the amount of $400 for its customers to use while browsing. BookNook paid cash for the couches. 6. BookNook earned $100 in interest on its bank account.

4 7. BookNook sold $80 worth of books to a customer. The customer asked to be billed for the purchase. The books had cost BookNook $ BookNook received an $80 payment from the customer that had purchased books in question BookNook received the telephone bill in the amount of $150. They plan to wait to pay the bill. 10. BookNook paid a dividend to its owners in the amount of $600.

5 11. BookNook sold $60 worth of books to a customer. The customer asked to be billed for the purchase. The books had cost BookNook $ BookNook received a $60 check from the customer in question BookNook received a $20,000 small business loan from its bank. 14. One of the owners of BookNook invested an additional $30,000 into the business. 15. BookNook paid the monthly rent on its store in the amount of $800.

6 16. BookNook paid $400 on its small business loan ($300 went towards the principal of the loan, $100 towards the interest on the loan). 17. BookNook paid a $1,000 dividend to its owners. 18. BookNook pays its sales clerks their weekly salary of $ BookNook purchased a new computer for the store in the amount of $1,200 cash. 20. BookNook sold a $50 gift card to a customer that paid in cash.

7 Part II (20 points). The following table represents the account balances on Jan. 1, 2010 for a small retail shop ( Flower Power ) specializing in unique flower arrangements for corporate clients. Accounts Balance Capital Stock $30,000 Accounts Payable 4,000 Inventory 40,000 Long-Term Debt 26,000 Accounts Receivable 5,000 Retained Earnings 20,000 Property, Plant, & Equipment 20,000 Cash 15,000 During the year, the following transactions occurred. Flower Power made a $20,000 sale of flowers to a customer that paid in cash. The flowers had cost the store $12,000. Flower Power made a $3,000 payment on its long-term debt ($2,000 went towards the principal of the loan, $1,000 went towards interest on the loan). Flower Power its employees their salaries in the amount of $3,000. Flower Power paid a dividend to its owners in the amount of $1,000. Flower Power made a $10,000 sale of flowers to a customer. The customer asked to be billed for the purchase. The flowers had cost the store $4,000. Clearly do each of the following. (Please note, I am not asking to see you record the transactions though you can do so if it helps you keep track of things. Feel free to use the back of this page.) (21.) (10 points) Construct the income statement for the year (22.) (10 points) Construct the ending balance sheet as of Dec. 31, 2010.

8 Part III (10 points). Make the appropriate entries for each situation assuming the accounting cycle ends on Dec. 31 st of the year. Be sure to write your answers clearly. 23. The owner of a business pays the store manager a monthly salary of $6,000 on the 15 th of each month. On Dec. 31 st, the following would be recorded. On Jan. 15 th of the following year, the following would be recorded. 24. On November 1 st, the owner of a business pays the $18,000 health insurance premiums for employees to be covered for the next 6 months (thus, the insurance premiums cost $3,000 per month). On Nov. 1, the following would be recorded. On Dec. 31 st, the following would be recorded.

9 25. On May 1 st, the owner of a business purchases $7,000 worth of office supplies for the business. On May 1, the following would be recorded. On December 31 st, the owner finds that the business has $2,000 worth of office supplies remaining. Make the necessary adjusting entry. 26. On November 1 st, an advertising agency signs a contract for $20,000 to develop a new marketing campaign for a customer by the end of 5 months. The customer pays the advertising agency the entire amount on this date. On Nov. 1, the following would be recorded. Assuming the work is being conducted in equal monthly installments make the necessary adjusting entry as of Dec. 31 st.

10 27. On June 1, the owner of a business purchases $2,000 worth of phone cards for her sales associates. The owner paid for the phone cards in cash. On May 15 th, the following would be recorded. On Dec. 31 st, the owner discovers that only $100 worth of phone calls remain on the phone cards. Make the necessary adjusting entry. Part IV (10 points). Clearly answer each of the following. You must show your work to earn any partial credit for wrong answers. (4 pts) A small manufacturing business purchased a new machine for $50,000. Calculate the annual depreciation assuming straight-line depreciation method under the following scenarios. 28. The machine will last for 10 years with no salvage value at the end. 29. The machine will last for 10 years with a $5,000 salvage value at the end.

11 (6 pts) The following transactions occurred at a gas station during one week. Monday purchased 50 gallons of gasoline at a cost of $1 per gallon. Tuesday purchased 100 gallons of gasoline at a cost of $2 per gallon. Thursday sold 125 gallons of gasoline for a price of $3 per gallon. 30. Assuming the gas station uses the FIFO method of accounting for inventory calculate the total Net Income earned during the week. You should show as much of your work as necessary, though you do not need to show complete recordings for each transaction. 31. Assuming the retailer uses the LIFO method of accounting for inventory calculate the total Net Income earned during the week. You should show as much of your work as necessary, though you do not need to show complete recordings for each transaction.