ACCOUNTING. The Wonder of the Worksheet

Transcription

1 ACCOUNTING The Wonder of the Worksheet SAC 2012

2 P a g e State Group 11 Refer to the Table and to the work sheet. For questions 53 through 59, write the identifying letter of the best response on your answer sheet. 53. On the Balance Sheet dated December 31, 2011 the total of current assets is A. $47,022 B. $72,875 C. $96,222 D. $98,847 E. $100, On the Balance Sheet dated December 31, 2011 the total of current liabilities is A. $91,976 B. $92,200 C. $92,606 D. $122,200 E. $137, What amount of supplies was purchased during 2011? A. zero B. $2,795 C. $3,070 D. $8,137 E. $8,412 F. $11, What was the balance of Prepaid Insurance on January 1, 2011? A. zero B. $795 C. $930 D. $3,585 E. $3,720 F. $4, The insurance premium paid on March 31, 2010 should be allocated to expense in the following years: A. $3,180 $ 0 $ 0 B. $2,790 $ 930 $ 0 C. $2,385 $ 795 $ 0 D. $ 0 $2,790 $930 *58. The Return on Stockholders Equity for 2011 was A. 0.9% B. 9% C. 45% D. 50% E. 51% F. 90% G. 190% H. 290% *59. The current ratio calculated from information found on the Balance Sheet dated December 31, 2011 and rounded to the nearest hundredth was? to 1. A B C D E What was the amount in the Unadjusted Trial Balance for each of the following? **60. Cash in Bank 61. Accounts Receivable 62. Allowance for Uncollectible Accounts 63. Merchandise Inventory 64. Supplies 65. Prepaid Insurance 66. Equipment 67. Accumulated Depreciation Equipment *68. Accounts Payable 69. Capital Stock *70. Retained Earnings *71. Sales *72. Purchases What was the amount in the Adjusted Trial Balance for each of the following? 73. Allowance for Uncollectible Accounts 77. Dividends Payable 74. Accumulated Depreciation Equipment 78. Unearned Revenue **75. Land 79. Dividends 76. Interest Payable 80. Income Summary

3 P a g e 3 Table 2 For this problem, disregard sales taxes, payroll taxes, and corporate income tax. Most operational expenses are combined only because of space limitations on the work sheet form. Company Policies: Uses the accrual basis of accounting Uses 360-day year for promissory note calculations Purchases of supplies and insurance are posted to respective asset accounts. Adjusting entries, closing entries, and financial statements are prepared only at the end of the fiscal year which is December 31. All prior year adjusting entries were journalized and posted correctly. Actual customer accounts are written off only after numerous attempts to collect. Other Information: The account called Supplies had a balance of $2,795 on January 1, There is only one insurance policy. It is always a twelve month policy and was paid as follows: March 31, 2010 for $3,180 and March 31, 2011 for $3,720 On December 29, 2011 one customer account for $4,100 was written off as uncollectible. The Aging of Accounts Receivable was prepared on : Age Group Amount Estimated % Uncollectible Not Yet Due 18,300 2% 1-30 days past due 1,200 4% days past due % days past due % over 90 days past due % Estimated Uncollectible Amount Allowance for Uncollectible Accounts had a credit balance of $4,675 on The Equipment account contains the following asset groups: Description Date Original Cost Est. Life in Years Salvage Value Depr. Method Fixtures $57,000 7 $4,500 SL Computer Eq $32,000 5 $5,000 DDB The company uses the periodic inventory system and the specific identification method. The physical inventory on consists of: Per Unit Cost 10 units purchased for $ units purchased for $ units purchased for $ units purchased for $175 9 units purchased for $170 Tumbleweed purchased land for future use in the year 2010.

4 P a g e 4 On November 29, 2011, Tumbleweed borrowed $42,000 from Infinity Bank by signing a 90- day, 6% interest-bearing promissory note. (This is the only time the company has ever had to borrow money from any source.) The bookkeeper for Tumbleweed recorded correctly the deposit of the loan amount, but knows nothing about end-of-year accruals and deferrals. The maturity value is $42,630. On December 26, 2011 a customer paid Tumbleweed a deposit of $1,500 for a special order of merchandise. No one had ever placed a special order before, so the bookkeeper did not know how to handle this transaction. So the payment was recorded like a regular sale. Tumbleweed contacted a supplier who may be able to produce the item, but cannot confirm this until January 5, The customer was updated regarding the progress of the special order and will wait for word in January. Tumbleweed, Inc. is a closely held corporation with 20,000 shares of common stock authorized with a par value of $10 each. In 2008 Tumbleweed issued the following shares at par value: Name # of shares Barbara 1,000 Ben 1,000 Hunter 500 Campbell 500 On December 15, 2011 the board of directors declared a cash dividend of $12 per share payable to the shareholders on January 15, This is the first time since the corporation was formed that the board of directors declared a dividend. Therefore, the bookkeeper did not know to make any kind of journal entry in December. There were no transactions posted to Retained Earnings during Financial statement analysis for the year ended indicated the following: o the gross profit percentage was 45% (dollar amount of gross profit $108,279) o the quick ratio was 0.51 to 1 o the ending balance on the Statement of Stockholders Equity dated December 31, 2011 was $54,500. Group 11 Group 11 cont. 53 D 64 $ 11, B 65 $ 4, E 66 $ 89, B 67 $ 41, C *68 $ 12,476 *58 F 69 $ 30,000 *59 E *70 $ 15,500 **60 $ 27,187 *71 $ 242, $ 21,050 *72 $ 134, $ $ 1, $ 45, $ 53,213 **75 $ 12, $ $ 36, $ 1, $ 36, $ 2,625

5 P a g e 5 Cash in Bank Tumbleweed, Inc. Work Sheet For the Year Ended December 31, 2011 Account Title Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Accounts Receivable Allow. for Uncol. Accts. Merchandise Inventory Supplies 3,070 Prepaid Insurance Equipment Accum. Depr. Equip. Land Notes Payable Interest Payable Accounts Payable Dividends Payable Capital Stock Retained Earnings Dividends Income Summary 2,625 Sales Purchases Bad Debt Expense Supplies Expense 8,137 Insurance Expense Depreciation Expense Operating Expenses 38,585 Net Income or <Loss> 192,128

6 Beg. During Tumbleweed, Inc. Bal. the Worksheet Jan. 1 Year For the Year Ended December 31, 2011 Account Title Trial Balance Adjustments Adjusted Trial Balance Debit Credit Debit Credit Debit Credit Cash in Bank Accounts Receivable Allowance for UA Merchandise Inventory Supplies 3,070 Prepaid Insurance Equipment Accum. Depr. Equip. Land Notes Payable Interest Payable Accounts Payable Dividends Payable Capital Stock Retained Earnings Dividends Income Summary 2,625 Sales Purchases Bad Debt Expense Supplies Expense 8,137 Insurance Expense Depreciation Expense Operating Expenses 38,585 P a g e 6

7 P a g e 7 Beg. During Tumbleweed, Inc. Bal. the Worksheet Jan. 1 Year For the Year Ended December 31, 2011 Account Title Trial Balance Adjustments Adjusted Trial Balance Debit Credit Debit Credit Debit Credit Cash in Bank 4,675 CR 4,100 DR 2,795 8, , ,000 Accounts Receivable 21,050 21,050 4,100 DR Allowance for UA ,215 Merchandise Inventory 45,200 2,625 47,825 8,412 Supplies 11,207 3,720 Prepaid Insurance 4,515 11,207 8,137 4,515 3,585 8,137 3,070 3, Equipment 89,000 89,000 Accum. Depr. Equip. 41,105 12,108 53,213 0 Land 42,000 Notes Payable 42,000 42,000 42, Interest Payable Accounts Payable 0 0 Dividends Payable 0 36, ,000 36, Unearned Revenue 0 1,500 1,500 30,000 0 Capital Stock 30,000 30,000 Retained Earnings Dividends 0 36,000 36,000 Income Summary 0 0 2,625 2,625 Sales 242,120 1, ,620 Purchases 134, ,966 Bad Debt Expense Supplies Expense 0 8,137 8,137 Insurance Expense 0 3,585 3,585 Depreciation Expense 0 12,108 12,108 Operating Expenses 38,585 38,585 Interest Expense

8 P a g e 8 Solving Steps (You certainly could use a different order.) 1. Observe Supplies Expense is given. Plot on the worksheet the adjustment for supplies used. Supplies Expense 8,137 Supplies Supplies 8, ,795 This will enable you to answer Q#55 and Q#64 Bought Trial Balance Adjusted Trial Balance 3,070 8,137 Adjustment ,720 Prepaid Insurance Pd $3180 Pd $ Trial Balance Adjusted Trial Balance Adjustment This will enable you to answer Q#56 and Q#57 3. Calculate the total of Accounts Receivable given in the table: 18, , = 21,050 Then finish the Aging of Accounts Receivable: = 1,215 Accounts Receivable ,100 W/off 4,100 Allow. for UA 4, T. Bal 21,050 T.Bal 0 Adjust. 1,215 Adj. T. Bal. Bad Debt Expense 4. Equipment: 57, = 89, Accumulated Depreciation: Fixtures Computer xxx Fixtures: (57,000 4,500) / 7 = 7,500 annually 7,500/12 = 625 per month In 2008, asset owned for 9 months: 625 x 9 =5,625 Accum. Depr depr exp Computer: 100 / 5 = 20 x 2 = 40% ,000 x 40% = 12, ,000-12,800 x 40% = 7, ,000-(12,800+7,680) x 40% = 4,608

9 P a g e 9 6. Merchandise Inventory on : Complete the extension of the table: 1, , , , ,530 = 47, Observe Income Summary Credit $2,625. Plot the adjustment on the worksheet. Then solve for Merchandise Inventory on : 47,825 2,625 = 45, Land: Given information indicates Land had a balance and no activity in We still don t know the balance. Have faith. Keep going. 9. Promissory Note Payable: Given information indicates zero balance on , but we know what happened during 2011 and the balance of the liability account. Given information also states this is the only loan, so Interest Payable has a zero balance on Interest accrual: P x R x T = interest 42,000 x.06 x 32 / 360 = Time: 1 day in Nov 31 days in Dec 32 days Fence Post Maturity 32 days 58 days $ $ = $ Customer deposit $1,500: Remove from Sales since it is UNearned and place in a current liability account called Unearned Revenue. 12. Capital Stock: 3,000 total shares issued x $10 par = $30,000 Given information indicates all shares were issued in 2008; therefore, no shares issued during Dividends: 3,000 shares x $12 = $36, Sales: Gross Profit $108,279 / Gross Profit Percentage 45% = $240,620 This is the amount for the ADJUSTED Trial Balance. The Sales amount on the Trial Balance is: 240,620 + $1,500 (remember the bookkeeper posted the customer deposit to Sales in error). 15. Purchases: Sales 240, % BI 45,200 Purch COMAS EI 47,825 COMS GP 108,279 45% 240, ,279 = 132,341 COMS 132, ,825 = 180,166 COMAS 180,166 45,200 = 134,966 Purchases

10 P a g e 10 At this point your worksheet should look like the one on page 7. It appears there are two unknown debits (Cash in Bank and Land) and two unknown credits (Accounts Payable and Retained Earnings. However, there are items in the given information that we have not yet considered. Here are the final solving steps. 16. Use the given Stockholders Equity on December 31, 2011 $54,500 along with T-accounts for Retained Earnings and Capital Stock to write down what you know. Be careful to understand that $54,500 is the amount on a financial statement, which means this number was snapshot AFTER all temporary capital accounts were closed. This has a bearing on how you understand the following missing piece to ending Retained Earnings. Common Stock Retained Earnings ,000 + = Total Stockholders Equity 30,000 + = 54,500 Total Ending SE 54,500 Common Stock 30,000 = Ending Retained Earnings 24,500 This is NOT the amount on the Trial Balance!!! It is calculated from the Total Stockholders Equity that was found on a financial statement. Therefore, $24,500 is the amount of Retained Earnings AFTER all temporary accounts had been closed. Retained Earnings No entries during the year by bookkeeper Trial Balance There is enough information on the worksheet (page 7) to calculate net income: 2, , , ,137-3,585-12,108-38, = 45,000 Dividends 36,000 45,000 Net Income for Year 24,500 Balance on AFTER Closing Solve for beginning Retained Earnings: 24,500 45, ,000 = 15,500 This is the amount that belongs on the worksheet in the Trial Balance AND the Adjusted Trial Balance columns. 17. Now you can solve for Accounts Payable because the subtotal of the Balance Sheet Credit column is given on the worksheet 192,128: (1, , , , , , ,500) 192,128 = 12,476

11 18. Calculate the current liabilities: 42, , , ,500 = 92,200 (Q#54) P a g e Use Quick Ratio to solve for Cash in Bank: Quick Assets / Current Liabilities = 0.51 QA / 92,200 = 0.51 QA = 0.51 x 92,200 QA = 47,022 Quick Assets are: Cash in Bank Accounts Receivable 21,050 Allow. for UA 1,215 NET Receivables 19,835 Total Quick Assets 47,022 47,022 19,835 = Cash in Bank = 27, The next step is to determine the worksheet subtotal of the Balance Sheet Debit column. Income Statement Balance Sheet Debit Credit Debit Credit Net Income 45, , , ,128 45,000 45, , ,000 = 237, Now you are ready to solve the final missing piece on the worksheet, which is Land: 237,128 (27, , , , , ,000) = 12,066 Questions: 53. Current Assets = Quick Assets 47,022 + MI 47,825 + Supplies 3,070 + Prepaid Ins 930 = 98, Current Liabilities see above item Supplies purchased see page 8 item Beginning balance of Prepaid Insurance see page 8 item See page 8 item 2. 30, ,500 = 45, Return on SE = Net Income / Average Stockholders Equity Common Stock Retained Earnings Total SE , ,500 = 36,000 45, , ,500 = 54,500 Net Income / {(Beginning SE + Ending SE) / 2} = Return on SE 45,000 / {(45, ,500) / 2} = Return on SE Not sure whether to mark.9 or 90? Test it. 45,000 / {100,000 / 2} = Return on SE The return on SE represents that a certain 45,000 / 50,000 = Return on SE percentage of the average SE ($50,000) turns 0.9 = Return on SE This is expressed as a decimal. into profit. What is 90% of $50,000? Convert to percentage: 0.9 x 100 = 90% 59. Current Ratio = Current Assets / Current Liabilities Current Ratio = (Q#53) 98,847 / (Q#54) 92,200 Current Ratio = 1.07 to 1

12 Tumbleweed, Inc. Work Sheet For the Year Ended December 31, 2011 Account Title Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash in Bank 27,187 Accounts Receivable 21,050 Allow. for Uncol. Accts. 1,215 Merchandise Inventory 47,825 Supplies 3,070 Prepaid Insurance 930 Equipment 89,000 Tip for Worksheet Net Income/Loss: Accum. Depr. Equip. 53,213 Net Income increases Capital. We increase Capital with a credit. So net income is ALWAYS written in the Balance Sheet CREDIT column, under the first subtotal line. Land 12,066 Notes Payable 42,000 Interest Payable 224 Accounts Payable 12,476 Dividends Payable If you write net income in the credit column 36,000 Unearned Revenue of the Balance Sheet, you will DEBIT the 1,500 Capital Stock Income Statement column. 30,000 Retained Earnings 15,500 A net loss decreases Capital. We decrease Dividends 36,000 Capital with a debit. So net loss is written in Income Summary 2,625 2,625 the Debit column of Balance Sheet; Sales therefore, it will also be written in the Credit 240,620 Purchases column of the Income Statement. 134,966 Bad Debt Expense 640 Then AUTOMAGICALLY all of the final totals of the last four columns of the worksheet will come out correctly in balance. It s a wonder. Supplies Expense 8,137 Insurance Expense 3,585 Depreciation Expense 12,108 Operating Expenses 38,585 38,585 Interest Expense , , , ,128 P a g e , ,128 Net Income or <Loss> 45,000 45, , , , , , ,128