Cambodian Mekong University

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1 Cambodian Mekong University Course Review for Comprehensive Exam Subject Code: AC101& AC102 Subject Name: Accounting Principle Accounting Principle I. Concepts & False 1. Communication consists of keeping a systematic, chronological diary of events, measured in dollars and cents. 2. Financial accounting provides internal reports to help users make decisions about their companies. A. Tue 3. The first step in analyzing ethics cases is to recognize an ethical situation and the ethical issues involved. 4. The cost principle dictates that companies record assets at their cost. 5. The economic entity assumption applies to corporations but not proprietorships or partnerships. 6. Expenses that result from operating the business are decreases in owner's equity. 7. The receipt of cash on account will increase total assets. 8. A balance sheet is prepared as of a specific date. 9. The statement of cash flows provides information on the cash receipts and payments for a specific period of time.

2 10. Cost accounting is an activity in public accounting. 11. Companies initially record transactions in the general journal in chronological order. 12. An entry that requires more than two accounts is a compound entry. A True 13. The entire group of accounts maintained by a company is the ledger. 14. Transferring journal entries to the ledger accounts is called journalizing. 15. Companies prepare a trial balance at the end of an accounting period and it is useful in preparing financial statements. 16. Dollar signs do not appear in journal or ledgers. 17. Accountants divide the economic life of a business into artificial time periods because of the time period assumption. 18. The revenue recognition principle dictates that companies recognize revenue in the accounting period before it is earned. 19. A company must make adjusting entries every time it prepares financial statements. 20. Prior to adjustment for prepaid expenses, assets are understated and expenses are overstated. 21. Accumulated Depreciation is an asset account. 22. Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets and to enhance the accuracy and reliability of its accounting records. 23. Control is most effective when two people are responsible for a given task.

3 24. Few internal control systems provide for independent internal verification. 25. Cash is the asset most susceptible to improper diversion and use. 26. Internal control over cash disbursements is more effective when companies pay by check, rather than by cash. 27. Companies use a petty cash fund to pay relatively small amounts. 28. Notes and accounts receivable that result from sales transactions are often called trade receivables. 29. The opportunity to receive a cash discount usually occurs when a retailer sells to customers. 30. Cash (net) realizable value is the net amount the company expects to receive in cash. 31. The percentage-of-receivables basis results in a better matching of expenses with revenues than the percentage-of-sales basis. 32. Under the percentage-of-receivables basis, the amount of bad debt expense is the difference between the required balance and the existing balance in the allowance account. 34. The cost of land includes closing costs such as title and attorney's fees. 33. The cost of equipment consists of the cash purchase price, freight charges, motor vehicle licenses and accident insurance on company vehicles. 34. Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset.

4 35. The units-of-activity method can be used for airplanes, buildings, and furniture. 36. The declining-balance method is considered an accelerated-depreciation method. 37. A current liability is a debt that the company reasonably expects to pay from existing current assets. 38. Notes Payable due for payment within one year of the balance sheet date are usually classified as current liabilities. 39. Companies report any balance in an unearned revenue account as a current liability in the balance sheet. 40. Current liabilities are usually listed in the order of maturity on the balance sheet. 41. If a contingent liability is reasonably possible and the amount can be reasonably estimated, it should be recorded in the accounts. 42. Companies generally disclose retained earnings restrictions in the retained earnings statement. 45. Companies prepare the retained earnings statement from the Retained Earnings account. 46. The change in each stockholders' equity account and in total for the year is presented in the stockholders' equity section of the balance sheet. 47. The return on common stockholders' equity shows how many dollars of net income the company earned for each dollar invested by the stockholders. 48. Income tax expense is reported in a separate section of the income statement. 49. Earnings per share indicate the net income earned by each share of issued common stock.

5 50. The market interest rate is the rate used to determine the amount of cash interest the borrower pays. B. Multiple Choice 1. Which of the following statements is false? A. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. B. A balance sheet reports the assets, liabilities, and owner's equity at a specific date. C. An income statement represents the revenues, expenses, changes in owner's equity, and resulting net income or net loss for a specific period of time. D. An owner's equity statement summarizes the changes in owner's equity for a specific period of time. 2. On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect the: A. income statement only. B. balance sheet only. C. income statement and owner's equity statement only. D. income statement, owner's equity statement, and balance sheet. 3. The financial statement that reports assets, liabilities, and owner's equity is the: A. income statement. B. owner's equity statement. C. balance sheet. D. statement of cash flow. 4. Services provided by a public accountant include: A. auditing, taxation, and management consulting. B. auditing, budgeting, and management consulting. C. auditing, budgeting, and cost accounting. D. internal auditing, budgeting, and management consulting. 5. Debits: A. increase both assets and liabilities. B. decrease both assets and liabilities. C. increase assets and decrease liabilities. D. decrease assets and increase liabilities. 6. A revenue account: A. is increased by debits. B. is decreased by credits. C. has a normal balance of a debit. D. is increased by credits. 7. Accounts that normally have debit balances are: A. assets, expenses, and revenues. B. assets, expenses, and owner's capital. C. assets, liabilities, and owner's drawings.

6 D. assets, owner's drawings, and expenses. 8. The expanded accounting equation is: A. Assets + Liabilities = Owner's Capital + Owner's Drawing + Revenues + Expenses B. Assets = Liabilities + Owner's Capital + Owner's Drawing + Revenues Expenses C. Assets = Liabilities Owner's Capital Owner's Drawing Revenues Expenses D. Assets = Liabilities + Owner's Capital Owner's Drawing + Revenues Expenses 9. Which of the following is not part of the recording process? A. Analyzing transactions. B. Preparing a trial balance. C. Entering transactions in a journal. D. Posting transactions. 10. Which of the following statements about a journal is false? A. It is not a book of original entry. B. It provides a chronological record of transactions. C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. D. It discloses in one place the complete effect of a transaction. 12. Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was: A. $21,000. B. $5,000. C. $11,000. D. Cannot be determined. 13. Kathy Siska earned a salary of $400 for the last week of September. She will be paid on October 1. The adjusting entry for Kathy's employer at September 30 is: A. No entry is required. B. Debit Salaries Expense $400 and credit Salaries Payable $400. C. Debit Salaries Expense $400 and credit Cash $400. D. Debit Salaries Payable $400 and credit Cash $ Which of the following statements is incorrect concerning the adjusted trial balance? A. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. B. The adjusted trial balance provides the primary basis for the preparation of f inancial statements. C. The adjusted trial balance lists the account balances segregated by assets and liabilities. D. The adjusted trial balance is prepared after the adjusting entries have been journalized and posted. 15. The trial balance shows Supplies $0 and Supplies Expense $1,500. If $800 of supplies are on hand at the end of the period, the adjusting entry is: A. Debit Supplies $800 and credit Supplies Expense $800. B. Debit Supplies Expense $800 and credit Supplies $800. C. Debit Supplies $700 and credit Supplies Expense $700. D. Debit Supplies Expense $700 and credit Supplies $ In a worksheet, net income is entered in the following columns: A. income statement (Dr) and balance sheet (Dr). B. income statement (Cr) and balance sheet (Dr).

7 C. income statement (Dr) and balance sheet (Cr). D. income statement (Cr) and balance sheet (Cr). 17. In the unadjusted trial balance of its worksheet for the year ended December 31, 2010, Taitum Company reported Office equipment of $120,000. The year-end adjusting entries require an adjustment of $15,000 for depreciation expense for the office equipment. After adjustment, the following adjusted amount should be reported: A. A debit of $105,000 for Office Equipment in the balance sheet column. B. A credit of $15,000 for Depreciation Expense Office Equipment in the income statement column. C. A debit of $120,000 for Office Equipment in the balance sheet column. D. A debit of $15,000 for Accumulated Depreciation Office Equipment in the balance sheet column. 18. An account that will have a zero balance after closing entries have been journalized and posted is: A. Service Revenue. B. Advertising Supplies. C. Prepaid Insurance. D. Accumulated Depreciation. 19. When a net loss has occurred, Income Summary is: A. debited and Owner's Capital is credited. B. credited and Owner's Capital is debited. C. debited and Owner's Drawing is credited. D. credited and Owner's Drawing is debited. 20. The closing process involves separate entries to close (1) expenses, (2) drawings, (3) revenues, and (4) income summary. The correct sequencing of the entries is: A. (4), (3), (2), (1) B. (1), (2), (3), (4) C. (3), (1), (4), (2) D. (3), (2), (1), (4) 21. Gross profit will result if: A. operating expenses are less than net income. B. sales revenues are greater than operating expenses. C. sales revenues are greater than cost of goods sold. D. operating expenses are greater than cost of goods sold. 22. Under a perpetual inventory system, when goods are purchased for resale by a company: A. purchases on account are debited to Merchandise Inventory. B. purchases on account are debited to Purchases. C. purchase returns are debited to Purchase Returns and Allowances. D. freight costs are debited to Freight-out. 23. The sales accounts that normally have a debit balance are: A. Sales Discounts. B. Sales Returns and Allowances. C. both (a) and (b). D. neither (a) nor (b).

8 24. A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is: A. $700. B. $686. C. $685. D. $ Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system? A. Purchases. B. Freight-in. C. Cost of Goods Sold. D. Purchase Discounts. 26. To record the sale of goods for cash in a perpetual inventory system: A. only one journal entry is necessary to record cost of goods sold and reduction of inventory. B. only one journal entry is necessary to record the receipt of cash and the sales revenue. C. two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory. D. two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue. 27. Cost of goods available for sale consists of two elements: beginning inventory and: A. ending inventory. B. cost of goods purchased. C. cost of goods sold. D. all of the above. 28. Tinker Bell Company has the following: If Tinker Bell has 9,000 units on hand at December 31, the cost of the ending inventory under FIFO is: A. $99,000. B. $108,000. C. $113,000. D. $117, Using the data in Question 4 above, the cost of the ending inventory under LIFO is: A. $113,000. B. $108,000. C. $99,000. D. $100, Postings from the purchases journal to the subsidiary ledger are generally made: A. yearly. B. monthly. C. weekly. D. daily.

9 31. Which statement is incorrect regarding the general journal? A. Only transactions that cannot be entered in a special journal are recorded in the general journal. B. Dual postings are always required in the general journal. C. The general journal may be used to record acceptance of a note receivable in payment of an account receivable. D. Correcting, adjusting, and closing entries are made in the general journal. 32. When companies use special journals: A. they record all purchase transactions in the purchases journal. B. they record all cash received, except from cash sales, in the cash receipts journal. C. they record all cash disbursements in the cash payments journal. D. a general journal is not necessary. 33. If a customer returns goods for credit, the selling company normally makes an entry in the: A. cash payments journal. B. sales journal. C. general journal. D. cash receipts journal. 34. In a bank reconciliation, deposits in transit are: A. deducted from the book balance. B. added to the book balance. C added to the bank balance. D. deducted from the bank balance. 35. The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: A. outstanding checks. B. deposit in transit. C. a bank error. D. bank service charges. 36. Which of the following items in a cash drawer at November 30 is not cash? A. Money orders. B. Coins and currency. C. A customer check dated December 1. D. A customer check dated November Which of the following statements correctly describes the reporting of cash? A. Cash cannot be combined with cash equivalents. B. Restricted cash funds may be combined with Cash. C. Cash is listed first in the current assets section. D. Restricted cash funds cannot be reported as a current asset. 38. Erin Danielle Company purchased equipment and incurred the following costs. hat amount should be recorded as the cost of the equipment? A. $24,000. B. $25,200. C. $25,400. D. $25,800.

10 39. Depreciation is a process of: A. valuation. B. cost allocation. C. cash accumulation. D. appraisal. 40. Micah Bartlett Company purchased equipment on January 1, 2009, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2010, if the straight-line method of depreciation is used, is: A. $80,000. B. $160,000. C. 78,000. D $156, Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover ratio? A B C D Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair market value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books? A. $45,000. B. $46,000. C. $49,000. D. $50, In exchanges of assets in which the exchange has commercial substance: A. neither gains nor losses are recognized immediately. B. gains, but not losses, are recognized immediately. C. losses, but not gains, are recognized immediately. D. both gains and losses are recognized immediately. 44. Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Insurance Premiums at December 31? A. $0. B. $4,500. C. $13,500. D. $18, Working capital is calculated as: A. current assets minus current liabilities. B. total assets minus total liabilities. C. long-term liabilities minus current liabilities. D. both (b) and (c).

11 46. The current ratio is computed as: A. total assets divided by total liabilities. B. total assets divided by current liabilities. C. current assets divided by total liabilities. D. current assets divided by current liabilities. 47. Which of the following is not a characteristic of a partnership? A. Taxable entity B. Co-ownership of property C. Mutual agency D. Limited life 48. A partnership agreement should include each of the following except: A. names and capital contributions of partners. B. rights and duties of partners as well as basis for sharing net income or loss. C. basis for splitting partnership income taxes. D. provision for withdrawal of assets. 49. Upon formation of a partnership, each partner's initial investment of assets should be recorded at their: A. book values. B. cost. C. market values. D. appraised values. 50. The NBC Company reports net income of $60,000. If partners N, B, and C have an income ratio of 50%, 30%, and 20%, respectively, C's share of the net income is: A. $30,000. B. $12,000. C. $18,000. D. No correct answer is given.

12 II. Problem Solving A. Question Accounting is ingrained in our society and it is vital to our economic system. Do you agree? Explain Bookkeeping and accounting are the same. Do you agree? Explain (a) What is a ledger? (b) What is a chart of accounts and why is it important? 4.2. State two generally accepted accounting principles that relate to adjusting the accounts. 5.SE4-8The steps in the accounting cycle are listed in random order below. List the steps in proper sequence, assuming no worksheet is prepared, by placing numbers 1 9 in the blank spaces. (a) Prepare a trial balance. (b) Journalize the transactions. (c) Journalize and post-closing entries. (d) Prepare financial statements. (e) Journalize and post adjusting entries. (f) Post to ledger accounts. (g) Prepare a post-closing trial balance. (h) Prepare an adjusted trial balance. (i) Analyze business transactions. 6.SE4-1The following are the major balance sheet classifications: Current assets (CA) Current liabilities (CL) Long-term investments (L TI) Long-term liabilities (L TL) Property, plant, and equipment (PPE) Owner s equity (OE) Intangible assets (IA) Match each of the following accounts to its proper balance sheet classification. Accounts payable Income tax payable Accounts receivable Investment in long-term bonds Accumulated depreciation Land Building Merchandise inventory Cash Patent Copyrights Supplies 7.SE1-1 Presented below is the basic accounting equation. Determine the missing amounts. Assets = Liabilities + Owner s Equity (a) $90,000 $50,000.? (b).....? $40,000 $70,000 (c) $94,000.? $60,000 8.SE1-5Indicate whether each of the following items is an asset (A), liability (L), or part of owner s equity (OE). (a) Accounts receivable (b) Salaries payable

13 (c) Equipment (d) Office supplies (e) Owner s investment (f) Notes payable 9.SE1-8Classify each of the following items as owner s drawing (D), revenue (R), or expense (E). (a) Advertising expense (b) Commission revenue (c) Insurance expense (d) Salaries expense (e) Bergman, Drawing (f) Rent revenue (g) Utilities expense 10. E1-1 Urlacher Company performs the following accounting tasks during the year. Analyzing and interpreting information. Classifying economic events. Explaining uses, meaning, and limitations of data. Keeping a systematic chronological diary of events. Measuring events in dollars and cents. Preparing accounting reports. Reporting information in a standard format. Selecting economic activities relevant to the company. Summarizing economic events. Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. Categorize the accounting tasks performed by Urlacher as relating to either the identification (I), recording (R), or communication (C) aspects of accounting. B. Exercises 1.E1-12 The following information relates to Linda Stanley Co. for the year Linda Stanley, Capital, January 1, 2010 $ 48,000 Advertising expense $ 1,800 Linda Stanley, Drawing during ,000 Rent expense 10,400 Service revenue 62,500 Utilities expense 3,100 Salaries expense 30,000 After analyzing the data, prepare an income statement and an owner s equity statement for the year ending December 31, E1-14Jan Nab is the sole owner of Deer Park, a public camping ground near the Lake Mead National Recreation Area. Jan has compiled the following financial information as of December 31, Revenues during 2010 camping fees $140,000 Market value of equipment $140,000 Revenues during 2010 general store 50,000 Notes payable 60,000 Accounts payable 11,000 Expenses during ,000 Cash on hand 23,000 Supplies on hand 2,500

14 Original cost of equipment 105,500 (a) Determine Jan Nab s net income from Deer Park for (b) Prepare a balance sheet for Deer Park as of December 31, E2-12 Selected transactions for Tina Cordero Company during its first month in business are presented below. Sept. 1 Invested $10,000 cash in the business. 5 Purchased equipment for $12,000 paying $5,000 in cash and the balance on account. 25 Paid $3,000 cash on balance owed for equipment. 30 Withdrew $500 cash for personal use Cordero s chart of accounts shows: No. 101 Cash, No. 157 Equipment, No. 201 Accounts Payable, No. 301 Tina Cordero, Capital; No. 306 Tina Cordero, Drawing. (a) Journalize the transactions on page J1 of the journal. (Omit explanations.) (b) Post the transactions using the standard account form. 4.PG2-1AFrontier Park was started on April 1 by C. J. Mendez. The following selected events and transactions occurred during April. Apr. 1 Mendez invested $40,000 cash in the business. 4 Purchased land costing $30,000 for cash. 8 Incurred advertising expense of $1,800 on account. 11 Paid salaries to employees $1, Hired park manager at a salary of $4,000 per month, effective May Paid $1,500 cash for a one-year insurance policy. 17 Withdrew $1,000 cash for personal use. 20 Received $5,700 in cash for admission fees. 25 Sold 100 coupon books for $25 each. Each book contains 10 coupons that entitle the holder to one admission to the park. 30 Received $8,900 in cash admission fees. 30 Paid $900 on balance owed for advertising incurred on April 8. Mendez uses the following accounts: Cash, Prepaid Insurance, Land, Accounts Payable, Unearned Admission Revenue, C. J. Mendez, Capital; C. J. Mendez, Drawing; Admission Revenue, Advertising Expense, and Salaries Expense. Journalize the April transactions. 5.PG2-2AJane Kent is a licensed CP A. During the first month of operations of her business, the following events and transactions occurred May 1 Kent invested $25,000 cash. 2 Hired a secretary-receptionist at a salary of $2,000 per month. 3 Purchased $2,500 of supplies on account from Read Supply Company. 7 Paid office rent of $900 cash for the month. 11 Completed a tax assignment and billed client $2,100 for services provided.

15 12 Received $3,500 advance on a management consulting engagement. 17 Received cash of $1,200 for services completed for H. Arnold Co. 31 Paid secretary-receptionist $2,000 salary for the month. 31 Paid 40% of balance due Read Supply Company. Jane uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies, No. 201 Accounts Payable, No. 205 Unearned Revenue, No. 301 Jane Kent, Capital; No. 400 Service Revenue, No. 726 Salaries Expense, and No. 729 Rent Expense. (a) Journalize the transactions. (b) Post to the ledger accounts. (c) Prepare a trial balance on May 31, PG2-3Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2009 (the end of its fiscal year) BYTE REP AIR SERVICE Trial Balance December 31, 2009 Cash $ 8,000 Accounts Receivable 15,000 Parts Inventory 13,000 Prepaid Rent 3,000 Shop Equipment 21,000 Accounts Payable $19,000 Jack Shellenkamp, Capital 41,000 $60,000 $60,000 Summarized transactions for January 2010 were as follows: 1. Advertising costs, paid in cash, $1, Additional repair parts inventory acquired on account $4, Miscellaneous expenses, paid in cash, $2, Cash collected from customers in payment of accounts receivable $14, Cash paid to creditors for accounts payable due $15, Repair parts used during January $4,000. (Hint: Debit this to Repair Parts Expense.) 7. Repair services performed during January: for cash $6,000; on account $9, Wages for January, paid in cash, $3, Jack s drawings during January were $3,000. (a) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for (b) Prepare journal entries to record each of the January transactions. (Omit explanations.) (c) Post the journal entries to the accounts in the ledger. (Add accounts as needed.) (d) Prepare a trial balance as of January 31, 2010.

16 7. E3-7 The ledger of Piper Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. Debit Credit Prepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 9,900 Rent Revenue 60,000 Interest Expense 0 Wages Expense 14,000 An analysis of the accounts shows the following. 1. The equipment depreciates $400 per month. 2. One-third of the unearned rent revenue was earned during the quarter. 3. Interest of $500 is accrued on the notes payable. 4. Supplies on hand total $ Insurance expires at the rate of $200 per month. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense. 8. E3-9 The trial balance for Pioneer Advertising Agency is shown in Illustration 3-3, p In lieu of the adjusting entries shown in the text at October 31, assume the following adjustment data. 1. Advertising supplies on hand at October 31 total $ Expired insurance for the month is $ Depreciation for the month is $ Unearned revenue earned in October totals $ Services provided but not recorded at October 31 are $ Interest accrued at October 31 is $ Accrued salaries at October 31 are $1,500. Prepare the adjusting entries for the items above. 9. E3-10The income statement of Benning Co. for the month of July shows net income of $1,400 based on Service Revenue $5,500, Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $600. In reviewing the statement, you discover the following. 1. Insurance expired during July of $400 was omitted. 2. Supplies expense includes $200 of supplies that are still on hand at July Depreciation on equipment of $150 was omitted.

17 4. Accrued but unpaid wages at July 31 of $300 were not included. 5. Services provided but unrecorded totaled $500. Prepare a correct income statement for July E4-1 The trial balance columns of the worksheet for Briscoe Company at June 30, 2010, are as follows. Trial Balance Account Titles Dr. Cr. Cash $2,230 Accounts Receviable 2,440 Supplies 1,880 Accounts Payable $1,120 Unearned Revenue 240 Lenny Briscoe, Capital 3,600 Service Revenue 2,400 Salaries Expense 560 Miscellaneous Expense 160 $7,360 $7,360 Other data: 1. A physical count reveals $300 of supplies on hand. 2. $100 of the unearned revenue is still unearned at month-end. 3. Accrued salaries are $280. Enter the trial balance on a worksheet and complete the worksheet. 11. E4-7 Emil Skoda Company had the following adjusted trial balance. EMIL SKODA COMPANY Adjusted Trial Balance for the Month Ended June 30, 2010 Adjusted Trial Balance Account Titles Debit Credit Cash $3,712 Accounts Receviable 3,904 Supplies 480 Accounts Payable $1,792 Unearned Revenue 160 Emil Skoda, Capital 5,760 Emil Skoda, Drawing 300 Service Revenue 4,064 Salaries Expense 1,344 Miscellaneous Expense 256 Supplies Expense 2,228 Salaries Payable 448 $12,224 $12,224 (a) Prepare closing entries at June 30, (b) Prepare a post-closing trial balance.

18 12. E5-2 Information related to Steffens Co. is presented below. 1. On April 5, purchased merchandise from Bryant Company for $25,000 terms 2/10, net/30, FOB shipping point. 2. On April 6 paid freight costs of $900 on merchandise purchased from Bryant. 3. On April 7, purchased equipment on account for $26, On April 8, returned damaged merchandise to Bryant Company and was granted a $4,000 credit for returned merchandise. 5. On April 15 paid the amount due to Bryant Company in full. (a) Prepare the journal entries to record these transactions on the books of Steffens Co. under a perpetual inventory system. (b) Assume that Steffens Co. paid the balance due to Bryant Company on May 4 instead of April 15. Prepare the journal entry to record this payment. 13. E5-3 On September 1, Howe Office Supply had an inventory of 30 calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred. Sept. 6 Purchased 80 calculators at $20 each from DeVito Co., for cash. 9 Paid freight of $80 on calculators purchased from DeVito Co. 10 Returned 2 calculators to DeVito Co. for $42 credit (including freight) because they did not meet specifications. 12 Sold 26 calculators costing $21 (including freight) for $31 each to Mega Book Store, terms n/ Granted credit of $31 to Mega Book Store for the return of one calculator that was not ordered. 20 Sold 30 calculators costing $21 for $31 each to Barbara s Card Shop, terms n/30. Journalize the September transactions. 14. E5-8 Presented is information related to Rogers Co. for the month of January Ending inventory per Insurance expense $12,000 perpetual records $21,600 Rent expense 20,000 Ending inventory actually Salary expense 61,000 on hand $21,000 Sales discounts 10,000 Cost of goods sold 218,000 Sales returns and allowances 13,000 Freight-out 7,000 Sales 350,000 (a) Prepare the necessary adjusting entry for inventory. (b) Prepare the necessary closing entries.

19 15. E6-4 Boarders sells a snowboard, Xpert that is popular with snowboard enthusiasts. Below is information relating to Boarders s purchases of Xpert snowboards during September? During the same month, 121 Xpert snowboards were sold. Boarders uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 26 $97 $2,552 Sept. 12 Purchases ,590 Sept. 19 Purchases ,080 Sept. 26 Purchases ,250 Totals 141 $14,442 (a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method. (b) For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold. What do you notice about the answers you found for each method? 16. PG6-5AYou are provided with the following information for Pavey Inc. for the month ended October 31, Pavey uses a periodic method for inventory. Date Description Units Unit Cost or Selling Price October 1 Beginning inventory 60 $25 October 9 Purchase October 11 Sale October 17 Purchase October 22 Sale October 25 Purchase October 29 Sale (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods.(1) LIFO. (2) FIFO. (3) Average-cost. (b) Compare results for the three cost flow assumptions.

20 17. E8-9 Anna Pelo is unable to reconcile the bank balance at January 31. Anna s reconciliation is as follows. Cash balance per bank $3, Add: NSF check Less: Bank service charge Adjusted balance per bank $4, Cash balance per books $3, Less: Deposits in transit Add: Outstanding checks Adjusted balance per books $4, (a) Prepare a correct bank reconciliation. (b) Journalize the entries required by the reconciliation. 18. E8-11 The following information pertains to Family Video Company. 1. Cash balance per bank, July 31, $7, July bank service charge not recorded by the depositor $ Cash balance per books, July 31, $7, Deposits in transit, July 31, $1, Bank collected $900 note for Family in July, plus interest $36, less fee $20. The collection has not been recorded by Family, and no interest has been accrued. 6. Outstanding checks, July 31, $591. (a) Prepare a bank reconciliation at July 31. (b) Journalize the adjusting entries at July 31 on the books of Family Video Company. 19. E10-5 Younger Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1,2010,at a cost of $168,000.Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000. (a) Compute the depreciation cost per unit. (b)prepare a depreciation schedule assuming actual mileage was:2010,26,000;2011,32,000; 2012,25,000;and 2013,17, E10-6 Kelm Company purchased a new machine on October 1,2010,at a cost of $120,000.The company estimated that the machine will have a salvage value of $12,000.The machine is expected to be used for 10,000 working hours during its 5-year life. Compute the depreciation expense under the following methods for the year indicated. (a) Straight-line for (b)units-of-activity for 2010, assuming machine usage was 1,700 hours. (c) Declining-balance using double the straight-line rate for 2010 and 2011.

21 21. E10-10Beka Company owns equipment that cost $50,000 when purchased on January 1, It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years. Prepare Beka Company s journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $28,000 on January 1, (b)sold for $28,000 on May 1, (c) Sold for $11,000 on January 1, (d)sold for $11,000 on October 1, E11-1Rob Judson Company had the following transactions involving notes payable. July 1,2010 Borrows $50,000 from Third National Bank by signing a 9-month,12% note Nov.1,2010 Borrows $60,000 from DeKalb State Bank by signing a 3-month,10% note. Dec.31,2010 Prepares adjusting entries. Feb.1,20011 Pays principal and interest to DeKalb State Bank. Apr.1,20011 Pays principal and interest to Third National Bank. Prepare journal entries for each of the transactions. 23.P11-1AOn January 1, 2010, the ledger of Mane Company contains the following liability accounts. Accounts Payable $52,000 Sales Taxes Payable 7,700 Unearned Service Revenue 16,000 During January the following selected transactions occurred. Jan. 5 Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. 12 Provided services for customers who had made advance payments of $10,000.(Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2009 ($7,700). 20 Sold 800 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1-year warranty. 21 Borrowed $18,000 from UCLA Bank on a 3-month, 8%,$18,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes. (a) Journalize the January transactions. (b) Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product.(hint: Use one-third of a month for the UCLA Bank note.) (c) Prepare the current liabilities section of the balance sheet at January 31, Assume no change in accounts payable.

22 24.E14-14McCoy Corporation has outstanding at December 31,2010,50,000 shares of $20 par value, cumulative, 8% preferred stock and 200,000 shares of $5 par value common stock.all shares were outstanding the entire year. During 2010,McCoy earned total revenues of $2,000,000 and incurred total expenses (except income taxes) of $1,200,000.McCoy s income tax rate is 30%. Compute McCoy s 2010 earnings per share. 25.E18-6 Leach Incorporated had the following transactions occur involving current assets and current liabilities during February Feb. 3 Accounts receivable of $15,000 are collected. 7 Equipment is purchased for $28,000 cash. 11 Paid $3,000 for a 3-year insurance policy. 14 Accounts payable of $12,000 are paid. 18 Cash dividends of $5,000 are declared. Additional information: 1. As of February 1, 2010, current assets were $130,000, and current liabilities were $50, As of February 1, 2010, current assets included $15,000 of inventory and $2,000 of prepaid expenses. (a) Compute the current ratio as of the beginning of the month and after each transaction. (b)compute the acid-test ratio as of the beginning of the month and after each transaction. 26.E18-4The comparative condensed income statements of Hendi Corporation are shown below. (a) Prepare a horizontal analysis of the income statement data for Hendi Corporation using 2010 as a base.(show the amounts of increase or decrease.) (b) Prepare a vertical analysis of the income statement data for Hendi Corporation in columnar form for both years.

23 27. E18-8 Selected comparative statement data for Willingham Products Company are presented below.all balance sheet data are as of December 31. Compute the following ratios for (a) Profit margin. (b)asset turnover. (c) Return on assets. (d)return on common stockholders equity. 28.E18-11 Scully Corporation s comparative balance sheets are presented below. Scully s 2010 income statement included net sales of $100,000, cost of goods sold of $60,000, and net income of $15,000. Compute the following ratios for (a) Current ratio.

24 (b)acid-test ratio. (c) Receivables turnover. (d)inventory turnover. (e) Profit margin. (f) Asset turnover. (g) Return on assets. (h)return on common stockholders equity. (i) Debt to total assets ratio. 29.E17-1Pioneer Corporation had these transactions during (a) Issued $50,000 par value common stock for cash. (b) Purchased a machine for $30,000,giving a long-term note in exchange. (c) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000. (d) Declared and paid a cash dividend of $18,000. (e) Sold a long-term investment with a cost of $15,000 for $15,000 cash. (f) Collected $16,000 of accounts receivable. (g) Paid $18,000 on accounts payable. Analyze the transactions and indicate whether each transaction resulted in a cash flow from operating activities, investing activities, financing activities, or noncash investing and financing activities. 30. E17-4Villa Company reported net income of $195,000 for 2010.Villa also reported depreciation expense of $45,000 and a loss of $5,000 on the sale of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2010.Use the indirect method. Good Luck!!!