Question 1 (30 points)
Best Company adjusts and closes its accounts at the end of each month. The trial balance at end of the March 2021, before adjustments, is as follows:
| Debit | Credit | |
| Cash | $72,000 | |
| Account Receivable | $5,700 | |
| Prepaid Rent | $12,000 | |
| Office Supplies | $2,500 | |
| Equipment | $36,000 | |
| Accumulated Depreciation: Equipment | $6,500 | |
| Accounts Payable | $4,000 | |
| Notes Payable | $8,000 | |
| Unearned Fees | $9,000 | |
| Capital Stock | $44,000 | |
| Retained Earnings | $49,000 | |
| Dividends | $2,000 | |
| Fees Earned | $81,800 | |
| Salary Expense | $55,000 | |
| Utility Expense | $12,800 | |
| Insurance Expense | $4,300 | |
| $202,300 | $202,300 |
The following information relates to month end adjustments:
(a) Office supplies on hand amounted to $500.
(b) The useful life of the equipment was estimated to be 7 years with no salvage value.
(c) Many clients pay in advance. Fees of $6,000 were earned during the month by performing contracts for clients who had paid in advance.
(d) Salaries earned by employees during the month but not yet recorded amounted to $2,300.
(e) On the first of the month, Best Co. moved in paid 3 month’s rent in advance.
(f) Contracts completed during the month but not yet billed or recorded amounted to $4,600.
Prepare the adjusting entries required at end of the month.
| Date/note | account | Debit | credit |
Question 2 (30 points)
An Adjusted Trial Balance for My Inc., at December 31 appears below.
Prepare journal entries to close the accounts. Use four entries to: (1) close the revenue account, (2) close the expense accounts, (3) close the Income Summary account, and (4) close the Dividends account.
| Date/Note | Account | Debit | Credit | ||
| 31-Dec | |||||
| to close Rev Account | |||||
| 31-Dec | |||||
| to close Exp Accounts | |||||
| 31-Dec | |||||
| to close Income Summary Account | |||||
| 31-Dec | |||||
| to close Dividends Account | |||||
Question 3 (30 points)
Net Sales and Gross Profit
Your Inc., had gross sales revenue of $2,850,000, Cost of Goods Sold of $1,350,000, Sales Returns Allowance of $50,000 and allowed Sales Discount of $100,000.
Compute: (show your work)
| a | Net Sales | $______________ |
| b | Gross Profit | $______________ |
| c | Gross Profit % | _______________% |
Question 4 (30 points)
Notes Receivable Computation
Compute the following about promissory notes and interest in the space provided. Use 360 days in one year AND show your work!
| a | The interest on $70,000 note for 100 days at 6% is: | $___________________ |
| b | The interest on $66,000 note for 90 days at 12% is: | $___________________ |
| c | A 90 day note dated Sept.20th will mature on: | Date________________ |
| d | If Interest Expense on an 8% note for one year is $12,000, then amount of the note is: | $___________________ |
| e | The Maturity value of 10%, 60 days note for $30,000 is: | $___________________ |
Question #5: 30 Points
Mr. Perpetual Inc., uses a periodic inventory system for the purchase of his refrigerators. The beginning inventory and purchases during the year were:
| Jan 1st | Beginning Inventory | 400 Units @ $7.00 | $2,800 |
| Feb 15th | Purchase | 1,000 Units @ $7.50 | $7,500 |
| May 18th | Purchase | 1,400 Units @ $8.00 | $11,200 |
| Oct 25th | Purchase | 1,200 Units @ $8.50 | $10,200 |
| Total Available for sale in the year | 4,000 units | $31,700 | |
At the end of the year on Dec 31st there were $1,300 units left in the inventory. Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation: (show your work)
| Inventory on Dec. 31 2xxx | Cost of Goods Sold in 2xxx | ||
| a | Average Cost | ||
| b | FIFO | ||
| c | LIFO |
Question #6: 30 Points
Prepare a 200% declining balance depreciation table. (Round to the nearest $).
| Year | Computation | Depreciation Expense | Accumulated Depreciation | Book Value |
| $___________ | ||||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8 | ||||
| 9 | ||||
| 10 |
Question #7: 30 Points
The IOU Inc, recently took a mortgage on a property for $200,000. The interest is 12% and the monthly payment is $2,500 Prepare the first four months of the amortization table.
| Payment # | Payment | Interest Expense | Principle Reduction | Balance |
| $200,000 | ||||
| 1 | $2,500 | |||
| 2 | $2,500 | |||
| 3 | $2,500 | |||
| 4 | $2,500 |
Question #8: 30 Points
The stockholders’ equity section of the balance sheet of Our Stock Inc., at December 31, 2xxx, appears as follow:
Answer the following questions based on the stockholders’ equity section given above. Each question is a separate situation, unless otherwise indicated. (Show your work)
| answer | computation | ||
| a | What is the total dollar amount paid annually as dividends to preferred stockholders? | ||
| b | What was the average issue price per share of preferred stock? | ||
| c | What was the average issue price per share of common stock? | ||
| d | How many shares of common stock are outstanding? | ||
| e | What is the book value per share of the common stock? | ||
| f | If all the treasury stock is reissued at a price of $45 per share, what amount will be credited to the account Additional Paid-In Capital: Treasury Stock Transactions? |
Question #9: 30 Points
WeNeed EPS Inc., had net income of $7,800,000 in 2xxx. The company had 500,000 shares of $4 par value common stock and 70,000 shares of 8%, $100 par, preferred stock outstanding throughout the year. Each share of preferred stock is both cumulative and convertible. Each share of preferred stock is convertible into three shares of common stock. Compute the following for 2xxx: (show your work)
| (a) The number of shares to be used in computing basic earnings per share. | |
(b) The number of shares to be used in computing diluted EPS. | |
(c) Basic earnings per share. |
Question #10: 30 Points
In the computation of net cash flows from operating activities for 2020 by the indirect method, determine whether each of the following items would be added to net income, deducted from net income, or omitted from the computation.
Indicate your answer by using the following symbols:
+ (added to net income),
– (deducted from net income),
or 0 (omitted from computation)
| Ans: +/-/0 | |
| A decrease in accounts payable to suppliers of merchandise during 2020. | |
| A loss recognized on the sale of office equipment during 2020 | |
| Depreciation expense during 2020 | |
| Dividends, declared at the end 2020, paid to shareholders next year | |
| An increase in inventory levels during 2020 | |
| A decrease in accounts receivable from customers in 2020 |
