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:

Account Receivable$5,700 
Prepaid Rent$12,000 
Office Supplies$2,500 
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
Fees Earned $81,800
Salary Expense$55,000 
Utility Expense$12,800 
Insurance Expense$4,300 

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.


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.

 to close Rev Account 
 to close Exp Accounts 
 to close Income Summary Account 
 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)

aNet Sales$______________
bGross Profit$______________
cGross 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!

aThe interest on $70,000 note for 100 days at 6% is:$___________________
bThe interest on $66,000 note for 90 days at 12% is:$___________________
cA 90 day note dated Sept.20th will mature on:Date________________
dIf Interest Expense on an 8% note for one year is $12,000, then amount of the note is:$___________________
eThe 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 1stBeginning Inventory400 Units @ $7.00$2,800
Feb 15thPurchase1,000 Units @ $7.50$7,500
May 18thPurchase1,400 Units @ $8.00$11,200
Oct 25thPurchase1,200 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 2xxxCost of Goods Sold in 2xxx
aAverage Cost  

Question #6: 30 Points

On Jan1st Appreciate Depreciation Inc., purchased a new Walk-In Freezer for $36,000 and paid an additional $4,000 for delivery and installation. The estimated useful life is 10 years with an estimated residual value of $5,000.

Prepare a 200% declining balance depreciation table. (Round to the nearest $).

YearComputationDepreciation ExpenseAccumulated DepreciationBook Value

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 #PaymentInterest ExpensePrinciple ReductionBalance

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)

aWhat is the total dollar amount paid annually as dividends to preferred stockholders?  
bWhat was the average issue price per share of preferred stock?  
cWhat was the average issue price per share of common stock?  
dHow many shares of common stock are outstanding?  
eWhat is the book value per share of the common stock?  
fIf 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 

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