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*E10-15 Presented below are two independent transactions. Both transactions have commercial

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Presented below are two independent transactions. Both transactions have commercial
substance.
1. Sidney Co. exchanged old trucks (cost $64,000 less $22,000 accumulated depreciation) plus
cash of $17,000 for new trucks.The old trucks had a fair market value of $36,000.
2. Lupa Inc. trades its used machine (cost $12,000 less $4,000 accumulated depreciation) for a
new machine. In addition to exchanging the old machine (which had a fair market value of
$9,000), Lupa also paid cash of $3,000.

Instructions
(a) Prepare the entry to record the exchange of assets by Sidney Co.
(b) Prepare the entry to record the exchange of assets by Lupa Inc.

E10-14 During 2008 Nasra Corporation reported net sales of $4,900,000 and net income of

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E10-14 During 2008 Nasra Corporation reported net sales of $4,900,000 and net income of
$1,500,000. Its balance sheet reported average total assets of $1,400,000

Instructions
Calculate the asset turnover ratio.

E10-13 Herzogg Company, organized in 2008, has the following transactions related to intangible

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Herzogg Company, organized in 2008, has the following transactions related to intangible
assets.
1/2/08 Purchased patent (7-year life) $560,000
4/1/08 Goodwill purchased (indefinite life) 360,000
7/1/08 10-year franchise; expiration date 7/1/2018 440,000
9/1/08 Research and development costs 185,000

Instructions
Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make
the adjusting entries as of December 31, 2008, recording any necessary amortization and reporting
all intangible asset balances accurately as of that date.

E10-12 The following are selected 2008 transactions of Franco Corporation.

Price: $


E10-12 The following are selected 2008 transactions of Franco Corporation.
Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of
20 years.

Instructions

Prepare necessary adjusting entries at December 31 to record amortization required by the
events above.

E10-11 On July 1, 2008, Hurtig Inc. invested $720,000 in a mine estimated to have 800,000 tons

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On July 1, 2008, Hurtig Inc. invested $720,000 in a mine estimated to have 800,000 tons
of ore of uniform grade. During the last 6 months of 2008, 100,000 tons of ore were mined and sold.

Instructions
(a) Prepare the journal entry to record depletion expense.
(b) Assume that the 100,000 tons of ore were mined, but only 80,000 units were sold. How are the
costs applicable to the 20,000 unsold units reported?

E10-9 Presented below are selected transactions at Ingles Company for 2008.

Price: $1.99


Presented below are selected transactions at Ingles Company for 2008.

Jan. 1 Retired a piece of machinery that was purchased on January 1, 1998.The machine cost
$62,000 on that date. It had a useful life of 10 years with no salvage value.

June 30 Sold a computer that was purchased on January 1, 2005.The computer cost $40,000. It
had a useful life of 5 years with no salvage value.The computer was sold for $14,000.

Dec. 31 Discarded a delivery truck that was purchased on January 1, 2004. The truck cost
$39,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.

Instructions
Journalize all entries required on the above dates, including entries to update depreciation,
where applicable, on assets disposed of. Ingles Company uses straight-line depreciation. (Assume
depreciation is up to date as of December 31, 2007.)

E10-8 Jerry Grant, the new controller of Blackburn Company, has reviewed the expected useful

Price: $1.99


Jerry Grant, the new controller of Blackburn Company, has reviewed the expected useful
lives and salvage values of selected depreciable assets at the beginning of 2008. His findings
are as follows.



All assets are depreciated by the straight-line method. Blackburn Company uses a calendar year
in preparing annual financial statements. After discussion, management has agreed to accept
Jerry’s proposed changes.

Instructions
(a) Compute the revised annual depreciation on each asset in 2008. (Show computations.)
(b) Prepare the entry (or entries) to record depreciation on the building in 2008

P3-46B Consider the unadjusted trial balance of Star Limo Service Company at September 30,

Price: $3.99


P3-46B Prepare an adjusted trial balance and financial statements [45–60 min]
Consider the unadjusted trial balance of Star Limo Service Company at September 30,
2012, and the related month-end adjustment data.

STAR LIMO SERVICE COMPANY
Trial Balance
30-Sep-12
Cash $6,800
Accounts receivable 1,400
Prepaid rent 5,000
Supplies 1,200
Automobile 72,000
Accumulated depreciation 3,800
Accounts payable 3,600
Salary payable
Simmons, capital 75,000
Simmons, drawing 3,700
Service revenue 9,700
Salary expense 1,400
Rent expense
Fuel expense 600
Depreciation expense
Supplies expense
Total 92,100 92,100

a. Accrued service revenue at September 30, $1,800.

b. One-fifth of the prepaid rent expired during the month.

c. Supplies on hand at September 30, $800.

d. Depreciation on automobile for the month, $1,000.

e. Accrued salary expense at September 30 for one day only.

f. The five-day weekly payroll is $1,200.

Requirements

1. Write the trial balance on a worksheet, using Exhibit 3-8 as an example, and prepare
the adjusted trial balance of Star Limo Service at September 30, 2012. Key
each adjusting entry by letter.

2. Prepare the income statement and the statement of owner’s equity for the month
ended September 30, 2012, and the balance sheet at that date.


P3-42B Lindsey Landscaping has the following independent cases at the end of the year on

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P3-42B Journalizing adjusting entries [15–25 min]
Lindsey Landscaping has the following independent cases at the end of the year on
December 31, 2014.

a. Each Friday, Lindsey pays employees for the current week’s work. The amount of the
weekly payroll is $6,500 for a five-day workweek. This year December 31 falls on a
Wednesday.

b. Details of Prepaid insurance are shown in the account:

Prepaid insurance
jan 1 $5,500


Lindsey prepays a full year’s insurance each year on January 1. Record insurance
expense for the year ended December 31.
c. The beginning balance of Supplies was $4,200. During the year, Lindsey purchased
supplies for $5,100, and at December 31, the supplies on hand total $2,400.

d. Lindsey designed a landscape plan, and the client paid Lindsey $9,000 at the start of the
project. Lindsey recorded this amount as Unearned service revenue. The job will take
several months to complete, and Lindsey estimates that the company has earned 70% of
the total revenue during the current year.

e. Depreciation for the current year includes Equipment, $3,600; and Trucks, $1,400.
Make a compound entry.

Requirement

1. Journalize the adjusting entry needed on December 31, 2014, for each of the previous
items affecting Lindsey Landscaping.


E3-17 Categorizing and journalizing adjusting entries

Price: $2.99


E3-17 Categorizing and journalizing adjusting entries [10–15 min]
Consider the following independent situations at December 31, 2014.

a. On August 1, a business collected $3,300 rent in advance, debiting Cash and crediting Unearned rent revenue. The tenant was paying one year’s rent in advance. At December 31, the business must account for the amount of rent it has earned.

b. Salary expense is $1,700 per day—Monday through Friday—and the business pays employees each Friday. This year December 31 falls on a Thursday.

c. The unadjusted balance of the Supplies account is $3,500. Supplies on hand total $1,700.

d. Equipment depreciation was $300.

e. On March 1, when the business prepaid $600 for a two-year insurance policy, the business debited Prepaid insurance and credited Cash.

Requirements

1. For each situation, indicate which category of adjustment is described.

2. Journalize the adjusting entry needed on December 31 for each situation. Use the
letters to label the journal entries.

E3-15 Applying the time-period concept

Price: $2.99


E3-15 Applying the time-period concept [5–10 min]
Consider the following situations:

a. Business receives $2,000 on January 1 for 10-month service contract for the period January 1 through October 31.

b. Total salary for all employees is $3,000 per month. Employees are paid on the 1st and 15th of the month.

c. Work performed but not yet billed to customers for the month is $900.

d. The company pays interest on its $10,000, 6% note payable of $50 on the first day of each month.

Requirement

1. Assume the company records adjusting entries monthly. Calculate the amount of
each adjustment needed, if any, as of February 28.

E3-14 Sweet Catering completed the following selected transactions during May, 2012

Price: $2.99


E3-14 Comparing accrual and cash-basis accounting, preparing adjusting
entries, and preparing income statements [15-25 min]

Sweet Catering completed the following selected transactions during May, 2012:

1-May Prepaid rent for three months, $1,500.
5 Paid electricity expenses, $400.
9
Received cash for meals served to customers, $2,600.
14 Paid cash for kitchen equipment, $2,400.
23 Served a banquet on account, $3,000.
31 Made the adjusting entry for rent (from May 1).
31 Accrued salary expense, $1,400.
31 Recorded depreciation for May on kitchen equipment, $40.

Requirements

1. Prepare journal entries for each transaction.

2. Using the journal entries as a guide, show whether each transaction would be
handled as a revenue or an expense using both the accrual and cash basis by
completing the following table.

Date
Amount of Revenue (Expense) for May
Cash Basis Amount of
Revenue (Expense)
Accrual-Basis Amount of
Revenue (Expense)

3. After completing the table, calculate the amount of net income or net loss for
Sweet Catering under the accrual and cash basis for May.

4. Considering your results from Requirement 3, which method gives the best picture
of the true earnings of Sweet Catering? Why?



E9-17 Papa’s Fried Chicken bought equipment on January 2, 2012, for $39,000

Price: $2.99


E9-17 Computing depreciation—three methods [10–15 min]

Papa’s Fried Chicken bought equipment on January 2, 2012, for $39,000. The equipment was expected to remain in service for four years and to perform 11,000 fry jobs.

At the end of the equipment’s useful life, Papa’s estimates that its residual value will be $6,000. The equipment performed 1,100 jobs the first year, 3,300 the second year, 4,400 the third, and 2,200 the fourth year.

Requirements

1. Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under double-declining-balance depreciation, the company switched to the straight-line method. Show your computations. Note: Three depreciation schedules must be prepared.

2. Which method tracks the wear and tear on the equipment most closely?

ACC205 Quiz 5 11-1-11

Price: $4.99


1. GAAP prefers companies to use the: (Points : 1) 
       direct write-off method to evaluate bad debts.
       allowance method to evaluate bad debts.
       amortization method to evaluate bad debts.
       360-day method to evaluate bad debts.

2. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1) 
       True 
       False 

3. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1) 
       Decrease the book balance.
       Decrease the bank statement balance.
       Increase the book balance.
       Increase the bank statement balance.

4. Which of the following items will NOT appear on the book side of the reconciliation? (Points : 1) 
       The bank collected a note receivable of $1,000.
       A nonsufficient funds check of $75 was returned to the bank.
       A deposit was in transit.
       The bank charged a service fee of $20.

5. The aging method is a balance sheet approach of estimating uncollectible accounts. (Points : 1) 
       True 
       False


6. A company has Net sales of $850,000, Beginning net receivables of $230,000 and Ending net receivables of $190,000. What is the days' sales in accounts receivable? (Please round to nearest whole day.) (Points : 1) 
       82 days
       99 days
       93 days
       90 days
       None of these is correct


.

7. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.


Travel expense
$120
Office supplies
$200
Equipment rental expense
$70


The journal entry to replenish the account would be which of the following: (Points : 1) 
       Debit various expenses $390, credit Cash $390
       Debit various expenses $390, credit Petty cash fund $390
       Debit Cash $10, credit various expenses $10
       Credit Petty cash fund $390, debit Cash $390





8. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1) 
       $3,275
       $3,075
       $2,875
       $2,675
       None of these is correct

9. A company has the following account balances. What is the acid-test ratio? (Please round to two decimal places.)


Cash
$50,000
Short-term investments
85,000
Net current receivables
120,000
Inventory
145,000
Total current liabilities
275,000
(Points : 1) 
       .93
       1.45
       .64
       1.76
       None of these is correct

10. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1) 
       True 
       False

P5-39B The adjusted trial balance of Daddy’s Music Company at April 30, 2012, follows:

Price: $3.99 


P5-39B Making closing entries, preparing financial statements, and
computing gross profit percentage, inventory turnover, and days in inventory
[20–30 min]

The adjusted trial balance of Daddy’s Music Company at April 30, 2012, follows:

DADDY’S MUSIC COMPANY
Adjusted Trial Balance
April 30, 2012

Cash $4,300
Accounts receivable 38,200
Inventory 17,800
Supplies 600
Furniture 39,400
Accumulated depreciation 9,000
Accounts payable 13,600
Salary payable 1,200
Unearned sales revenue 6,600
Note payable, long–term 14,000
Otousan, capital 40,100
Otousan, drawing 40,000 180,000
Sales revenue
Sales returns 8,000
Cost of goods sold 81,800
Selling expense 19,200
General expense 14,000
Interest expense 1,200
Total $264,500 $264,500


Requirements

1. Journalize Daddy’s closing entries.

2. Prepare Daddy’s single-step income statement for the year.

3. Compute the gross profit percentage, the rate of inventory turnover, and the
days in inventory for the fiscal year ending April 30, 2012. Inventory on hand
one year ago, at April 30, 2011, was $13,000

4. For the year ended April 30, 2011, Daddy’s gross profit percentage was 50%, and
inventory turnover was 4.9 times. Did the results for the year ended April 30, 2012,
suggest improvement or deterioration in profitability over last year?



Brainiac Company 2011

Price: $1.99  


Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck
has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated
useful life of 8 years.Actual miles driven were 15,000 in 2011 and 12,000 in 2012.

Instructions
(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the
units-of-activity method, and (3) the double-declining balance method.
(b) Assume that Brainiac uses the straight-line method.
(1) Prepare the journal entry to record 2011 depreciation.
(2) Show how the truck would be reported in the December 31, 2011, balance sheet.

E10-6 Kelm Company purchased a new machine on October 1, 2008

Price: $2.99
  
E10-6 Kelm Company purchased a new machine on October 1, 2008, 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.

Instructions

Compute the depreciation expense under the following methods for the year indicated.

(a) Straight-line for 2008.

(b) Units-of-activity for 2008, assuming machine usage was 1,700 hours.

(c) Declining-balance using double the straight-line rate for 2008 and 2009.

E10-5 Younger Bus Lines uses the units-of-activity method in depreciating its buses. One bus

Price: $2.99


E10-5 Younger Bus Lines uses the units-of-activity method in depreciating its buses. One bus
was purchased on January 1, 2008, 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.

Instructions

(a) Compute the depreciation cost per mile.

(b) Prepare a depreciation schedule assuming actual mileage was: 2008, 26,000; 2009, 32,000;
2010, 25,000; and 2011, 17,000.

E10-4 Chris Rock has prepared the following list of statements about depreciation.

Price: $2.99  

E10-4 Chris Rock has prepared the following list of statements about depreciation.

1. Depreciation is a process of asset valuation, not cost allocation.

2. Depreciation provides for the proper matching of expenses with revenues.

3. The book value of a plant asset should approximate its market value.

4. Depreciation applies to three classes of plant assets: land, buildings, and equipment.

5. Depreciation does not apply to a building because its usefulness and revenue-producing ability
generally remain intact over time.

6. The revenue-producing ability of a depreciable asset will decline due to wear and tear and to
obsolescence.

7. Recognizing depreciation on an asset results in an accumulation of cash for replacement of
the asset.

8. The balance in accumulated depreciation represents the total cost that has been charged to
expense.

9. Depreciation expense and accumulated depreciation are reported on the income statement.

10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual
value.

Instructions

Identify each statement as true or false. If false, indicate how to correct the statement.

E10-3 On March 1, 2008, Penner Company acquired real estate on which it planned to construct

Price: $1.99


On March 1, 2008, Penner Company acquired real estate on which it planned to construct
a small office building. The company paid $80,000 in cash. An old warehouse on the property was
razed at a cost of $8,600; the salvaged materials were sold for $1,700. Additional expenditures before
construction began included $1,100 attorney’s fee for work concerning the land purchase, $5,000 real
estate broker’s fee, $7,800 architect’s fee, and $14,000 to put in driveways and a parking lot.

Instructions
(a) Determine the amount to be reported as the cost of the land.
(b) For each cost not used in part (a), indicate the account to be debited.

E10-2 Trudy Company incurred the following costs.

Price: $2.99
  
E10-2 Trudy Company incurred the following costs.

1. Sales tax on factory machinery purchased $5,000

2. Painting of and lettering on truck immediately upon purchase 700

3. Installation and testing of factory machinery 2,000

4. Real estate broker’s commission on land purchased 3,500

5. Insurance premium paid for first year’s insurance on new truck 880

6. Cost of landscaping on property purchased 7,200

7. Cost of paving parking lot for new building constructed 17,900

8. Cost of clearing, draining, and filling land 13,300

9. Architect’s fees on self-constructed building 10,000

Instructions

Indicate to which account Trudy would debit each of the costs.

E10-1 The following expenditures relating to plant assets were made by Spaulding Company

Price: $2.99
  

E10-1 The following expenditures relating to plant assets were made by Spaulding Company
during the first 2 months of 2008.

1. Paid $5,000 of accrued taxes at time plant site was acquired.

2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery
was in transit.

3. Paid $850 sales taxes on new delivery truck.

4. Paid $17,500 for parking lots and driveways on new plant site.

5. Paid $250 to have company name and advertising slogan painted on new delivery truck.

6. Paid $8,000 for installation of new factory machinery.

7. Paid $900 for one-year accident insurance policy on new delivery truck.

8. Paid $75 motor vehicle license fee on the new truck.

Instructions

(a) Explain the application of the cost principle in determining the acquisition cost of
plant assets.

(b) List the numbers of the foregoing transactions, and opposite each indicate the account title
to which each expenditure should be debited

*BE10-16 Assume the same information as BE10-15, except that the fair market value of the

Price: $1.99  
 

*BE10-16 Assume the same information as BE10-15, except that the fair market value of the
old delivery equipment is $38,000. 

Prepare the entry to record the exchange.

data from be10-15
The book value of the old delivery equipment is $31,000 (cost $61,000 less accumulated depreciation
$30,000). Its fair market value is $19,000, and cash of $5,000 is paid



*BE10-15 Rivera Company exchanges old delivery equipment for new delivery equipment.

Price: $1.99


*BE10-15 Rivera Company exchanges old delivery equipment for new delivery equipment.
The book value of the old delivery equipment is $31,000 (cost $61,000 less accumulated depreciation
$30,000). Its fair market value is $19,000, and cash of $5,000 is paid. 

Prepare the entry to record the exchange, assuming the transaction has commercial substance.

BE10-14 In its 2005 annual report Target reported beginning total assets of $32.2 billion; ending

Price: $1.00  
 

BE10-14 In its 2005 annual report Target reported beginning total assets of $32.2 billion; ending
total assets of $35.0 billion; property and equipment (net) of $19.4 billion; and net sales of
$51.2 billion. 

Compute Target’s asset turnover ratio.

Spain Company 1100000

Price: $1.99


Information related to plant assets, natural resources, and intangibles at the end of
2011 for Spain Company is as follows: buildings $1,100,000; accumulated depreciation—buildings
$650,000; goodwill $410,000; coal mine $500,000; accumulated depletion—coal mine $108,000.


Prepare a partial balance sheet of Spain Company for these items

BE10-12 Galena Company purchases a patent for $120,000 on January 2, 2008. Its estimated

Price: $1.99
  

BE10-12 Galena Company purchases a patent for $120,000 on January 2, 2008. Its estimated
useful life is 10 years.

(a) Prepare the journal entry to record patent amortization expense for the first year.

(b) Show how this patent is reported on the balance sheet at the end of the first year.

BE10-11 Olpe Mining Co. purchased for $7 million a mine that is estimated to have 35 million

Price: $1.99  


BE10-11 Olpe Mining Co. purchased for $7 million a mine that is estimated to have 35 million
tons of ore and no salvage value. In the first year, 6 million tons of ore are extracted and sold.

(a) Prepare the journal entry to record depletion expense for the first year.

(b) Show how this mine is reported on the balance sheet at the end of the first year.

BE10-10 Chan Company sells office equipment on September 30, 2008, for $20,000 cash.The

Price: $1.99  


BE10-10 Chan Company sells office equipment on September 30, 2008, for $20,000 cash.The
office equipment originally cost $72,000 and as of January 1, 2008, had accumulated depreciation
of $42,000. Depreciation for the first 9 months of 2008 is $5,250. Prepare the journal entries to

(a) update depreciation to September 30, 2008, and 

(b) record the sale of the equipment.

BE10-9 Gomez Company retires its delivery equipment, which cost $41,000. Accumulated depreciation

Price: $1.99  


BE10-9 Prepare journal entries to record the following.

(a) Gomez Company retires its delivery equipment, which cost $41,000. Accumulated depreciation
is also $41,000 on this delivery equipment. No salvage value is received.

(b) Assume the same information as (a), except that accumulated depreciation for Gomez
Company is $39,000, instead of $41,000.

BE10-8 Firefly Company had the following two transactions related to its delivery truck.

Price: $1.99 


BE10-8 Firefly Company had the following two transactions related to its delivery truck.

1. Paid $45 for an oil change.

2. Paid $400 to install special shelving units, which increase the operating efficiency of the truck.

Prepare Firefly’s journal entries to record these two transactions.

BE10-7 On January 1, 2008, the Ramirez Company ledger shows Equipment $29,000 and

Price: $1.99  


BE10-7 On January 1, 2008, the Ramirez Company ledger shows Equipment $29,000 and
Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line
method with a useful life of 10 years and salvage value of $2,000. On this date, the company concludes
that the equipment has a remaining useful life of only 4 years with the same salvage value.

Compute the revised annual depreciation.

BE10-6 Speedy Taxi Service uses the units-of-activity method in computing depreciation on

Price: $1.99  


BE10-6 Speedy Taxi Service uses the units-of-activity method in computing depreciation on
its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi no. 10 cost $33,500 and is expected
to have a salvage value of $500.Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles
in year 2. 

Compute the depreciation for each year.

ACC280 Week 2 E3-3 P3-3A

Price: $ 4.99


E3-3 Conan Industries collected $100,000 from customers in 2008. Of the amount collected,
$25,000 was from revenue earned on account in 2007. In addition, Conan earned $40,000 of revenue
in 2008, which will not be collected until 2009.

Conan Industries also paid $70,000 for expenses in 2008. Of the amount paid, $30,000 was for
expenses incurred on account in 2007. In addition, Conan incurred $42,000 of expenses in 2008,
which will not be paid until 2009.

Instructions
(a) Compute 2008 cash-basis net income.
(b) Compute 2008 accrual-basis net income.

P3-3A Fernetti Advertising Agency, Inc. was founded by John Fernetti in January of 2007.

Presented below are both the adjusted and unadjusted trial balances as of December 31,
2008.

FERNETTI ADVERTISING AGENCY, INC.
Trial Balance
December 31, 2008

Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash $ 11,000 $ 11,000
Accounts Receivable 20,000 22,500
Art Supplies 8,600 5,000
Prepaid Insurance 3,350 2,500
Printing Equipment 60,000 60,000
Accumulated Depreciation $ 28,000 $ 34,000
Accounts Payable 5,000 5,000
Interest Payable –0– 150
Notes Payable 5,000 5,000
Unearned Advertising Fees 7,200 5,600
Salaries Payable –0– 1,300
Common Stock 25,000 25,000
Retained Earnings 500 500
Dividends 12,000 12,000
Advertising Revenue 58,600 62,700
Salaries Expense 10,000 11,300
Insurance Expense 850
Interest Expense 350 500
Depreciation Expense 6,000
Art Supplies Expense 3,600
Rent Expense 4,000 4,000
$129,300 $129,300 $139,250 $139,250

Instructions

(a) Journalize the annual adjusting entries that were made.

(b) Prepare an income statement and a retained earnings statement for the year ending
December 31, 2008, and a balance sheet at December 31.

(c) Answer the following questions.

(1) If the note has been outstanding 6 months, what is the annual interest rate on that note?

(2) If the company paid $12,500 in salaries in 2008, what was the balance in Salaries Payable
on December 31, 2007?


ACC280 Week 2 Q5, 11, 15, & 17 E3-5 E3-12

Price: $6.99


Resource: Ch. 3 of Financial Accounting
Prepare written answers to the following assignments from Ch. 3 of Financial Accounting:

·       Questions 5, 11, 15, & 17
·       Exercise E3-5  
·       Exercise E3-12

5. In completing the engagement in question 3, Marsh pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?

11. Explain the differences between depreciation expense and accumulated depreciation

15. A company fails to recognize an expense incurred but not paid. Indicate which of the following accounts is debited and which is credited in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense.

17. On January 9, a company pays $5,000 for salaries, of which $2,000 was reported as Salaries Payable on December 31. Give the entry to record the payment.

E3-5 Drew Carey Company has the following balances in selected accounts on December 31,
2008.

Accounts Receivable $ -0-
Accumulated Depreciation—Equipment -0-
Equipment 7,000
Interest Payable -0-
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries Payable -0-
Supplies 2,450
Unearned Consulting Revenue 40,000

All the accounts have normal balances.The information below has been gathered at December
31, 2008.

1. Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1,
2008.

2. A count of supplies on December 31, 2008, indicates that supplies of $800 are on hand.

3. Depreciation on the equipment for 2008 is $1,000.

4. Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2008.

5. On December 1, 2008, Drew Carey collected $40,000 for consulting services to be performed
from December 1, 2008, through March 31, 2009.

6. Drew Carey performed consulting services for a client in December 2008. The client will be
billed $4,200.

7. Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding
5-day week (Monday through Friday). On Monday, December 29, employees were
paid for the week ending December 26. All employees worked the last 3 days of 2008.

Instructions
Prepare adjusting entries for the seven items described on page 124.

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 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 was earned during the quarter.

3. Interest of $500 is accrued on the notes payable.

4. Supplies on hand total $700.

5. Insurance expires at the rate of $200 per month.

Instructions

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.





ACC280 Week 1 E1-1 E1-6 E1-14 E1-15 E2-4 E2-5 E7-3

Price: $6.99


·       Chapter 1: 
o   Exercise E1-1
o   Exercise E1-6
o   Exercise E1-14
o   Exercise E1-15 
·       Chapter 2:
o   Exercise E2-4  
o   Exercise E2-5  
·       Chapter 7: 
Exercise E7-3

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.”

Instructions: Categorize the accounting tasks performed by Urlacher as relating to either the identification (I), recording (R), or communication (C) aspects of accounting.

E1-6 Selected transactions for Evergreen Lawn Care Company are listed below.
1. Sold common stock for cash to start business.
2. Paid monthly rent.
3. Purchased equipment on account.
4. Billed customers for services performed.
5. Paid dividends.
6. Received cash from customers billed in (4).
7. Incurred advertising expense on account.
8. Purchased additional equipment for cash.
9. Received cash from customers when service was performed.

Instructions:
List the numbers of the above transactions and describe the effect of each transaction on assets,
liabilities, and stockholders’ equity. For example, the first answer is: (1) Increase in assets and increase
in stockholders’ equity.

E1-14 Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008.


Instructions
(a) Determine Jan Nab’s net income from Deer Park for 2010.
(b) Prepare a balance sheet for Deer Park as of December 31, 2010.

E1-15 Presented below is financial information related to the 2008 operations of Summers
Cruise Company.
Maintenance expense 95,000
Property tax expense (on dock facilities) 10,000
Salaries expense 142,000
Advertising expense 3,500
Ticket revenue 325,000

Instructions:
Prepare the 2008 income statement for Summers Cruise Company.

E2-4 Presented below is information related to Hanshew Real Estate Agency.

Oct. 1 Pete Hanshew begins business as a real estate agent with a cash investment of $15,000
in exchange for common stock.
2 Hires an administrative assistant.
3 Purchases office furniture for $1,900, on account.
6 Sells a house and lot for B. Kidman; bills B. Kidman $3,200 for realty services provided.
27 Pays $700 on the balance related to the transaction of October 3.
30 Pays the administrative assistant $2,500 in salary for October.

Instructions
Prepare the debit-credit analysis for each transaction as illustrated on pages 61–66.

E2-5 Transaction data for Hanshew Real Estate Agency are presented in E2-4.
Instructions:
Journalize the transactions. (You may omit explanations.)

E7-3 Presented below are the assumptions, principles, and constraints discussed in this chapter.

1. Economic entity assumption 6. Matching principle
2. Going concern assumption 7. Full disclosure principle
3. Monetary unit assumption 8. Revenue recognition principle
4. Time period assumption 9. Materiality
5. Cost principle 10. Conservatism

Instructions
Identify by number the accounting assumption, principle, or constraint on page 323 that describes
each situation below. Do not use a number more than once.

(a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use
historical cost principle.)
(b) Indicates that personal and business record-keeping should be separately maintained.
(c) Ensures that all relevant financial information is reported.
(d) Assumes that the dollar is the “measuring stick” used to report on financial performance.
(e) Requires that the operational guidelines be followed for all significant items.
(f ) Separates financial information into time periods for reporting purpose.
(g) Requires recognition of expenses in the same period as related revenues.
(h) Indicates that market value changes subsequent to purchase are not recorded in the accounts






P9-7B On January 1, 2008, Frybendall Company had Accounts Receivable $56,900 and

Price: $3.99
  

P9-7B On January 1, 2008, Frybendall Company had Accounts Receivable $56,900 and
Allowance for Doubtful Accounts $4,700. Frybendall Company prepares financial statements
annually. During the year the following selected transactions occurred.

Jan. 5 Sold $6,300 of merchandise to Klosterman Company, terms n/30.

Feb. 2 Accepted a $6,300, 4-month, 10% promissory note from Klosterman Company for the
balance due.

12 Sold $7,800 of merchandise to Menard Company and accepted Menard’s $7,800,

2-month, 10% note for the balance due.

26 Sold $4,000 of merchandise to Louk Co., terms n/10.

Apr. 5 Accepted a $4,000, 3-month, 8% note from Louk Co. for the balance due.

12 Collected Menard Company note in full.

June 2 Collected Klosterman Company note in full.

July 5 Louk Co. dishonors its note of April 5. It is expected that Louk will eventually pay the
amount owed.

15 Sold $7,000 of merchandise to Peck Co. and accepted Peck’s $7,000, 3-month, 12%
note for the amount due.

Oct. 15 Peck Co.’s note was dishonored. Peck Co. is bankrupt, and there is no hope of future
settlement.

Instructions
Journalize the transactions

P9-7A On January 1, 2008, Kloppenberg Company had Accounts Receivable $139,000, Notes

Price: $2.50


P9-7A On January 1, 2011, Kloppenberg Company had Accounts Receivable $139,000, Notes
Receivable $25,000, and Allowance for Doubtful Accounts $13,200.The note receivable is from Sara Rogers Company. It is a 4-month, 12% note dated December 31, 2007. Kloppenberg
Company prepares financial statements annually. During the year the following selected transactions
occurred.

Jan. 5 Sold $20,000 of merchandise to Dedonder Company, terms n/15.

20 Accepted Dedonder Company’s $20,000, 3-month, 9% note for balance due.

Feb. 18 Sold $8,000 of merchandise to Ludwig Company and accepted Ludwig’s $8,000,
6-month, 9% note for the amount due.

Apr. 20 Collected Dedonder Company note in full.

30 Received payment in full from Sara Rogers Company on the amount due.

May 25 Accepted Jenks Inc.’s $4,000, 3-month, 7% note in settlement of a past-due balance on
account.

Aug. 18 Received payment in full from Ludwig Company on note due.

25 The Jenks Inc. note was dishonored. Jenks Inc. is not bankrupt; future payment is
anticipated.

Sept. 1 Sold $12,000 of merchandise to Lena Torme Company and accepted a $12,000,
6-month, 10% note for the amount due.

Instructions

Journalize the transactions.

P9-6B Schottenheimer Co. closes its books monthly. On June 30, selected ledger account

Price: $3.99


P9-6B Schottenheimer Co. closes its books monthly. On June 30, selected ledger account
balances are:

Notes Receivable $46,000
Interest Receivable $ 300

Notes Receivable include the following.
Date Maker Face Term Interest

May 16 Baylor Inc. $ 6,000 60 days 10%
May 25 Felter Co. 25,000 60 days 9%
June 30 ERV Corp. 15,000 6 months 8%

During July, the following transactions were completed.

July 5 Made sales of $6,200 on Schottenheimer Co. credit cards.

14 Made sales of $700 on Visa credit cards.The credit card service charge is 3%.

14 Added $440 to Schottenheimer Co. credit card customer balances for finance charges
on unpaid balances.

15 Received payment in full from Baylor Inc. on the amount due.

25 Received notice that the Felter Co. note has been dishonored. (Assume that Felter Co.
is expected to pay in the future.)

Instructions

(a) Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable.
(Interest is computed using 360 days.)

(b) Enter the balances at July 1 in the receivable accounts. Post the entries to all of the receivable
accounts.

(c) Show the balance sheet presentation of the receivable accounts at July 31.

P9-6A Mendosa Company closes its books monthly. On September 30, selected ledger account

Price: $3.99  


P9-6A Mendosa Company closes its books monthly. On September 30, selected ledger account
balances are:

Notes Receivable $33,000
Interest Receivable $ 170
Notes Receivable include the following.

Date Maker Face Term Interest
Aug. 16 Chang Inc. $ 8,000 60 days 8%
Aug. 25 Hughey Co. 9,000 60 days 10%
Sept. 30 Skinner Corp. 16,000 6 months 9%

Interest is computed using a 360-day year. During October, the following transactions were
completed.

Oct. 7 Made sales of $6,900 on Mendosa credit cards.

12 Made sales of $900 on MasterCard credit cards.The credit card service charge is 3%.

15 Added $460 to Mendosa customer balances for finance charges on unpaid balances.

15 Received payment in full from Chang Inc. on the amount due.

24 Received notice that the Hughey note has been dishonored. (Assume that Hughey is
expected to pay in the future.)

Instructions

(a) Journalize the October transactions and the October 31 adjusting entry for accrued interest
receivable.

(b) Enter the balances at October 1 in the receivable accounts. Post the entries to all of the receivable
accounts.

(c) Show the balance sheet presentation of the receivable accounts at October 31.

P9-5B At December 31, 2008, the trial balance of Schnakenberg Company contained the following

Price: $3.99  
 

P9-5B At December 31, 2008, the trial balance of Schnakenberg Company contained the following
amounts before adjustment.

Debits Credits
Accounts Receivable $350,000
Allowance for Doubtful Accounts $ 1,500
Sales 850,000

Instructions

(a) Prepare the adjusting entry at December 31, 2008, to record bad debts expense under each
of the following independent assumptions.

(1) An aging schedule indicates that $17,550 of accounts receivable will be uncollectible.

(2) The company estimates that 2% of sales will be uncollectible.

(b) Repeat part (a) assuming that instead of a credit balance, there is a $1,500 debit balance in
Allowance for Doubtful Accounts.

(c) During the next month, January 2009, a $4,500 account receivable is written off as uncollectible.
Prepare the journal entry to record the write-off.

(d) Repeat part (c) assuming that Schnakenberg Company uses the direct write-off method
instead of the allowance method in accounting for uncollectible accounts receivable.

(e) What are the advantages of using the allowance method in accounting for uncollectible
accounts as compared to the direct write-off method?

P9-5A At December 31, 2008, the trial balance of Worcester Company contained the following

Price: $3.99  
 

P9-5A At December 31, 2008, the trial balance of Worcester Company contained the following
amounts before adjustment.

Debits Credits
Accounts Receivable $385,000
Allowance for Doubtful Accounts $ 2,000
Sales 950,000

Instructions

(a) Based on the information given, which method of accounting for bad debts is Worcester
Company using—the direct write-off method or the allowance method? How can you tell?

(b) Prepare the adjusting entry at December 31, 2008, for bad debts expense under each of the
following independent assumptions.

(1) An aging schedule indicates that $11,750 of accounts receivable will be uncollectible.

(2) The company estimates that 1% of sales will be uncollectible.

(c) Repeat part (b) assuming that instead of a credit balance there is an $2,000 debit balance in
Allowance for Doubtful Accounts.

(d) During the next month, January 2009, a $3,000 account receivable is written off as uncollectible.
Prepare the journal entry to record the write-off.

(e) Repeat part (d) assuming that Worcester uses the direct write-off method instead of the allowance
method in accounting for uncollectible accounts receivable.

(f) What type of account is Allowance for Doubtful Accounts? How does it affect
how accounts receivable is reported on the balance sheet at the end of the accounting period?