1. (TCO 2) Explain how accounts are listed in the trial balance and the importance of the trial balance in preparing financial statements (10 points) and (2) Prepare a trial balance from the following accounts. List the accounts in the proper order.(10 points) Accrued liabilities $10 Revenue $190 Accounts receivable $40 Building $100 Rent expense $140 Wages payable $30 Stockholders’ equity $50
2. (TCO 3) At the end of the period it is necessary to close all temporary accounts. (1) Explain why this process is required (15 points) and (2) provide an example of the closing of an expense account, Supplies Expense in the form of a journal entry.
3. (TCO 4) Thomas Manufacturing had 4 units of their product in inventory at $250 per unit to start the month. During the month, they purchased an additional 7 units at $250 per unit and another 12 units at $275 per unit. Also, at the end of the month, they sold 12 units and ended the month at 8 units. Calculate their ending inventory and cost of goods sold using ONE of the following: LIFO, FIFO or Average Cost methods. Show all computations.
4. (TCO 1) To evaluate the financial operations and health of a business, ratio anaylysis is used. 1) What do profitability ratios indicate about the company? (10 points) 2) Please provide 2 examples of profitability ratios and the related formula and indicate how they can be used in the decision making process.
5. (TCO 4) Inventory valuation methods determine the cost of goods sold and the inventory balance reported by companies. Companies use FIFO, LIFO, Weighted Average and Specific identification. 1) If costs are increasing, which method would yield the highest gross profit? Why? 2) Which method comes closest to matching current costs and revenues? Why?
6. (TCO 6) BagODonuts Company bought a used delivery truck on January 1, 2010, for $19,200. The van was expected to remain in service 4 years (30,000 miles). BagODonuts’ accountant estimated that the truck’s residual value would be $2,400 at the end of its useful life. The truck traveled 8,000 miles the first year, 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth year.
1. Calculate depreciation expense for the truck for each year (2010-2013) using the:
a. Straight-line method.
b. Double-declining balance method.
c. Units of Production method.
(For units-of-production and double-declining balance, round to the nearest two decimals after each step of the calculation.)
2. Which method best tracks the wear and tear on the van?
3. Which method would BagODonuts prefer to use for income tax purposes? Explain in detail why BagODonuts prefers this method.
7. (TCO 7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock:
Preferred Stock: 7%, par value $100 per share, 100,000 shares.
Common Stock: $1 par value, 500,000 shares.
The following transactions occurred during the year:
1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.
12/1/12 – Declared and paid a total dividend of $95,000.
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and preferred stock.
8. (TCO 5) Internal Control Procedures are in place to protect the assets of every business as mentioned in the textbook and our discussions. Of the seven internal control procedures, list five of these controls and describe how each procedure is implemented. (5 points each with 2 points for listing and 3 points for a description) (Points : 25)
9. (TCO 2) Below are the accounts of Super Pool Service, Inc. The accounts have normal balances on June 30, 2012. The accounts are listed in no particular order.
Common stock $5,100
Accounts payable $4,400
Service revenue $17,100
Note payable $9,500
Utilities expense $2,100
Accounts receivable $10,600
Delivery expense $700
Retained earnings $25,600
Salary expense $8,200
Prepare the company’s trial balance as of June 30, 2012, listing accounts in proper sequence, as illustrated in the chapter. For example, Accounts Receivable comes before Land. List the expense with the largest balance first, the expense with the next largest balance second, and so on.
(TCO 4) Linda’s Lampshades started business on Jan. 1, 2001. They had the following inventory transactions:
Journals - Jan. 2001
Supplier Date Received Quantity Unit Cost Amount
Donna 01/10/01 110 12.00 1320.00
Thomas 01/15/01 160 14.00 2240.00
Cindy 01/18/01 150 15.00 2250.00
Customer Date shipped Quantity Sel. Price Amount
Norilene 01/16/01 200 25.00 5000.00
1. Calculate the ending inventory, using the perpetual inventory method:
A. Using FIFO
B. Using LIFO
C. Using Average Cost
2. Prepare the following statement
FIFO LIFO Average Cost
Cost of Sales
(Points : 25)
|Due By (Pacific Time)||04/25/2015 11:30 pm|
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