Winter Semester Support for Excelling in Accounting
1. Vinod, Gaurav and Swami are partners sharing profits equally. They decided that in future Swami...
Vinod, Gaurav and Swami are partners sharing profits equally. They decided that in future Swami willget 1/5th share in profits and remaining profit will be shared by Vinod and Gaurav in the equall ratio.On the day of change, firm’s Goodwill is valued at Rs.45,000. Give Journal entry due to change inprofit sharing ratio.
2. 1. Mary just purchased a bond which pays $60 a year in interest. What is this $60 called? A. coupon
1. Mary just purchased a bond which pays $60 a year in
interest. What is this $60 called?
A. coupon
B. face value
C. discount
D. call premium
E. yield
2. Bert owns a bond that will pay him $75 each year in
interest plus a $1,000 principal payment at maturity. What is the $1,000
called?
A. coupon
B. face value
C. discount
D. yield
E. dirty price
3. A bond’s coupon rate is equal to the annual
interest divided by which one of the following?
A. call price
B. current price
C. face value
D. clean price
E. dirty price
4. The specified date on which the principal amount of
a bond is payable is referred to as which one of the following?
A. coupon date
B. yield date
C. maturity
D. dirty date
E. clean date
5. Currently, the bond market requires a return of
11.6 percent on the 10-year bonds issued by Winston Industries. The 11.6
percent is referred to as which one of the following?
A. coupon rate
B. face rate
C. call rate
D. yield to maturity
E. interest rate
6. The current yield is defined as the annual interest
on a bond divided by which one of the following?
A. coupon
B. face value
C. market price
D. call price
E. dirty price
7. An indenture is:
A. another name for a bond’s coupon.
B. the written record of all the holders of a bond issue.
C. a bond that is past its maturity date but has yet to be repaid.
D. a bond that is secured by the inventory held by the bond’s issuer.
E. the legal agreement between the bond issuer and the bondholders.
8. Atlas Entertainment has 15-year bonds outstanding.
The interest payments on these bonds are sent directly to each of the
individual bondholders. These direct payments are a clear indication that the
bonds can accurately be defined as being issued:
A. at par.
B. in registered form.
C. in street form.
D. as debentures.
E. as callable.
9. A bond that is payable to whomever has physical
possession of the bond is said to be in:
A. new-issue condition.
B. registered form.
C. bearer form.
D. debenture status.
E. collateral status.
10. The Leeward Company just issued 15-year, 8
percent, unsecured bonds at par. These bonds fit the definition of which one of
the following terms?
A. note
B. discounted
C. zero-coupon
D. callable
E. debenture
3. At June 30, 2017, the end of its most recent fiscal year, Green River Computer Consultants’...
At June 30, 2017, the end of its most recent fiscal year, Green River Computer Consultants’ post-closing trial balance was as follows The company underwent a major expansion in July. New staff was hired and more financing was obtained. Green River conducted the following transactions during July 2017, and adjusts its accounts monthly
July 1 Purchased equipment, paying $4,000 cash and signing a 2-year note payable for $20,000. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
2 Issued 20,000 shares of common stock for $50,000 cash. 3 Paid $3,600 cash for a 12-month insurance policy effective July 1.
3 Paid the first 2 (July and August 2017) months’ rent for an annual lease of
office space for $4,000 per month.
6 Paid $3,800 for supplies.
9 Visited client offices and agreed on the terms of a consulting project. Green River will bill the client, Connor Productions, on the 20th of each month for services performed. 10 Collected $1,200 cash on account from Milani Brothers. This client was billed in June when Green River performed the service.
13 Performed services for Fitzgerald Enterprises. This client paid $1,120 in advance last month. All services relating to this payment are now completed.
14 Paid $400 cash for a utility bill. This related to June utilities that were accrued at the end of June.
16 Met with a new client, Thunder Bay Technologies. Received $12,000 cash in advance for future services to be performed.
18 Paid semi-monthly salaries for $11,000.
20 Performed services worth $28,000 on account and billed customers.
20 Received a bill for $2,200 for advertising services received during July. The amount is not due until August 15.
23 Performed the first phase of the project for Thunder Bay Technologies. Recognized $10,000 of revenue from the cash advance received July 16. 27 Received $15,000 cash from customers billed on July 20. Adjustment data:
1. Adjustment of prepaid insurance.
2. Adjustment of prepaid rent.
3. Supplies used, $1,250.
4. Equipment depreciation, $500 per month.
5. Accrual of interest on note payable. (Hint: Use the formula from Illustration 4-18 to compute interest.)
6. Salaries for the second half of July, $11,000, to be paid on August 1.
7. Estimated utilities expense for July, $800 (invoice will be received in August).
8. Income tax for July, $1,200, will be paid in August. The chart of accounts for Green River Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.
Instructions
(a) Enter the July 1 balances in the ledger accounts. (Use T-accounts.)
(b) Journalize the July transactions.
(c) Post to the ledger accounts.
(d) Prepare a trial balance at July 31.
(e) Journalize and post adjusting entries for the month ending July 31.
(f) Prepare an adjusted trial balance.
(g) Prepare an income statement and a retained earning statement for July and a classified balance sheet at July 31.
(h) Journalize and post closing entries and complete the closing process.
(i) Prepare a post-closing trial balance at July 31.
4. Marjorie Knaus, an architect, organized Knaus Architects on January 1, 2018. During the month, Knaus
Marjorie Knaus, an architect, organized Knaus Architects on January 1, 2018. During the month, Knaus Architects completed the following transactions: A. Issued common stock to Marjorie Knaus in exchange for $30,000. B. Paid January rent for office and workroom, $2,500. C. Purchased used automobile for $28,500, paying $6,000 cash and giving a note payable for the remainder. D. Purchased office and computer equipment on account, $8,000. E. Paid cash for supplies, $2,100. F. Paid cash for annual insurance policies, $3,600. G. Received cash from client for plans delivered, $9,000. H. Paid cash for miscellaneous expenses, $2,600. I. Paid cash to creditors on account, $4,000. J. Paid installment due on note payable, $1,875. K. Received invoice for blueprint service, due in February, $5,500. L. Recorded fees earned on plans delivered, payment to be received in February, $31,400. M. Paid salary of assistants, $6,000. N. Paid gas, oil, and repairs on automobile for January, $1,300. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Ac-counts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Ac¬counts Payable, Common Stock, Professional Fees, Salary Expense, Blueprint Expense, Rent Expense, Automobile Expense, Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balan
5. Which of the following expenditures would never qualify as an exploration and evaluation asset?
Which of the following expenditures would never qualify as an exploration and evaluation asset?
(a) Expenditure for acquisition of rights to explore.
(b) Expenditure for exploratory drilling.
(c) Expenditures related to the development of mineral resources.
(d) Expenditure for activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource.
6. Which item among the following is not an intangible asset:
Which item among the following is not an intangible asset:
a. A trademark
b. A copyright
c. A patent
d. Goodwill
e. All of the above are intagible assets
7. The company provides consulting services and bills its customer $3,000 for these service
The company provides consulting services and bills its customer $3,000 for these service
8. Case 1 Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing of venues and...
Case 1 Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing of venues and is steadily losing market share despite favorable market testing of its products/recipes. The company's strategy has traditionally been defined gaining increased market share through customer satisfaction. Management has asked your internal audit function to help them understand the reasons for declining sales at the Uptown location and how the decline might be related to internal operations. Your prior internal audit experience and direct observation of work performed at the troubled location identified the following information:
9. Terri Ronsin had recently been transferred to the Home Security
Terri Ronsin had recently been transferred to the Home Security Systems Division of National Home Products. Shortly after taking over her new position as divisional controller, she was asked to develop the division’s predetermined overhead rate for the upcoming year. The accuracy of the rate is important because it is used throughout the year and any overapplied or under- applied overhead is closed out to Cost of Goods Sold at the end of the year. National Home Products uses direct labor-hours in all of its divisions as the allocation base for manufacturing overhead.
To compute the predetermined overhead rate, Tern divided her estimate of the total manufacturing overhead for the coming year by the production manager’s estimate of the total direct labor-hours for the coming year. She took her computations to the division’s general manager for approval but was quite surprised when he suggested a modification in the base. Her conversation with the general manager of the Home Security Systems Division. Harry Irving, went like this:
Ronsin:
Here are my calculations for next year’s predetermined overhead rate. If you approve, we can enter the rate into the computer on January 1 and be up and running in the job-order costing system right away this year.
Irving:
Thanks for coming up with the calculations so quickly, and they look just fine. There is, however, one slight modification I would like to see. Your estimate of the total direct labor- hours for the year is 440.000 hours. How about cutting that to about 420,000 hours?
Ronsin:
I don’t know if I can do that. The production manager says she will need about 440,000 direct labor-hours to meet the sales projections for the year. Besides, there are going to be over 430,000 direct labor-hours during the current year and sales are projected to be higher next year.
Irving:
Ten, I know all of that. I would still like to reduce the direct labor-hours in the base to something like 420,000 hours. You probably don’t know that I had an agreement with your predecessor as divisional controller to shave 5% or so off the estimated direct labor-hours every year. That way, we kept a reserve that usually resulted in a big boost to net operating income at the end of the fiscal year in December. We called it our Christmas bonus. Corporate headquarters always seemed as pleased as punch that we could pull off such a miracle at the end of the year. This system has worked well for many years, and I don’t want to change it now.
Required:
1. Explain how shaving 5% off the estimated direct labor-hours in the base for the predetermined overhead rate usually results in a big boost in net operating income at the end of the fiscal year.
2. Should Tern Ronsin go along with the general manager’s request to reduce the direct labor- hours in the predetermined overhead rate computation to 420,000 direct labor-hours?
10. ZXY Company is a food product company. ZXY is considering expanding to two new products and a...
ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percent return on investments. You have been asked to recommend whether or not to make the investment.
- Analysis of financial information.
- Identification of risks associated with the investment. Consider:
- How risky the project appears.
- How far off your estimates of revenues and expenses can be before your decision would change.
- The difference if the company were to use a straight line versus a MACRS depreciation.
- Recommendation for a course of action.
- Explanation of criteria supporting your recommendation.
11. Problem 22-10 You have been asked by a client to review the records of Crane Company, a small man...
Problem 22-10 You have been asked by a client to review the records of Crane Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, a accounting records. Your examination reveals the following information. 1. Crane Company commenced business on April 1, 2015, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual stateme income before closing and before deducting income taxes. Year Ended Income Before Taxes $72,316 2016 2017 112,514 2018 104,616 2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each ye amounted to: 2016 $6,565 2017 none 2018 5,646 Sales price was determined by adding 25% to cost. Assume that the consigned machines are sold the following year. 3. On March 30, 2017, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2017, when cash was received for $6,161. The machine (Title passed on March 30, 2017.) 4. All machines are sold subject to a 5-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to of 1% of sales. Th costs incurred.