Conquering Accounting Modules: A Journey to Academic Success

Published: 9 months ago

Conquering Accounting Modules: A Journey to Academic Success

15. The cash account for Collegiate Sports Co. on November 1, 2014, indicated a balance of $81,145.

PR 7-4B Bank reconciliation and entries

The cash account for Collegiate Sports Co. on November 1, 2014, indicated a balance of $81,145. During November, the total cash deposited was $293,150, and checks written totaled $307,360. The bank statement indicated a balance of $112,675 on November 30, 2014. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $41,840.

b. A deposit of $12,200, representing receipts of November 30, had been made too late to appear on the bank statement.

c. A check for $7,250 had been incorrectly charged by the bank as $2,750.

d. A check for $760 returned with the statement had been recorded by Collegiate Sports Co. as $7,600. The check was for the payment of an obligation to Ramirez Co. on account.

e. The bank had collected for Collegiate Sports Co. $7,385 on a note left for collection.

The face of the note was $7,000.

f. Bank service charges for November amounted to $125.

g. A check for $2,500 from Hallen Academy was returned by the bank because of insufficient funds.

Instructions

1. Prepare a bank reconciliation as of November 30.

2. Journalize the necessary entries. The accounts have not been closed.

3. If a balance sheet were prepared for Collegiate Sports Co. on November 30, 2014, what amount should be reported as cash?

16. Rolling Hills Golf Inc. was organized on July 1, 2012. Quarterly financial statements are prepared....

Rolling Hills Golf Inc. was organized on July 1, 2012. Quarterly financial statements are prepared. The trial balance and adjusted trial balance on September 30 are shown here.

Instructions

(a) Journalize the adjusting entries that were made.

(b) Prepare an income statement and a retained earnings statement for the 3 months ending September 30 and a classified balance sheet at September 30.

(c) Identify which accounts should be closed on September 30.

(d) If the note bears interest at 12%, how many months has it been outstanding?

17. Luzadis Company makes furniture using the latest automated technology. The company uses a...

18. Yoshi Company completed the following transactions and events involving its delivery trucks....

Yoshi Company completed the following transactions and events involving its delivery trucks.

2014

Jan. 1

Paid $22,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account.

Dec. 31 Recorded annual straight-line depreciation on the truck.

2015

Dec. 31

Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck.

2016

Dec. 31

Recorded annual straight-line depreciation on the truck.

Dec. 31 Sold the truck for $5,500 cash.

Required:

Calculate depreciation for year 2015.

19. BOND VALUATION The Pennington Corporation issued a new series of bonds on January 1, 1992. The bonds

BOND VALUATION The Pennington Corporation issued a new series of bonds on January 1, 1992. The bonds were sold at par ($1,000); had a 12% coupon; and mature in 30 years, on December 31, 2021. Coupon payments are made semiannually (on June 30 and December 31).

a. What was the YTM on January 1, 1992?

b. What was the price of the bonds on January 1, 1997, 5 years later, assuming that interest rates had fallen to 10%?

c. Find the current yield, capital gains yield, and total return on January 1, 1997, given the price as determined in part b.

d. On July 1, 2015, 6½ years before maturity, Pennington’s bonds sold for $916.42. What were the YTM, the current yield, the capital gains yield, and the total return at that time?

e. Now assume that you plan to purchase an outstanding Pennington bond on March 1, 2015, when the going rate of interest given its risk was 15.5%. How large a check must you write to complete the transaction? (This is a difficult question.)

20. 3-20 CVP exercises. The Doral Company manufactures and sells pens.

3-20 CVP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit Consider each case separately: 1a. What is the current annual operating income? b. What is the present breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A $0.04 per unit increase in variable costs 3. A 10% increase in fixed costs and a 10% increase in units sold 4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 5. A 10% increase in fixed costs 6. A 10% increase in selling price and a $20,000 increase in fixed costs

21. To increase sales from their present annual $24 million, Kim Chi Company, a wholesaler, may try more...

To increase sales from their present annual $24 million, Kim Chi Company, a wholesaler, may try more liberal credit standards. Currently, the firm has an average collection period of 30 days. It believes that, with increasingly liberal credit standards, the following will result:

The prices of its products average $20 per unit, and variable costs average $18 per unit. No bad-debt losses are expected. If the company has a pre-tax opportunity cost of funds of 30 percent, which credit policy should be pursued? Why? (Assume a 360-day year.)

22. REPLACEMENT ANALYSIS The Chang Company is considering the purchase of a new machine to replace an...

REPLACEMENT ANALYSIS

The Chang Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently that Chang’s engineers estimate that it will produce after-tax cash flows (labor savings and depreciation) of $9,000 per year. The new machine will cost $40,000 delivered and installed, and its economic life is estimated to be 10 years. It has zero salvage value. The firm’s WACC is 10%, and its marginal tax rate is 35%. Should Chang buy the new machine? Explain.

23. Shaw Company sells goods that cost $300,000 to Richard Company for $410,000 on January 2, 2015. T...

Shaw Company sells goods that cost $300,000 to Richard Company for $410,000 on January 2, 2015. The sales price includes an installation fee, which is valued at $40,000. The fair value of the goods is $370,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. The company paid bills for $800,000 on January 31, 2015.

• a) Prepare the journal entries (if any) to record the sale on January 2, 2015 until January 31, 2015.

• b) Shaw prepares an income statement for the first quarter of 2015, ending on March 31, 2015. (installation was completed on June 18, 2015). Prepare journal needed for March 31, 2015.

24. Terry Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000...

Terry Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2002. The weighted average number of shares outstanding in 2002 was 50,000 shares. Terry Corporation's common stock is selling for $60 per share on the New York Stock Exchange. Terry Corporation's price-earnings ratio is a. 15 times. b. 18.8 times. c. 6 times. d. 3.8 times. Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments? Fixed costs are $600,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars? a. $2, 400,000. b. $1, 400,000. c. $800,000. d. $1, 800,000. Craft Manufacturing Company's accounting records reflect the following inventories: During 2002, $500,000 of raw materials were purchased, direct labor coats amounted to $600,000, and manufacturing overhead incurred was $480,000. If Craft Manufacturing Company's cost of goods manufactured for 2002 amounted to $1, 390,000, its cost of goods sold for the year is a. $1, 350,000. b. $1, 500,000. c. $1, 430,000. d. $1, 250,000.

25. Explain the difference between cost flow and the movement of

Explain the difference between cost flow and the movement of goods.

26. Natalie had a very busy December. At the end of the month, after journalizing and posting the...

Natalie had a very busy December. At the end of the month, after journalizing and posting the December transactions and adjusting entries, Natalie prepared the following adjusted trial balance.

Instructions

Using the information in the adjusted trial balance, do the following.

(a) Prepare an income statement and an owner’s equity statement for the 2 months ended December 31, 2011, and a classified balance sheet as at December 31, 2011. The note payable has a stated interest rate of 6%, and the principal and interest are due on November 16, 2013.

(b) Natalie has decided that her year-end will be December 31, 2011. Prepare and post closing entries as of December 31, 2011.

(c) Prepare a post-closing trial balance.

27. What is Len's income tax?

Len Mast earned $2,200 for the last two weeks. He is married, is paid biweekly, and claims 3 exemptions. What is Len's income tax? Use the percentage method.

28. Justin's Plant Store, a retailer, started operations on January 1. 

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear...

29. The unadjusted trial balance of Arlington Air Purification System at December 31, 2014, and the d...

The unadjusted trial balance of Arlington Air Purification System at December 31,

2014, and the data needed for the adjustments follow.

ARLINGTON AIR PURIFICATION SYSTEM

Unadjusted Trial Balance

December 31, 2014

Adjusted trial balance,

Adjustment data at December 31 follow:

a. On December 15, Arlington contracted to perform services for a client receiving

$2,700 in advance. Arlington recorded this receipt of cash as Unearned Revenue.

As of December 31, Arlington has completed $1,300 of the services.

b. Arlington prepaid two months of rent on December 1

c. Arlington used $650 of office supplies.

d. Depreciation for the equipment is $650.

e. Arlington received a bill for December?s online advertising, $600. Arlington will

not pay the bill until January. (Use Accounts Payable.)

f. Arlington pays its employees on Monday for the previous weekly wages.

Its employees earn $3,500 for a five-day workweek. December 31 falls on

Wednesday this year.

g. On October 1, Arlington agreed to provide a four-month air system check

(beginning October 1) for a customer for $3,200. Arlington has completed

the system check every month, but payment has not yet been received and no

entries have been made.

Requirements

1. Journalize the adjusting entries on December 31.

2. Using the unadjusted trial balance, open the T-accounts with the unadjusted

balances. Post the adjusting entries to the T-accounts.

3. Prepare the adjusted trial balance.

4. How will Arlington Air Purification System use the adjusted trial balance?