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SolutionsExam1Su_09 - Print Last Name Print First Name...

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Unformatted text preview: Print Last Name Print First Name Score ACCT 2101 EXAM 1 SUMMER 2009 (100 PTS.) instructions: 1. This exam is open book, open notes. Sharing of materials is not permitted. The only electronic device permitted is the calculator that will be supplied. 2. You must show all work to receive any credit. 3. If you feel a problem is unclear, you may state your assumption in writing and give the best answer you can. 4. Make sure you have a cover sheet plus 7 numbered pages. WW “Typical accountant! Always looks at the bottom’line first." l (5 pts.) Accounts payable = $44,000 Accounts receivable = $13,000 Advertising expense = $50,000 Cash 2 $19,000 , Supplies expense = $33,000 Rent expense = $22,000 Capital stock = $89,000 Utilities expense = $17,000 Salaries expense = $45,000 Land = $400,000 Consulting revenues = $176,000 Interest revenues = $28,000 Net income = $ ‘ 11. (8 pts.) , Prepare journal entries for the following transactions of J EA Services: 1) Paid $75,000 cash for office equipment. (WM, x 55' z" 4) Paid rent expense of $900. {3 vssvr 2 i] f 111. (3 pts.) Laureate Co. has a beginning retained earnings balance of $8, 200 and an ending retained earnings balance of $10, 700. The company’ s net income was $4, 900 during the year What amount of dividends were paid? $ “3; IV. (10 pts. ) * The following data is available for Sanderson Corp at the start of 2006: Assets $900,000 Liabilities ‘ $700,000 Owners Equity $200,000 During 2006, the following transactions occurred: 1) Sanderson borrowed $55,000 from a bank. 2) Purchased $79,000 of inventory on credit. 3) Issued capital stock for $190,000 cash. 4) Paid $30,000 for utilities expense. 5) Billed customers $12,000 for fees earned, For each transaction, indicate whether there was an Increase, Decrease, or No Effect on: Assets, Liabilities, and Owners Equity. Assets Liabilities Owners Equity 2) 3) 4) 5) t 5 am: V. (6 pts.) Brown Co. reported the following amounts at the end of the first year of operations: capital stock $40,000; sales revenue $95,000; total assets $80,000; no dividends; and total liabilities $30,000. VI. (7 pts.) The following balances were present prior to closing the books of Julie’s Publishing House: Rent expense $38,000 Copyrights $98,000 Sales revenue $470,000 Cost of sales $300,000 Insurance expense $49,000 Rent revenue $18,000 Selling expense $90,000 Accounts payable $75,000 Dividends $32,000 Capital stock $128,000 Prepare the closing entries needed. VII. (12 pts.) For each of the following items, prepare the necessary adjusting entries at 12/31/06 for EHS, Inc. (Assume the initial entries were done the conceptually correct way): a) On 7/1/06, EHS paid a rth—ree y—ear preiniurn of $7200 on an insurance policy. 3 3 3 c) On 6/15/06, EHS bought $2500 of supplies for cash As of 12/31 /,06 EHS had used $1700 of supplies during the year. , . _ . . a, d) On 11/1/06, EHS borrowed $150,000 at 8% annual interest, due in two years. VIII. (14 pts.) -- Multiple Choice: Circle the w best answer for each question. 1. Cash over and short is: a. a liability account. b. an asset account. 0. an expense account. d. a revenue account. ,Rcsmm/ Either (c) or (d) is correct depending on whether the account has a debit or a credit balance. was“ 2. Cash includes: a. cash in bank and cash on hand. b. petty cash and money orders. c. lOUs and postage stamps. d. All of the above are correct. Na gfiegiOnly (a) and (b) are correct. 3. Internal control of cash requires that cash-handling activities: 12% and related record-keeping activities should be assigned to different individuals. b. should be performed by a firm's bank exclusively. c. and related record—keeping activities should be assigned to one individual. d. and balancing the bank statement should be performed by the same individual. e. None of the above is correct. 4. The account Allowance for Doubtful Accounts is classified as a(n) a. liability. b contra account of Bad Debt Expense. c expense. of contra account to Accounts Receivable. e contra account to Net Sales. 5. When an account is written off using the allowance method: ' net realizable value of total accounts receivable will increase. net accounts receivable will decrease. allowance account will increase. net income will decrease. t . net accounts receivable will stay the same. 6. The discounting of a note receivable with recourse gives rise to a(n): S? v “2654 n s . . r3123 contingent liability contra—asset contra—revenue c d. extraordinary item 6. bad debt write—off 7. Which item(s), taken from a bank reconciliation, would require an entry in a firm's journal? _ outstanding checks which have not yet cleared the bank. bank service charge. c. one of the firm's checks written for $54 recorded incorrectly by the bank in the firm’s bank statement as $45. d. All of the above require an entry on the company’s books. 6. Only (b) and (c) require an entry on the company's books. 5 {D IX. (5 pts.) On September 1, 2007, Letchem Company establishes a petty cash fund by issuing a check for $250 to John Jones, the custodian of the petty cash fund. On September 30, 2007, John Jones submitted the following paid petty cash vouchers for replenishment of the petty cash fund when there is $15 cash in the fund: Freight—in $25 Office Supplies Expense 75 Entertainment of Clients 59 Postage Expense - 80 Prepare the journal entry for the replenishment of the fimd on September 30. X. (5 pts.) The following is a partial list of accounts from Pearl Jam Company: Accounts receivable Accounts payable Building Cash Common stock Dividends Insurance expense Retained earnings Salary expense Salary payable Service revenue 1 13,200 it For the trial balance, the debit column total = $ 93 E“ 6 W XI. (10 pts.) Listed below are items that may be useful in preparing the March 2007 bank reconciliation for the Armstrong Machine Works. Using the code letters below, insert in the space before each item the letter where the amount would be located or otherwise treated in the bank reconciliation process. Code Located or Treated A Add to the cash balance per books 8 Deduct from the cash balance per books C Add to the cash balance per bank D Deduct from the cash balance per bank E Does not affect the bank reconciliation ti» 1. Included with the bank statement materials was a check from Joe Terrell for $40 stamped "non-sufficient funds”. i? 2. A personal deposit by Ted Armstrong to his personal account in the amount of $300 for dividends on his General Electric common stock was credited by the bank to the company account. . 3. The bank statement included a debit memorandum for $22.00 for four books of blank checks for Armstrong Machine Works. 4. The bank statement contains a credit memorandum for $42.75 interest on the average checking account balance. ,5. The daily deposits of March 30 and March 31 for $3,362 and $3,125, respectively, were not included in the bank statement postings. i 6. Two checks totaling $316. 86 which were outstanding at the end of February cleared in March and were returned with the March statement. _,____ 7. The bank statement included a credit memorandum dated March 28, 2007, for $62.00 for the monthly interest on a 6—month, $15,000 certificate of deposit that the company owns. «ti; 8. Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65. did not clear the bank during March. 9. On March 24, 2007, Armstrong Machine Works delivered to the bank for collection a $3,400, 3-month note from Tom Jacobs. A credit memorandum dated March 29, 2007, indicated the collection of the note and $102.00 of interest. as: 10. The bank statement included a debit memorandum for $20.00 for the collection service on the above note and interest. X11. (4 pts.) 1) The percentage of sales method for Schlosberg, Inc. reveals $2, 200 of uncollectible accounts. The allowance for uncollectible accounts prior to adjustment has a debit balance of $300. The amount of the adjusting entry will be: S Q. , s: a 2) St. John’s Corp. uses the percentage of receivables method to estimate uncollectibles. The aging schedule reveals $2.680 of uncollectible accounts Prior to adjustment, allowance for uncollectible accounts has a debit balance of $80. The expense reported on the income statement for uncollcctibles v.1 Willbe: $ e g ‘ .Q- .45” a. 3" i . a »: ”a > 3 kw. ’ 7 ll XIII. (5 pts.) Grissom Company had a $400 credit balance in Allowance for Doubtful Accounts at December 31, 2007, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Estimated Percentage Uncollcctible » , , Current Accounts $140,000 1% :7,- f' ’7’ é 1—30 days past due 15,000 - 3% :1 31-60 days past due 12,000 1:: 6% f: 6l~90 days past due 5,000 ,i; 12% Over 90 days past due 7 .000 11:: 30% 7;: Total Accounts Receivable S 179,000 Prepare the necessary adjusting journal entry on December 31, 2007. MW 5%: 1 XIV. (6 pts.) Questions on Illustrative Financial Statement Extracts 1. For Kellog Company (page 51), the average collection period is referred to as “days sales outstanding.” What do you conclude about the collection of receivables in relation to the invoice terms? 2. Disregarding the form of the company name, and just based on the information provided about the company, which one of the companies in the Accmed Expenses section (pages 24- 25) could not possibly be a sole proprietorship or partnership? 1 1 3. For Young Broadcasting (pg. 52), what is the net realizable value of its accounts receivable as of 12/31/06? $ :21, “l a {:32 :1: t? .K‘ ...
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