Mgmt_200_Spring_2008_Exam_1_Solution(2,12)

Mgmt_200_Spring_2008_Exam_1_Solution(2,12) - Name: _ PUID:...

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Name: ________________________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Spring 2008 Exam 1 – February 11, 2008 – Solution Outline This exam consists of 4 questions on 14 pages (excluding this cover page) for a total of 100 points. Time allowed: 90 minutes. Answer all questions. To ensure full credit and to maximize partial credit, clearly show all supporting calculations. The exam is closed book. A calculator is permitted. GOOD LUCK . Question 1 (25 points) ________ Question 2 (25 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________
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Question 1. Journal entries and ledger accounts (25 points) Lund’s Chocolates Inc. (LUND) has been in business for several years. It has six stores in central Indiana and sells a wide variety of imported and local chocolate products. Required: a. Prepare the journal entry (entries) for each of the following transactions that occurred during 2007. 1. LUND purchased land for a seventh store location for $220,000 on January 1, 2007. LUND paid $20,000 cash and signed a ten-year note for the balance of the purchase price. Land 220,000 Cash 20,000 Note payable 200,000 2. LUND purchased new store equipment for $30,000 cash. Store Equipment 30,000 Cash 30,000 3. LUND purchased new inventory from various suppliers for $62,000. All purchases were on credit with terms ranging from 30 to 60 days. Inventory 62,000 Accounts payable 62,000 4. Sales for 2007 totaled $125,000. Of this amount $73,000 was for cash sales and the remainder was on account. Cash 73,000 Accounts receivable 52,000 Sales revenue 125,000 Question 1 continued over . . . Mgmt 200 – Exam 1 Solution Outline– Spring 2008 – page 1
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5. The items sold in transaction 4 cost LUND $81,000. Cost of goods sold 81,000 Inventory 81,000 6. LUND collected $47,000 from their credit account customers. Cash 47,000 Accounts receivable 47,000 7. During 2007 LUND paid $49,000 to suppliers for inventory previously purchased on account. Accounts payable 49,000 Cash 49,000 8. LUND incurred operating expenses of $23,000 during 2007. $18,000 was paid in cash and the remaining $5,000 will be paid in January 2008. Operating expenses 23,000 Cash 18,000 Expenses payable 5,000 9. The note used to purchase the land in transaction 1 requires 6% interest to be paid annually and that the principal to be repaid in ten equal installments of $20,000. On December 28, 2007 LUND paid $12,000 in interest and $20,000 in principal for the 2007 payment due. Note payable 20,000 Interest expense 12,000 Cash 32,000 Question 1 continued over . . . Mgmt 200 – Exam 1 Solution Outline– Spring 2008 – page 2
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Mgmt_200_Spring_2008_Exam_1_Solution(2,12) - Name: _ PUID:...

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