Final Examination Answers.docx - Answers to Comprehensive...

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Answers to Comprehensive Final Examination Instructor: Farima Fakoor Time Allowed: One Week Solution for Problem # 1 – ( a ) Record necessary adjusting and correcting entries. 1. Dec. 31 Prepaid insurance 7,450 Insurance Expense 7,450 2. Sep. 30 Cash 18,000 Unearned Rent Revenue 18,000 Dec. 31 Unearned Rent Revenue 3,000 Rent Revenue 3,000 (18,000/18 x 3 months = 3,000) 3. Dec. 31 Depreciation Expense 20,800 Accumulated Depreciation 20,800 (15,600 + 5,200 = 20,800) Acquisitions and retirement of Plant and Equipment = (260,000 - 156,000) = 104,000 Depreciation Expense for acquisitions and retirements = 104,000 x 5% = 5,200 Depreciation Expense for the remaining = 156,000 x 10%=15,600 4. Dec. 31 Sales 10,000 Accounts Receivable 10,000 5. Dec. 31 Salaries Expense 4,200 Salaries Payable 4,200 6. Dec. 31 Bad debts Expense 4,368 Allowance for Doubtful Accounts 4,368 (218,400 x 2% = 4,368)
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7. Dec. 31 Interest Receivable 2,625 Interest Revenue 2,625 (70 x $1,000 x 9% x 5/12 = 2,625) 8. Dec. 31 Rent Expense 20,000 Prepaid Rent 20,000 (2,500 x 8 months = 20,000) ( b ) Indicate which of the adjusting entries may be reversed at the beginning of the next accounting period. 1. The adjusting entries for interest received from bond can be reversed at the beginning of the next accounting period. Jan. 1 Interest Revenue 2,625 Interest Receivable 2,625 (70 x $1,000 x 9% x 5/12 = 2,625) Solution for Problem # 2 – Case 1: $800,000 is the amount of an 8% annuity due for 4 periods. Using the table factor for the future value of an 8% ordinary annuity for 4 periods, and multiplying by (1.08): 4.50611 × (1.08) = 4.86660. Periodic payments = $800,000 ÷ 4.86660 = $164,386 Case 2: Since interest is compounded semiannually, need to divide the 12% annual interest rate by 2, and use the table factor for the future value of a 6% ordinary annuity for 5 periods. Periodic payments = $800,000 ÷ 5.63709 = $141,917
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Final Examination Answers.docx - Answers to Comprehensive...

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