Inter Acct I Final Review Exercises-Fall 2010 with Solutions

Inter Acct I Final Review Exercises-Fall 2010 with Solutions

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1--Balance Sheet Problem: Presented below is the adjusted trial balance of Abbey Corporation at December 31, 2010. CDS /ED – 12/10
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CDS /ED – 12/10 Debits Credits Cash $ ? Office Supplies 1,200 Prepaid Insurance 1,000 Equipment 48,000 Accumulated Depreciation—Equipment $ 9,000 Trademarks 950 Accounts Payable 10,000 Wages Payable 500 Unearned Service Revenue 2,000
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Solution: ABBEY CORPORATION Balance Sheet December 31, 2010 Assets Current assets Cash. .............................................................................................. $ 6,850 Office supplies. ............................................................................. 1,200 Prepaid insurance. ......................................................................... 1,000 Total current assets. ................................................................ $ 9,050 Equipment. .......................................................................................... 48,000 Less: Accumulated depreciation. ....................................................... 9,000 39,000 Intangible assets—trademark. ............................................................. 950 Total assets. ............................................................................ $49,000 Liabilities and Stockholders’ Equity Current liabilities Accounts payable. ......................................................................... $10,000 Wages payable. ............................................................................. 500 Unearned service revenue. ............................................................ 2,000 Total current liabilities. ......................................................... $12,500 Long-term liabilities Bonds payable. .............................................................................. 9,000 Total liabilities. ............................................................................. 21,500 Stockholders’ equity Common stock. ............................................................................. 10,000 Retained earnings ($20,000 – $2,500*). ....................................... 17,500 Total stockholders’ equity. ...................................................... 27,500 Total liabilities and stockholders’ equity. ............................... $49,000 *[$10,000 – ($9,000 + $1,400 + $1,200 + $900)] CDS /ED – 12/10 9,000 Common Stock 10,000 Retained Earnings 20,000 Service Revenue 10,000 Wages Expense 9,000 Insurance Expense 1,400 Rent Expense 1,200 Interest Expense 900 Total $ ? $ ?
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Income Statement Problem (Multiple-step income statement): Presented below is information related to Holt Company. Retained earnings, December 31, 2006 $ 650,000 Sales 1,400,000 Selling and administrative expenses 240,000 Hurricane loss (pre-tax) on plant (extraordinary item) 290,000 Cash dividends declared on common stock 33,600 Cost of goods sold 780,000 Gain resulting from computation error on depreciation charge in 2005 (pre-tax) 520,000 Other revenue 120,000 Other expenses 100,000 Instructions Prepare in good form a multiple-step income statement for the year 2007. Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year. Solution: Holt Company INCOME STATEMENT For the Year Ended December 31, 2007 Sales $1,400,000 Cost of goods sold 780,000 Gross profit 620,000 Selling and administrative expenses 240,000 Income from operations 380,000 Other revenue 120,000 Other expenses (100,000 ) Income before taxes 400,000 Income taxes (120,000 ) Income before extraordinary item 280,000 Extraordinary loss, net of applicable income taxes of $87,000 (203,000 ) Net income $ 77,000 Per share of common stock— Income before extraordinary item $3.50 Extraordinary item, net of tax (2.54 ) Net income $ .96 CDS /ED – 12/10
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3--Cash Flow Problem: Presented below is a condensed version of the comparative balance sheets for Sondergaard Corporation for the last two years at December 31. CDS /ED – 12/10
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2010 2009 Cash $157,000 $ 78,000 Accounts receivable 180,000 185,000 Investments 52,000 74,000 Equipment 298,000 240,000 Less: Accumulated depreciation (106,000) (89,000) Current liabilities 134,000 151,000 Capital stock 160,000 160,000 Retained earnings 287,000 177,000 CDS /ED – 12/10
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Instructions CDS /ED – 12/10
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(a) Pre pare a stat eme nt of cas h flo ws for 201 0 for Son der gaar d Cor por atio n. (b) Det erm ine Son der gaar d Cor por atio n's free cas h flo w. CDS /ED – 12/10
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Solution: (a) SONDERGAARD CORPORATION Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities Net income. ......................................................................... $160,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense. ................................................... $17,000 Loss on sale of investments. ......................................... 7,000 Decrease in accounts receivable. .................................. 5,000 Decrease in current liabilities.
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This note was uploaded on 02/18/2011 for the course ACCT 325 taught by Professor Warren during the Fall '08 term at Rutgers.

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Inter Acct I Final Review Exercises-Fall 2010 with Solutions

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