Exam1W10 - NAME BUS 214, Financial Accounting Exam 1 Winter...

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NAME BUS 214, Financial Accounting Exam 1 — Winter 2010 Question 1 (110 points) The ABC Company operates a retail store that sells Office Supplies. The store is located in rented space in a Shopping Mall. The ABC Company started business several years ago. As of December 31, 2009, the ABC Company had the following account balances: ABC Company Trial Balance December 31, 2009 Debit Credit Cash $ 99,000 Accounts receivable 300,000 Supplies inventory 20,000 Merchandise inventory 550,000 Purchases -0- Freight-in -0- $ -0- Purchase discounts -0- Prepaid rent -0- Prepaid insurance -0- Land 60,000 Store fixtures 100,000 Accumulated depreciation—Store fixtures 20,000 Accounts payable 600,000 Interest payable -0- 8% Note payable -0- Common stock, $1 par 40,000 Additional paid-in capital 360,000 Retained earnings 109,000 Sales revenue -0- Sales returns & allowances -0- Sales discounts -0- Cost of goods sold -0- Wage expense -0- Rent expense -0- Insurance expense -0- Supplies expense -0- Depreciation expense -0- Freight-out expense -0- Interest expense -0- Dividends -0- Totals $ 1,129,000 $ 1,129,000 1
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Required: Prepare journal entries to record the following transactions and events that occurred during the month of January 2010. 1. On January 1, 2010, a new stockholder purchased 20,000 newly issued shares of ABC Company’s $1 par value common stock for $200,000 cash. 2. On January 1, 2010, the ABC Company paid its insurance company $24,000 cash for a 12-month comprehensive insurance policy. 3. On January 1, 2010, the ABC Company paid its landlord $15,000 cash for store rental for the month of January. 4. On January 1, 2010, the ABC Company purchased additional Store fixtures for a total of $80,000. ABC made a down payment of $10,000 cash and signed a 8% Note payable for the $70,000 balance. The 8% Note payable is due in 2 years on December 31, 2011. Interest is payable semi- annually on June 30 and December 31. 5. During January of 2010, the ABC Company paid $50,000 cash to purchase Supplies. 6. During January of 2010, the ABC Company purchased 50,000 units of Merchandise inventory for $1,225,000 on account (i.e., $24.50 per unit). ABC Company does maintain detailed Purchase accounts. 7 During January of 2010, the ABC Company paid $30,000 cash for freight-in cost on merchandise that was purchased during January (i.e., $0.60 per unit). 2
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8. During January of 2010, the ABC Company returned 1,000 units of Merchandise inventory to suppliers for $24,500 full credit. 9. During January of 2010, the ABC Company sold 45,000 units of merchandise to customers. $1,400,000 of the sales were for cash, and $100,000 of the sales were on account. 10. During January of 2010, the ABC Company paid $500 cash to deliver merchandise to customers. 11. During January of 2010, customers returned $1,000 of sales described in Item 9.
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Exam1W10 - NAME BUS 214, Financial Accounting Exam 1 Winter...

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