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Unformatted text preview: RUTTG E RS INTRODUCTION TO FINANCIAL ACCOUNTING 33:010:272 SECTIONS 08 81 09 |FALL 2011 Rutgers Business School _
Newark and New Brunswmck PROFESSOR JULIAN YEO Mid-Term Exam I Question (1) Journal Entries, Balance Sheet and Income Statement Arvin, Dolce and Gabbana (AD&G) Ltd started its operations on January 1, 2005. AD&G
specializes in high-fashion couture for men. Its signature look - open collar modern shirts
matched with tailored jeans — is gaining popularity amongst students enrolled in the
Executive MBA and MBA programs. Four years later, the balance sheet as at Dec 31, 2008,
reported the following account balances (there were no other accounts apart from those
listed below): Cash $238 Property, Plant and Equipment (PP&E) $660
Interest Payable $100 Inventory $1,500 Accounts Receivable $820 Accumulated Depreciation $440 Loan from Bank $2,000 Retained Earnings ? Common Stocks $300 During 2009, the following transactions occurred:
1. Issued common stock (at par) for $ 10,000. 2. Purchased a machine on 1/1/2009 for $500 (cash) with an estimated useful life of 5
years. The estimated salvage value for the machine was $0. The machine was sold
in the middle of the year (i.e., 6/30/2009) for $400. 3. The depreciation expense (excluding the new machine purchased on 1/1/2009) was
$1 10. 4. Rent for 2009 and 2010, in the amount of $2,880, was paid in full.
5. New purchases were $4,000. Of the $4,000, $500 was not paid at the end of 2009. 6. During the year, clothing sales (of goods that cost $2,400) were $12,000 and
collections from customers for the clothing sales made during the year were $9,800. 7. The ending balance for Accounts Receivable at the end of the year (12/31/2009) was
$ 1 ,080. 8. A customer paid $6,000 in advance for AD&G to provide monthly fashion advices
to her husband over the next 24 months. At the end of 2009, AD&G had performed
1A of its services. RUTTG E RS INTRODUCTION TO FINANCIAL ACCOUNTING 33:010:272 SECTIONS 08 81 09 |FALL 2011 Rutgers Business School _
Newark and New Brunswmck PROFESSOR JULIAN YEO 9. AD&G paid $2,150 on general Research and Development hoping to start its
couture line for women. 10. Declared new dividends of $250. The amount will not be paid until February 2010. 11. Interest expense was $100 and the ending balance of Interest Payable as at
12/31/2009 was $100. 12. The employees of AD&G earned $1,820 during the year. Cash payments to the
employees were $1,650. Required:
Assume AD&G is a tax-exempt entity.
a. Prepare AD&G Ltd’s Balance Sheet as at December 31, 2008. (4 points)
b. What was the balance of the account Retained Earnings on December 31, 2008?
c. Show the journal entries for all transactions that occurred during 2009 (items 1 to 12).
(1. Prepare AD&G Ltd’s Income Statement for the year ended December 31, 2009.
(6 points) ...
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