(TCO 3) Explain why
Adjusting Entries are required at the end of each accounting period (15 points)
and provide an example of a required journal entry for either the consumption
of supplies or insurance (10 points).
(TCO 2) Sandy Company
is a retailer who applies the periodic method to account for its inventory. It
had the following inventory transactions: Quantity Unit Cost Beginning
inventory 100 $10.00 Purchase on March 4th 120 12.00 Purchase on March 10th 150
14.00 Purchase on March 20th 170 15.00 During March, 360 units were sold for
$25 per unit. Calculate the cost of ending inventory, cost of goods sold, and
gross profit using the LIFO method. Show all computations.
(TCO 4) Thomas
Manufacturing had 4 units of their product in inventory at $250 per unit to
start the month. During the month, they purchased an additional 7 units at $250
per unit and another 12 units at $275 per unit. Also, at the end of the month,
they sold 12 units and ended the month at 8 units. Calculate their ending
inventory and cost of goods sold using one of the following: LIFO, FIFO or
Average Cost methods. Show all computations.
(TCO 4) Inventory
valuation methods determine the cost of goods sold and the inventory balance.
(1) Explain how the Average Cost method is applied (15 points) and (2) provide
an example of the application of this method. (10 points)
(TCO 1) Financial
statement analysts among others compute ratios to gauge how the company is
performing. One such ratio is the Acid-test (or Quick) Ratio. (1) Provide the
formula for the Acid-test (or Quick) Ratio. (10 points) (2) Explain why
inventories and prepaid expenses are excluded from this calculation (15
points).
(TCO 6) BagODonuts
Company bought a used delivery truck on January 1, 2010, for $19,200. The van
was expected to remain in service 4 years (30,000 miles). BagODonuts’
accountant estimated that the truck’s residual value would be $2,400 at the end
of its useful life. The truck traveled 8,000 miles the first year, 8,500
miles the second year, 5,500 miles the third year, and 8,000 miles in the
fourth year.
1. Calculate depreciation expense for the truck for each year (2010-2013)
using the:
a. Straight-line method.
b. Double-declining balance method.
c. Units of Production method.
(For units-of-production and double-declining balance, round to the
nearest two decimals after each step of the calculation.)
2. Which method best tracks the wear and tear on the van?
3. Which method would BagODonuts prefer to use for income tax
purposes? Explain in detail why BagODonuts prefers this method.
(TCO 7) ABC Inc. was
incorporated on 1/15/12. Their corporate charter authorized the following
capital stock:
Preferred Stock: 7%, par value $100 per share, 100,000 shares.
Common Stock: $1 par value, 500,000 shares.
The following transactions occurred during the year:
1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.
12/1/12 – Declared and paid a total dividend of $95,000.
Required:
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and preferred
stock.
(TCO 5) Internal
Control Procedures are in place to protect the assets of every business as
mentioned in the textbook and our discussions. Of the seven internal
control procedures, list five of these controls and describe how each procedure
is implemented. (5 points each with 2 points for listing and 3 points for a
description)
(TCO 2) Below are the
accounts of Super Pool Service, Inc. The accounts have normal balances on June
30, 2012. The accounts are listed in no particular order.
Account
Balance
Common
stock
$5,100
Accounts
payable
$4,400
Service
revenue
$17,100
Land $28,800
Note
payable
$9,500
Cash $5,200
Dividends
$6,100
Utilities
expense
$2,100
Accounts
receivable
$10,600
Delivery expense
$700
Retained
earnings
$25,600
Salary
expense
$8,200
Prepare the company’s trial balance as of June
30, 2012, listing accounts in proper sequence, as illustrated in the chapter.
For example, Accounts Receivable comes before Land. List the expense with the
largest balance first, the expense with the next largest balance second, and so
on.
(TCO 4)
Linda’s Lampshades started business on Jan. 1, 2001. They had the following
inventory transactions:
Journals
– Jan. 2001
Purchases
Supplier Date
Received Quantity
Unit Cost Amount
Donna
01/10/01 110
12.00 1320.00
Thomas
01/15/01 160
14.00
2240.00
Cindy
01/18/01 150
15.00 2250.00
Sales
Customer
Date shipped Quantity Sel.
Price
Amount
Norilene
01/16/01
200
25.00 5000.00
1. Calculate the ending inventory, using the perpetual
inventory method:
A. Using FIFO
B. Using LIFO
C.
Using Average Cost
2. Prepare
the following
statement
Using
FIFO LIFO Average Cost
Sales
Cost of
Sales
Gross Profit
