2024 – 1 The following information was made available from the income statement and balance

1. The following information was made available from the income statement and balance sheet of Lauren Company.

 

Item 12/31/10 12/31/09

 

Accounts Receivable $53,400 58,600

Accounts Payable 35,600 32,700

Merchandise Inventory 85,000 79,000

Sales (2010) 243,000

Interest Revenue (2010) 5,600

Dividend Revenue (2010) 1,200

Tax Expense (2010) 12,300

Salaries Expense (2010) 28,000

COGS (2010) 65,000

Interest Expense (2010) 3,600

Operating Expenses 28,500

 

Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.

 

2. Given the following balance sheet, complete a horizontal analysis. Compute the percentage to the nearest tenth of a percent.

 

Jill’s Bikes

Comparative Balance Sheet

For Years Ended December 31, 2011 and 2010

(in thousands) 2011 2010 Difference Percentage

 

Assets

Current Assets

 

Cash and Equivalents $72   $94

Accounts Receivable, net 122   104

Inventory 288 232

Total Current Assets 482    430

Property, Plant and Equipment 638    358

Total Assets $1,120 $788

 

Liabilities

Current Liabilities

 

Accounts Payable $242    $148

Accrued Liabilities 48     66

Total Current Liabilities 290    214

Long-Term Liabilities 346     208

Total Liabilities 636     422

 

Stockholders’ Equity

Common Stock 70      60

Retained Earnings 414     306

Total Stockholders’ Equity 484     366

Total Liabilities and Stockholders’ Equity $1,120       $788

 

 

 

Part B: Answer each of the following questions. Each answer is worth 4 points.

 

1. Record the following transactions using the accounting equation.

 

Example:

 

Assets = Liabilities + Equity

 

XXXX(cash) XXXX(accounts payable)

 

A. Amanda invests $17,000 cash into her merchandising business.

B. She buys $6,500 of office equipment and $3,000 of office supplies with cash from Office Depot.

C. Additional purchases were supplies for $35,000 on account from various suppliers.

 

2. Journalize the following transactions and omit the explanations.

A. ABC Corporation purchased $15,000 of office furniture by putting $7,000 down in cash and the rest on account on

April 8.

B. The corporation paid $60,000 for a two-year lease on April 19.

C. The corporation had sales of $45,000, of which $35,000 were on account on April 20.

D. The corporation borrowed $25,000 by signing a note payable on April 22.

E. The corporation paid $1,250 on one of its accounts payable on April 26.

 

3. Prepare a trial balance from the following information for Learn a New Language, Inc. for December 31, 2012.

 

Accounts payable $5,012

Common stock $9,692

Cash $3,928

Notes payable $1,439

Wages expense $777

Marketing expense $493

Equipment $8,345

Accounts receivable $1,142

Inventory $8,074

Sales $6,616

 

4. Compute the missing information from this post-closing trial balance.

 

Cash $34,689

Accounts Receivable 9,467

Prepaid Rent 5,000

Prepaid Insurance (A)

Supplies 944

Accounts Payable $5,389

Wages Payable (B)

Common Stock 37,049

 

Retained Earnings 8,234

                ______         _______

Total           $52,356       $52,356 

 

5. Journalize the following transactions using the perpetual inventory method.

 

Aug. 6 Purchased $830 of inventory on account from Johnston with terms of 2/10, n/30.

Aug. 8 Purchased $2,611 of inventory for cash from Pillner Company.

Aug.15 Paid for August 6 purchase from Johnston.

Aug. 17 Purchased $1,743 of merchandise on account from Luis Company with Terms of 3/15, n/45. 

 

6. Given the following information, prepare a balance sheet for Isaiah’s Tool Shed for the year ending December 31, 2012.

 

Cash $65,750       Retained Earnings $179,319

Common Stock $35,000     Equipment $27,500

Accounts Receivable $11,478   Accounts Payable $29,450

Land $30,000        Inventory $78,311

Prepaid Supplies $7,357   Income Taxes Payable $4,209

Office Computers $11,345    Other PPE $31,446

Accum. Depr. (all) $23,459   Prepaid Insurance $8,250

 

7. Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows:

(Note: The company uses a perpetual system of inventory.)

 

                                                   Units   Unit Price    Total Cost

January 1—Beginning inventory       18       $24            $432

March 12—Sold                    13

April 11—Purchase                45       $29       $1,305

June 20—Sold                     33

Aug 16—Purchase                  35       $27       $945

Sept 11—Sold                     29

Total Cost of Inventory

Ending inventory is 23 units.                       $2,682

 

What is the cost of goods sold for Rick Company for 2012 using LIFO?

 

8. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated for Years 1 and 2.

 

Item                 Year 1      Year 2

Ending inventory    ___________ _____________

Beginning inventory ___________ _____________

Cost of goods sold ___________ _____________

 

9. Below is a list of treatments of accounting topics. Place GAAP on the line if the treatment is GAAP-based and place IFRS on the line if the treatment is IFRS-based.

 

A. Interest and dividend income are reported in the investing section of the cash flow statement.__________

B. Interest expense is reported in the financing section of the cash flow statement. ___________

C. The use of LIFO is prohibited. ___________

 

10. Record the necessary journal entries from the following bank reconciliation information for July 31, 2011:

 

Bank Balance, July 31, 2011 $36,739

Checkbook Balance, July 31, 2011 36,444

Bank collection of note receivable 1,200 + 165 interest

Bank service charge 35

Deposits in transit 2,400

Outstanding checks 1,245

NSF check from customer 330

Correction of book error (check #456 written for $160, recorded at $610)—gas expense

 

 

11. Journalize the following transactions for Tammy Company:

 

Sept. 1 Sold $3,500 of merchandise to Jim on account

Oct. 1 Exchanged Jim’s account receivable for a fourmonth, 8% note for $3,500

Dec. 31 Recorded accrued interest on Jim’s note

Feb. 1 Jim paid off his note with interest (round to nearest dollar)

12. A truck was purchased on January 2 at a cost of $60,000.  It’s expected to be used for five years and to have a residual value of $5,000 after 120,000 miles of service. The truck was driven for 23,000 miles the first year and 25,000 miles the second year. Calculate the depreciation expense to the nearest dollar for the first and second years.

 

Method                         Year 1       Year 2

Straight-line                  ________     ________

Double-declining-balance   ________  ________

Units-of-production            ________   ________

 

13. Prepare the general journal entries for the following transactions:

 

Jan. 2, 2011 Purchased land with a building on it for $750,000. The land is worth $300,000.  Paid $150,000 cash down and signed a mortgage payable for the balance.

Dec. 31, 2011 Depreciation is computed using the straight-line method. The estimated salvage value of the building is $75,000 and has an estimated life of 20 years.

July 1, 2012 The building and land are sold for $825,000 cash.

 

14. Journalize the following treasury stock transactions:

 

June 3 Reacquired 350 shares of $12 par common stock at $10 per share.

June 7 Sold 180 shares of treasury stock for $16 per share.

June 8 Sold 150 shares of treasury stock for $9 per share.

 

15. Lowry Landscapes had net income of $50,000 for 2010.

 

Land was sold for $40,000, of which $3,000 was a gain.

The beginning cash balance was $53,000, and the ending cash balance was $151,000. Depreciation expenses were

$11,000. Prepare a statement of cash flows for the year ended December 31, 2010, for Lowry Landscapes using the

indirect method.