Academic Triumph: Excelling in Accounting Modules Made Easy
15. The cash account for Collegiate Sports Co. on November 1, 2014, indicated a balance of $81,145.
PR 7-4B Bank reconciliation and entries
The cash account for Collegiate Sports Co. on November 1, 2014, indicated a balance of $81,145. During November, the total cash deposited was $293,150, and checks written totaled $307,360. The bank statement indicated a balance of $112,675 on November 30, 2014. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $41,840.
b. A deposit of $12,200, representing receipts of November 30, had been made too late to appear on the bank statement.
c. A check for $7,250 had been incorrectly charged by the bank as $2,750.
d. A check for $760 returned with the statement had been recorded by Collegiate Sports Co. as $7,600. The check was for the payment of an obligation to Ramirez Co. on account.
e. The bank had collected for Collegiate Sports Co. $7,385 on a note left for collection.
The face of the note was $7,000.
f. Bank service charges for November amounted to $125.
g. A check for $2,500 from Hallen Academy was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of November 30.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Collegiate Sports Co. on November 30, 2014, what amount should be reported as cash?
16. Rolling Hills Golf Inc. was organized on July 1, 2012. Quarterly financial statements are prepared....
Rolling Hills Golf Inc. was organized on July 1, 2012. Quarterly financial statements are prepared. The trial balance and adjusted trial balance on September 30 are shown here.
ROLLING HILLS GOLF INC. Trial Balance September 30, 2012
Unadjusted
Adjusted
Dr.
Cr.
Dr.
Cr.
Cash
$ 6,700
$ 6,700
Accounts Receivable
400
1,000
Prepaid Rent
1,800
900
Supplies
1,200
180
Equipment
15,000
15,000
Accumulated Depreciation—Equipment
$ 350
Notes Payable
$ 5,000
5,000
Accounts Payable
1,070
1,070
Salaries and Wages Payable
600
Interest Payable
50
Unearned Rent Revenue
1,000
800
Common Stock
14,000
14,000
Retained Earnings
0
0
Dividends
600
600
Service Revenue
14,100
14,700
Rent Revenue
700
900
Salaries and Wages Expense
8,800
9,400
Rent Expense
900
1,800
Depreciation Expense
350
Supplies Expense
1,020
Utilities Expense
470
470
Interest Expense
50
$35,870
$35,870
$37,470
$37,470
Instructions
(a) Journalize the adjusting entries that were made.
(b) Prepare an income statement and a retained earnings statement for the 3 months ending September 30 and a classified balance sheet at September 30.
(c) Identify which accounts should be closed on September 30.
(d) If the note bears interest at 12%, how many months has it been outstanding?
17. Luzadis Company makes furniture using the latest automated technology. The company uses a...
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
Machine-hours
83,000
Fixed manufacturing overhead cost
$
1,273,000
Variable manufacturing overhead per computer-hour
$
3.70
During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:
Machine-hours
40,000
Manufacturing overhead cost
$
815,000
Required:
1.
Compute the company’s predetermined overhead rate for the year
18. Yoshi Company completed the following transactions and events involving its delivery trucks....
Yoshi Company completed the following transactions and events involving its delivery trucks.
2014 Jan. 1
Paid $22,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec. 31 Recorded annual straight-line depreciation on the truck.
2015 Dec. 31
Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck.
2016 Dec. 31
Recorded annual straight-line depreciation on the truck.
Dec. 31 Sold the truck for $5,500 cash.
Required:
Calculate depreciation for year 2015.
BOND VALUATION The Pennington Corporation issued a new series of bonds on January 1, 1992. The bonds were sold at par ($1,000); had a 12% coupon; and mature in 30 years, on December 31, 2021. Coupon payments are made semiannually (on June 30 and December 31).
a. What was the YTM on January 1, 1992?
b. What was the price of the bonds on January 1, 1997, 5 years later, assuming that interest rates had fallen to 10%?
c. Find the current yield, capital gains yield, and total return on January 1, 1997, given the price as determined in part b.
d. On July 1, 2015, 6½ years before maturity, Pennington’s bonds sold for $916.42. What were the YTM, the current yield, the capital gains yield, and the total return at that time?
e. Now assume that you plan to purchase an outstanding Pennington bond on March 1, 2015, when the going rate of interest given its risk was 15.5%. How large a check must you write to complete the transaction? (This is a difficult question.)
20. 3-20 CVP exercises. The Doral Company manufactures and sells pens.
3-20 CVP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit Consider each case separately: 1a. What is the current annual operating income? b. What is the present breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A $0.04 per unit increase in variable costs 3. A 10% increase in fixed costs and a 10% increase in units sold 4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 5. A 10% increase in fixed costs 6. A 10% increase in selling price and a $20,000 increase in fixed costs
To increase sales from their present annual $24 million, Kim Chi Company, a wholesaler, may try more liberal credit standards. Currently, the firm has an average collection period of 30 days. It believes that, with increasingly liberal credit standards, the following will result:
CREDIT POLICY
A
B
C
D
Increase in sales from previous level (in millions)
$2.8
$1.8
$1.2
$.6
Average collection period for incremental sales (days)
45
60
90
144
The prices of its products average $20 per unit, and variable costs average $18 per unit. No bad-debt losses are expected. If the company has a pre-tax opportunity cost of funds of 30 percent, which credit policy should be pursued? Why? (Assume a 360-day year.)
22. REPLACEMENT ANALYSIS The Chang Company is considering the purchase of a new machine to replace an...
REPLACEMENT ANALYSIS
The Chang Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently that Chang’s engineers estimate that it will produce after-tax cash flows (labor savings and depreciation) of $9,000 per year. The new machine will cost $40,000 delivered and installed, and its economic life is estimated to be 10 years. It has zero salvage value. The firm’s WACC is 10%, and its marginal tax rate is 35%. Should Chang buy the new machine? Explain.
23. Shaw Company sells goods that cost $300,000 to Richard Company for $410,000 on January 2, 2015. T...
Shaw Company sells goods that cost $300,000 to Richard Company for $410,000 on January 2, 2015. The sales price includes an installation fee, which is valued at $40,000. The fair value of the goods is $370,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. The company paid bills for $800,000 on January 31, 2015.
• a) Prepare the journal entries (if any) to record the sale on January 2, 2015 until January 31, 2015. • b) Shaw prepares an income statement for the first quarter of 2015, ending on March 31, 2015. (installation was completed on June 18, 2015). Prepare journal needed for March 31, 2015.
Terry Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2002. The weighted average number of shares outstanding in 2002 was 50,000 shares. Terry Corporation's common stock is selling for $60 per share on the New York Stock Exchange. Terry Corporation's price-earnings ratio is a. 15 times. b. 18.8 times. c. 6 times. d. 3.8 times. Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments? Fixed costs are $600,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars? a. $2, 400,000. b. $1, 400,000. c. $800,000. d. $1, 800,000. Craft Manufacturing Company's accounting records reflect the following inventories: During 2002, $500,000 of raw materials were purchased, direct labor coats amounted to $600,000, and manufacturing overhead incurred was $480,000. If Craft Manufacturing Company's cost of goods manufactured for 2002 amounted to $1, 390,000, its cost of goods sold for the year is a. $1, 350,000. b. $1, 500,000. c. $1, 430,000. d. $1, 250,000.
25. Explain the difference between cost flow and the movement of
Explain the difference between cost flow and the movement of goods.
26. Natalie had a very busy December. At the end of the month, after journalizing and posting the...
Natalie had a very busy December. At the end of the month, after journalizing and posting the December transactions and adjusting entries, Natalie prepared the following adjusted trial balance.
COOKIE CREATIONS
Adjusted Trial Balance
December 31, 2011
Debit
Credit
Cash
$1,180
Accounts Receivable
875
Supplies
350
Prepaid Insurance
1,210
Equipment
1,200
Accumulated Depreciation—Equipment
$ 40
Accounts Payable
75
Salaries and Wages Payable
56
Interest Payable
15
Unearned Service Revenue
300
Notes Payable
2,000
Owner’s Capital
800
Owner’s Drawings
500
Service Revenue
4,515
Salaries and Wages Expense
1,006
Utilities Expense
125
Advertising Expense
165
Supplies Expense
1,025
Depreciation Expense
40
Insurance Expense
110
Interest Expense
15
$7,801
$7,801
Instructions
Using the information in the adjusted trial balance, do the following.
(a) Prepare an income statement and an owner’s equity statement for the 2 months ended December 31, 2011, and a classified balance sheet as at December 31, 2011. The note payable has a stated interest rate of 6%, and the principal and interest are due on November 16, 2013.
(b) Natalie has decided that her year-end will be December 31, 2011. Prepare and post closing entries as of December 31, 2011.
(c) Prepare a post-closing trial balance.
Len Mast earned $2,200 for the last two weeks. He is married, is paid biweekly, and claims 3 exemptions. What is Len's income tax? Use the percentage method.
28. Justin's Plant Store, a retailer, started operations on January 1.
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear...
29. The unadjusted trial balance of Arlington Air Purification System at December 31, 2014, and the d...
The unadjusted trial balance of Arlington Air Purification System at December 31,
2014, and the data needed for the adjustments follow.
ARLINGTON AIR PURIFICATION SYSTEM
Unadjusted Trial Balance
December 31, 2014
Account Title
Balance
Debit
Credit
Cash
$7300
Accounts Receivable
$19900
Prepaid Rent
$2300
Office Supplies
$1900
Equipment
$19800
Accumulated Depreciation Equipment
$4400
Accounts Payable
$3500
Salaries Payable
Unearned Revenue
$2700
Common Stock
$39700
Dividends
$9900
Service Revenue
$15600
Salaries Expense
$3300
Rent Expense
Depreciation Expense?Equipment
Advertising Expense
$1500
Supplies Expense
Total
$65900
$65900
Adjusted trial balance,
Adjustment data at December 31 follow:
a. On December 15, Arlington contracted to perform services for a client receiving
$2,700 in advance. Arlington recorded this receipt of cash as Unearned Revenue.
As of December 31, Arlington has completed $1,300 of the services.
b. Arlington prepaid two months of rent on December 1
c. Arlington used $650 of office supplies.
d. Depreciation for the equipment is $650.
e. Arlington received a bill for December?s online advertising, $600. Arlington will
not pay the bill until January. (Use Accounts Payable.)
f. Arlington pays its employees on Monday for the previous weekly wages.
Its employees earn $3,500 for a five-day workweek. December 31 falls on
Wednesday this year.
g. On October 1, Arlington agreed to provide a four-month air system check
(beginning October 1) for a customer for $3,200. Arlington has completed
the system check every month, but payment has not yet been received and no
entries have been made.
Requirements
1. Journalize the adjusting entries on December 31.
2. Using the unadjusted trial balance, open the T-accounts with the unadjusted
balances. Post the adjusting entries to the T-accounts.
3. Prepare the adjusted trial balance.
4. How will Arlington Air Purification System use the adjusted trial balance?