ACC 100 Chapter Notes -Financial Statement, Income Statement, Source Document
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Question 1
Which one of the following is not an externaluser of accounting information?
Customers | ||
Investors | ||
Regulatory agencies | ||
All of these are external users |
3 points
Question 2
The first step in solving an ethical dilemma is to
identify and analyze the principal elements in thesituation. | ||
identify the alternatives. | ||
recognize an ethical situation and the ethical issuesinvolved. | ||
weigh the impact of each alternative on variousstakeholders. |
3 points
Question 3
Generally accepted accounting principles are
income tax regulations of the Internal Revenue Service. | ||
standards that indicate how to report economic events. | ||
theories that are based on physical laws of the universe. | ||
principles that have been proven correct by academicresearchers. |
3 points
Question 4
Which of the following events is not a businesstransaction?
Issuance of stock in exchange for cash. | ||
Hired employees. | ||
Incurred utility expenses for the month. | ||
Earned revenue for services provided. |
3 points
Question 5
When assets are distributed to the owners of a corporation,these distributions are termed
depletions. | ||
consumptions. | ||
dividends. | ||
a credit line. |
3 points
Question 6
If total liabilities increased by $8,000, then
assets must have decreased by $8,000. | ||
stockholders' equity must have increased by $8,000. | ||
assets must have increased by $8,000, or stockholders' equitymust have decreased by $8,000. | ||
assets and stockholders' equity each increased by $4,000. |
3 points
Question 7
If total liabilities increased by $30,000 and stockholders'equity increased by $20,000 during a period of time, then totalassets must change by what amount and direction during that sameperiod?
$50,000 decrease | ||
$10,000 decrease | ||
$10,000 increase | ||
$50,000 increase |
3 points
Question 8
Misra Company compiled the following financial information as ofDecember 31:
Revenues | $ 340,000 |
Retained Earnings, Beginning | $ 60,000 |
Equipment | $ 80,000 |
Expenses | $ 250,000 |
Cash | $ 90,000 |
Dividends | $ 20,000 |
Supplies | $ 10,000 |
Accounts payable | $ 40,000 |
Accounts receivable | $ 70,000 |
Common Stock | $ 80,000 |
Misra's assets on December 31 are
$180,000. | ||
$250,000. | ||
$360,000. | ||
$ 490,000. |
3 points
Question 9
Mofro's Computer Repair Shop started the year with total assetsof $300,000 and total liabilities of $200,000. During the year, thebusiness recorded $500,000 in computer repair revenues, $300,000 inexpenses, and Mofro paid dividends of $50,000. Stockholders' equityat the end of the year was
$200,000. | ||
$100,000. | ||
$250,000. | ||
$300,000. |
3 points
Question 10
A balance sheet shows
assets, liabilities, and stockholders' equity. | ||
expenses, dividends, and stockholders' equity. | ||
revenues, expenses, and dividends. | ||
revenues, liabilities, and stockholders' equity. |
3 points
Question 11
At September 1, Foli Co. reported retained earnings of $136,000.During the month, Foli generated revenues of $20,000, incurredexpenses of $12,000, purchased equipment for $5,000 and paiddividends of $2,000. What is the amount of retained earnings atSeptember 30?
$136,000 | ||
$142,000 | ||
$8,000 | ||
$137,000 |
3 points
Question 12
Grayton Industries purchased supplies for $1,000. The Companypaid $500 in cash and agreed to pay the balance in 30 days. Thejournal entry to record this transaction would include a debit toan asset account for $1,000, a credit to a liability account for$500. Which of the following would be the correct way to completethe recording of the transaction?
Credit an asset account for $500. | ||
Credit the Retained Earnings account for $500. | ||
Credit another liability account for $500. | ||
Debit the Retained Earnings account for $500. |
3 points
Question 13
Radio Moscow Industries purchased supplies for $1,000. They paid$400 in cash and agreed to pay the balance in 30 days. The journalentry to record this transaction would include a debit to an assetaccount for $1,000, a credit to a liability account for $600. Whichof the following would be the correct way to complete the recordingof the transaction?
Credit an asset account for $400. | ||
Credit another liability account for $400. | ||
Credit the retained earnings account for $400. | ||
Debit the retained earnings account for $400. |
3 points
Question 14
A credit to a liability account
must be accompanied by a debit to an asset account. | ||
indicates an increase in the amount owed to creditors. | ||
is an error. | ||
indicates a decrease in the amount owed to creditors. |
3 points
Question 15
In recording business transactions, evidence that an accountingtransaction has taken place is obtained from
business documents. | ||
the Internal Revenue Service. | ||
the public relations department. | ||
the SEC. |
3 points
Question 16
On June 1, Leno Inc. buys a copier machine for her business andfinances this purchase with cash and a note. When journalizing thistransaction, the company's accountant will
make a simple entry. | ||
use two journal entries. | ||
make a compound entry. | ||
list the credit entries first, which is proper form for thistype of transaction. |
3 points
Question 17
A three column form of account is so named because it hascolumns for
debit, credit, and balance. | ||
debit, credit, and date. | ||
debit, credit, and account name. | ||
debit, credit, and reference. |
3 points
Question 18
The first step in designing a computerized accounting system isthe creation of the
general ledger. | ||
general journal. | ||
trial balance. | ||
chart of accounts. |
3 points
Question 19
Chik Chik Company showed the following balances at the end ofits first year:
Cash | $ 6,000 |
Prepaid insurance | $ 9,400 |
Accounts receivable | $ 7,000 |
Accounts payable | $ 5,600 |
Notes payable | $ 8,400 |
Common stock | $ 2,800 |
Dividends | $ 1,400 |
Revenues | $ 44,000 |
Expenses | $ 35,000 |
What did Chik Chik Company show as total credits on its trialbalance?
$51,400 | ||
$60,800 | ||
$62,200 | ||
$70,200 |
3 points
Question 20
Which of the following time periods would notbe referred to as an interim period?
Monthly | ||
Quarterly | ||
Semi-annually | ||
Annually |
Entries Related to Uncollectible Accounts
The following transactions were completed by The Wild Trout Gallery during the current fiscal year ended December 31:
Jan. 19. | Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalized the receipt of $2,660 cash in full payment of Arleneâs account. |
Apr. 3. | Wrote off the $15,240 balance owed by Premier GS Co., which is bankrupt. |
July 16. | Received 25% of the $27,300 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. |
Nov. 23. | Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $4,335 cash in full payment. |
Dec. 31. | Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$11,465; Fogle Co., $3,405; Lake Furniture, $8,750; Melinda Shryer, $2,475. |
Dec. 31. | Based on an analysis of the $1,350,100 of accounts receivable, it was estimated that $58,700 will be uncollectible. Journalized the adjusting entry. |
Required:
1. Record the January 1 credit balance of $55,900 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.
2. a. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,350,100 balance in accounts receivable reflects the adjustments made during the year.
Jan. 19-reinstate | |||
Jan. 19-collection | |||
Apr. 3 | |||
July 16 | |||
Nov. 23-reinstate | |||
Nov. 23-collection | |||
Dec. 31-write-off | |||
Dec. 31-adjusting | |||
2. b. Post each entry that affects the following T accounts and determine the new balances:
Allowance for Doubtful Accounts | |||
---|---|---|---|
Jan. 1 Balance | |||
Dec. 31 Adjusted Balance |
Bad Debt Expense | |||
---|---|---|---|
3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$
4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ½ of 1% of the sales of $8,340,000 for the year, determine the following:
a. Bad debt expense for the year.
$
b. Balance in the allowance account after the adjustment of December 31.
$
c. Expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$
INSTRUCTIONS: PLEASE SELECT THE CORRECT ANSWER CHOICE
Use the following balance sheet information from Aggie Health and Fitness Centersâ month-end financial statements dated August 31, 2016 and open t-accounts for each balance sheet line item. Then use the enclosed TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations. Use the Perpetual Inventory method as discussed in class for all sales of merchandise.
Aggie Health and Fitness Center
Balance Sheet
As of August 31, 2016
Assets: Liabilities:
Cash $4,500 Accounts Payable $2,900
Accounts Receivable 6,500 Salaries Payable 5,600
Inventory â Concessions 1,100 Interest Payable 1,375
Supplies 400 Unearned Revenue 500
Prepaid Insurance 4,400 Note Payable 330,000
Total Current Assets 16,900 Total Current Liabilities 340,375
Land 80,000 Stockholderâs Equity
Building 408,000 Common Stock 245,500
Equipment 67,200 Retained Earnings 3,563
Furniture and Fixtures 20,016 Total Liab. and SHE $589,438
Accumulated Depreciation (2,678)
Total Assets $589,438
Fiscal Year
Aggie Health and Fitness Center was established as a business in August 2016. Aggie Health and Fitness Center follows a fiscal year end of July 31.
Inventories
Inventories consist of concessions available for resale to members. These concessions consist of energy drinks, nutritional supplements, etc. Inventories are valued on a first-in, first-out basis, using the perpetual method. (Note: The Center plans to expand its inventory during September to include logo-based apparel.)
Prepaid Insurance
Aggie Health and Fitness Center carries property insurance through Good Hands Insurance Co. The Center purchased a 12 month policy on August 1, 2016 for $4,800.
Fixed Assets
Property and Equipment are stated on the basis of historical cost.
Land and Building: The Land and Building was a group purchase made on August 1, 2016. The total purchase price amounted to $488,000. On the date of purchase the land was appraised at $80,000 and the building was appraised at $408,000. The Health and Fitness Center paid $158,000 down and signed a $330,000, 12-month, 5% note for the balance. Depreciation on the building is computed using the straight-line basis with no salvage value. The life of the building is estimated to be 20 years.
Equipment and Furniture and Fixtures: All equipment and furniture and fixtures were purchased for cash on August 1, 2016. Both equipment and furniture and fixtures are depreciated using the straight-line method of depreciation. No salvage value is anticipated. The useful life of the equipment is 8 years. The useful life of the furniture and fixtures is 6 years.
The book values of these assets are presented below:
Land $80,000 $80,000
Building 408,000
Less: Accumulated Depr 1,700 406,300
Equipment 67,200
Less: Accumulated Depr 700 66,500
Furniture and Fixtures 20,016
Less: Accumulated Depr 278 19,738
Net Plant, Property, and Equipment $572,538
Unearned Revenue
The balance in the unearned revenue account is due to the sale of gift certificates redeemable for massage therapy.
Revenue Recognition
The Company recognizes service revenue upon providing services for customers. Sales revenue is recognized upon customer receipt of goods. Revenue for gift certificate sales is recognized at redemption. (Note: all memberships sold during the first month of operations were for one month only).
Instructions
Use the following TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations for Aggie Health & Fitness Center (The Fitness Center). Use the Perpetual Inventory method as discussed in class for all sales of merchandise.
TRANSACTIONS:
TRANSACTION # | DATE | TRANSACTION DESCRIPTION |
1 | Sept 1 | Purchased a 3-month advertising campaign to be broadcast on local radio stations during the months of September, October and November. Paid $1,500 in advance for this ad campaign. |
2 | Sept 1 | Sold 160, twelve-month memberships to the Fitness Center for $420 each. All membership dues were collected in cash. |
3 | Sept 2 | Purchased office supplies for $325 on an open account from Kelliâs Office Supplies. The Fitness Center has 30 days to pay for the supplies. |
4 | Sept 3 | Purchased on account a total of 180 shirts with an embroidered Aggie Health and Fitness Center logo from C & C Creations at a price of $14 per shirt. These shirts are available for resale to customers. |
5 | Sept 4 | Paid wages due to employees on August 31 |
6 | Sept 5 | Purchased flowers for the reception desk for $54 cash |
7 | Sept 6 | Purchased concessions for $5,200 on account from Advocare Distributing, Inc. These concessions consist of energy drinks, nutritional supplements, etc., and are available for resale to customers |
8 | Sept 7 | Provided 50 hours of personal training services to members. Fees are charged at a rate of $45 an hour. The total amount was billed to individual memberâs accounts |
9 | Sept 10 | Paid the total amounts due to Kelliâs Office Supplies for the Sept. 2 transaction and C&C Creations for the Sept. 3 transaction |
10 | Sept 12 | Sold thirty-five shirts to a corporate member, Allen & Associates for $36 each. Collected $500 in cash and the balance is owed to the Fitness Center on account |
11 | Sept 13 | The owners of the company invested an additional $18,000 into Aggie Health and Fitness Center in exchange for common stock |
12 | Sept 14 | Gift certificates totaling $300 were redeemed for massage therapy performed |
13 | Sept 15 | The concessions stand reported sales of merchandise for $5,400 for the first half of the month. The concessions that were sold had an original cost of $2,320. All of these transactions were billed directly to each memberâs account |
14 | Sept 15 | For the first half of September, provided 22 hours of massage therapy at a rate of $75/hour. Billed the individual membersâ accounts for services provided |
15 | Sept 16 | Received $6,775 for services previously billed to customerâs accounts |
16 | Sept 16 | Paid wages and salaries of $4,700 to Aggie Health and Fitness Center employees |
17 | Sept 17 | Purchased on account additional concessions for $2,100 from Advocare Distributing |
18 | Sept 20 | Paid $5,680 on accounts payable |
19 | Sept 21 | Collected the balance of what was owed on account from Allen & Associates for the Sept. 12 transaction |
20 | Sept 22 | Sold forty-seven shirts to individual customers for $40 each. Collected 30% in cash, the balance is owed to Aggie Health and Fitness Center on account |
21 | Sept 23 | Received a utility bill that totaled $535 for the month. It is due October 12 |
22 | Sept 24 | Sold a gift certificate for $100 cash. The gift certificate is valid for one year and is redeemable for a 60 -minute massage |
23 | Sept 26 | Cash sales of shirts: 30 shirts sold at $40 each |
24 | Sept 27 | Aggie Health and Fitness Center paid a dividend of $4,000 to its shareholders |
25 | Sept 28 | Received $4,225 for services previously billed to customersâ accounts |
26 | Sept 29 | Purchased additional equipment for $28,000; paid $5,000 in cash and signed a two year, 4% note for the balance |
27 | Sept 29 | Fees for massage therapy for the last half of September totaled $4,900. All of these transactions were collected in cash. Fees for personal training given during the last half of September amounted to $7,200. Fifty percent of the personal training fees were collected in cash |
28 | Sept 30 | âCredit sales for concessions during the last half of September totaled $1,900. âCash sales for concessions during the last half of September totaled $480. âCost of the concessions sold during the last half of September was $1,015 |
ADDITIONAL INFORMATION:
1.Depreciation expense for the month of September should be calculated using the straight-line method.
2.At the end of the month, a physical count was taken of the Fitness Centerâs inventories.
It revealed the following information:
a.Sixty of the shirts for resale were on hand at September 30.
b.Concession merchandise still on hand as of September amounted to $4,990.
3. Salaries earned by employees but unpaid on September 30 totaled $5,115.
4. Office Supplies still on hand on September totaled $100.
What is the correct adjusting journal entry for Insurance Expense/Prepaid Insurance?
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What is the correct adjusting journal entry for Interest Expense/Interest Payable?
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