Calculations Shown

Part A: Answer each of the following two questions. Each answer is worth

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

Item 12/31/10

 12/31/09

Accounts Receivable $  42,000 $45,100

Accounts Payable   27,900 24,500

Merchandise Inventory   68,000 63,000

Sales (2010) 170,000 

Interest Revenue (2010)    3,200 

Dividend Revenue (2010)    1,800 

Tax Expense (2010)  11,600 

Salaries Expense (2010)   22,400 

COGS (2010)  57,000 

Interest Expense (2010)    2,200 

Operating Expenses  19,400 

Complete the cash flow from operating activities section for Meranda 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. 

Jessica’s Jewelry Store

Comparative Balance Sheet

For Years Ended December 31, 2011 and 2010

(in thousands) 2011 2010 Difference

Percentage

Assets  

Current Assets  

  Cash and Equivalents $319 $288

  Accounts Receivable, net 166 173

  Inventory 437 400

  Total Current Assets 922 861

Property, Plant and Equipment 377 412

Total Assets $1,299 $1,273

Liabilities  

Current Liabilities  

  Accounts Payable 132 144

  Accrued Liabilities 90 84

  Total Current Liabilities 222 228

Long-Term Liabilities 84 96

Total Liabilities 306 324

Stockholders’ Equity  

  Common Stock 288 255

  Retained Earnings 705 694

Total Stockholders’ Equity 993 949

Total Liabilities and

Stockholders’ Equity

$1,299 $1,273

Part B: Answer each of the following 15 questions. Each answer is worth 4 points.

1. Given the following information, show the increase or decrease in the accounting equation:

A. Deanne invests $45,000 and $10,000 of office equipment into the business.

B. Furniture is purchased for $8,000 cash.

C. Supplies are purchased on credit for $2,300.

D. The month’s electric bill of $775 was paid.

E. The month’s cash sales were $5,000.

2. Journalize the following transactions and include the explanations.

A. Tammy invested $40,000 into her corporation on June 11.

B. Tammy purchased inventory for $95,000, of which $70,000 was on account on June 14.

C. Tammy paid one month’s rent of $2,400 on June 16.

D. Tammy had sales of $15,000 on account on June 19.

E.  Tammy had paid $2,500 on her payables account on June 21.

3. Prepare a trial balance from the following information for Computer Systems, Inc. for December 31, 2012:

Accounts payable  $4,298

Common stock  $4,073

Sales    $8,302

Cash    $1,902

Notes payable  $888

Wages expense  $777

Supplies expense  $1,028

Equipment   $5,183

Accounts receivable  $1,733

Inventory    $6,938

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

Cash $38,502

Accounts Receivable   14,372 

Prepaid Rent   18,229 

Prepaid Insurance     4,583 

Supplies     (A) 

Accounts Payable  (B)

Wages Payable   29,428  

Common Stock   30,049

Retained Earnings   18,423

 _______ _______

Total $80,436  $80,436

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

Nov. 1 Purchased $3,600 of merchandise from Hilltop, terms 2/10, n/30.

Nov. 5 Purchased $1,750 of merchandise for cash from Owen’s Supply.

Nov. 7 Purchased $3,400 of merchandise from Seaside, terms 1/15, n/30.

Nov. 10 Returned $500 of merchandise to Seaside. Credit Memo #131.

Nov. 11 Paid the invoice from Hilltop.

6. Given the following information, prepare a balance sheet for Brandon’s Campstore for the year ending December 31, 2012:

Cash  $38,745

 Retained Earnings $171,309

Common Stock $43,500 Equipment $37,200

Accounts

Receivable

$14,109 Accounts Payable            $26,351

Land $35,000  Inventory $81,311

Prepaid Supplies   $9,003  Income Taxes

Payable

Office Computers $16,399  Other PPE $26,550

Accum. Depr. (all) $21,013 Prepaid Insurance             $9,140

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 ending inventory of Rick Company for 2012 using FIFO?

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

Gross Profit    _____________ ______________

Net Income    _____________ ______________

Ending Retained Earnings  _____________ ______________

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.  The use of LIFO is allowed. ___________________

B. Both research and development costs are expensed as incurred.

C.  Market is defined as current replacement cost. ___________________

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

Bank Balance, July 31, 2011  $ 28,542

Checkbook Balance, July 31, 2011 29,344 

Bank collection of note receivable 1,545 + 210

Bank service charge 75

Deposits in transit 3,145

Outstanding checks 2,685

NSF check from customer 770         

Correction of book error (check #456 written

for $280, recorded at $28)—maintenance expense interest

11. Journalize the following transactions for Ryan Company:

July 1 Sold $5,300 of merchandise to Rick on account.

Nov. 1 Exchanged Rick’s account receivable for an eight-month, 6% note for $5,300.

Dec. 31 Recorded accrued interest on Jim’s note (round to nearest dollar).

July 1 Rick paid off his note with interest (round to nearest dollar).

12.  A computer system was purchased on July 1 at a cost of $125,000. It’s expected to be used for four years and to have a residual value of $5,000 after 8,000 hours of service. The system was used for 1,750 hours the first year and 2,100 hours 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 journal entries for the following transactions for Ryan Company

in the general journal:

Feb. 28 Machinery that cost $57,000 and had accumulated depreciation of

$46,000 was sold for $2,500.

April 10 A van that cost $23,700 and had accumulated depreciation of $21,000 was sold for $1,250.

July 16 Equipment that cost $120,000 and had accumulated depreciation of $112,000 was traded in for new equipment with a fair-market value of $140,000. The old equipment and $135,000 in cash were given for the new equipment.

14. Journalize the following treasury stock transactions:

May 1 Reacquired 800 shares of $15 par common stock for $13 per share.

May 7 Sold 400 shares at $11 per share.

May 9 Sold 250 shares at $17 per share.

15. The following information was taken from the financial statements of

Brandon Company for 12/31/10 and12/31/09:

Net income for 2010: $313,000

Depreciation expense for 2010: $28,400

Loss on sale of equipment: $7,300

Balance Sheet    12/31/10  12/31/09

Accounts Receivable   $46,000  $50,000

Merchandise Inventory     35,000    28,000

Accounts Payable      27,000    24,000

Interest Payable       6,000     8,000

Prepare the operating activities section of the statement of cash flows under the

indirect method for the year ended December 31, 2010.

Submitting Your Assignment

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