Exercise 7-13A Superior Carpet Cleaning, Exercises 8-9A Sam's Subs, Problem 8-34A Cafe Ole' Company

Exercise 7-13A

Superior Carpet Cleaning provided $76,000 of services during 2013, its first year of operations. All customers paid for the services with major credit cards. Superior submitted the credit card receipt to the credit card company immediately. The credit card company paid Superior cash in the amount of face value less a 3 percent service charge.

Required:

a.  Record the credit card sales and the subsequent collection of Accounts Receivable in a horizontal statements model

b. Answer the following questions:

(1) What is the amount of total assets at the end of the accounting period?

(2) What is the amount of revenue reported on the income statement?

(3) What is the amount of cash flow from operating activities reported on the statement of cash flows?

(4) Why would Superior Carpet Cleaning accept credit cards instead of providing credit directly to its customers? In other words, why would Superior be willing to pay 3 percent of sales to have the credit card company handle its sales on account?

Exercise 8-9A 

Sam’s Subs purchased a delivery van on January 1,2013 for $35,000. In addition, Sam’s paid sales tax and title fees of $1500 for the van. The van is expected to have four-year life and a salvage value of $6,500

Required:

a. Using the straight-line methd, compute the depreciation expense for 2013 and 2014.

b. Prepare the general journal entry to record the 2013 deprection.

c, Assume the van was sold on January 1, 2016 for $21,000. Prepare the journal entry for the sale of the van in 2016.

Problem 8-34A 

Cafe Ole’ Company acquired a fast-food restaurant for $1,500,000. The fair market values of the assets acquired were as follows. No liabilities were assumed.

Equipment $380,000

Land $200,000

Building $680,000

Franchise (5-year life) $120,000

Required:

a. Calculate the amount of goodwill acquired

b. Prepare the journal entry to record the amortization of the franchise fee at the end of year 1.