All Tests

Test 1

Problem 1. At the beginning of 2010, Gonzales Company’s accounting records had the general ledger accounts and balances shown in the table below. During 2010, the following transactions occurred:
 1. received $80,000 cash for providing services to customers
 2. paid rent expense, $10,000
 3. purchased land for $9,000 cash
 4. paid $5,000 on note payable
 5. paid operating expenses, $52,000
 6. paid cash dividend, $6,000
 
 Required:
 1) Record the transactions in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column, providing appropriate titles for these accounts in the last column of the table.
2) What is the amount of total assets as of December 31, 2010?

3) What is the amount of total stockholders’ equity as of December 31, 2010?  

Problem 2. Given are the amounts of assets, liabilities, owner’s equity, revenues, and expenses of AQUA Inc. at 12/31/10. The beginning amount of Retained Earnings at 1/1/10 was $20,000, and during the year Dividends of $60,000 were taken out by the owners of Aqua Inc. Prepare the yearend Balance Sheet and Income Statement for AQUA LLP at the end of the year.

 (Include Correct Headings)

Accounts Payable                             $59,000                    Land                                                       $78,000

Accounts Receivable                            15,000                  Unearned Revenue                              45,000

Advertising Expense                            13,000                  Utilities Expense                                      5,000

Building                                               160,000                    Rent Expense                                         13,000

Cash                                                     140,000                    Operating Expenses                             23,000

Supplies                                                 10,000                  Common Stock                                     240,000                

Salary payable                                        2,000                   Accumulated Depreciation                                  10,000

Prepaid Insurance Expense                20,000                  Service Revenue                                  170,000

Interest Expense                                    9,000                   Retained Earnings                                          ?  

Test 2

Problem 1. The May 31, 2012, balance per bank statement for Upton Company was $7,200. The cash balance per books was $9,500. Outstanding checks amounted to $800, and deposits in transit were $2,400. The bank statement contained an NSF check for $500, a service charge for $25, and a debit memo for direct payment of the telephone bill of $175.

Required:

1) Prepare a bank reconciliation to determine the true cash balance at May 31, 2012. 

Problem 2. Scott Company is a merchandising business that was started in 2012. Scott uses the perpetual inventory system. It experienced the following events during 2012.

1. Acquired $25,000 cash by issuing common stock
2. Purchased inventory on account that cost $14,000, terms 2/10, n/30
3. Sold inventory that had cost $8,400 for $15,000 cash
4. Paid for the merchandise referred to in event 2, within the discount period

Required:

1) Record the events in the financial statements model below; include column totals.
2) Prepare an income statement for 2012.
3) What is the amount of total assets at the end of 2012?

Test 3

Problem 1. Maple Company started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first unit cost $800 and the second, $700. One of the items was sold during the year.

Required:

Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory, assuming use of:

a. LIFO
b. FIFO
c. Weighted average

Problem 2. Teague Company purchased a new machine on January 1, 2012, at a cost of $150,000. The machine is expected to have an eight-year life and a $15,000 salvage value. The machine is expected to produce 675,000 finished products during its eight-year life. Smith produced 70,000 units in 2012 and 110,000 units during 2013.

Required:

1) Determine the amount of depreciation expense to be recorded on the machine for the years 2012 and 2013 under each of the following methods:

   

Test 4

Problem 1. Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use the effective interest rate method to complete the amortization schedule below.

Problem 2. Allen Corporation was organized on July 15, 2012. It was authorized to issue 150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred stock. The preferred stock had a stated value of $50 per share. The following stock transactions relate to Allen Corporation.

·         Issued 55,000 shares of common stock for $33 per share.

·         Issued 2,750 shares of the class A preferred stock for $62 per share.

·         Issued 27,500 shares of common stock for $35 per share.

Required:

1) Indicate the effect of each of these transactions on Allen’s financial statements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock are outstanding?

   

Test 5

Problem 1. The following information applies to Barnhart Company:

  



Additional information:

• Net Credit Sales = $220,000
• Beginning Accounts Receivable = $10,000

Required:

1) Compute Barnhart’s:

a) Quick ratio

b) Current ratio

c) Working capital

d) Accounts receivable turnover

e) Average days to collect receivables 

Problem 2. The Jiffy Manufacturing Company started operations in 2012 when it acquired $100,000 from its owners. During the year, the company incurred the following costs:

  

The company placed 12,000 units into production, completed 10,000 units, and sold 8,000 units. The average selling price was $17 per unit.

Required:

1) Prepare a schedule of cost of goods manufactured and sold for the year ended December 31, 2012.

2) Prepare an income statement for the year ended December 31, 2012. 

Test 6

Problem 1. The following information is for a product manufactured and sold by Rivera Corporation:

• Sales price per unit, $30
• Variable cost per unit, $20
• Total fixed costs, $200,000
• Last year, Rivera earned a profit of $60,000

Required:

1) How many units did Rivera sell last year?

2) Rivera’s managers are considering decreasing the sales price to $28 in an effort to increase market share. Also, the company wants a profit of $80,000. How many units would it have to sell at the lower selling price to achieve this target? 

Problem 2. The management accountant at Melrose, Inc. provided the following estimated costs for producing 5,000 units of a specialty product manufactured by the firm:

  

The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.

Required:

1) Compute the predetermined overhead rate for this company.

 2) Compute the specialty product’s total estimated cost per unit.

3) Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs? 

Test 7

Problem 1. Ortiz Manufacturing is considering developing and marketing one of two new products, A and B. It has accumulated the following information about the two products:

  

Required:

1)      Which of these items are relevant to Ortiz’s decision about which of these products it will launch? 

Problem 2. Mae Lee owns a small retail store in Cairo, Georgia. The following summary information regarding expectations for the month of January is provided: As of December 31 there is $500 in the bank and the balance in accounts receivable is $2,500. Budgeted cash and credit sales for January are $3,000 and $2,000, respectively. Ninety percent of credit sales are collected in the month of sale and the remainder is collected in the following month. Mae’s suppliers do not extend credit. Cash payments for January are expected to be $12,000. Mae has a line of credit that enables the store to borrow funds on demand. However, funds must be borrowed on the first day of the month and interest paid in cash on the last day of the month. Mae desires to maintain a $500 cash balance before consideration is given to the payment of interest. Mae’s bank charges annual interest of 12% per year.

Required:

1) Compute the amount of funds that needs to be borrowed.

2) Compute the amount of interest expense that will appear on the January 31 pro forma income statement. 

Test 8

Problem 1. Creighton Company’s balance sheet and income statement are provided below:

 

Required:

1) Compute the margin, turnover, and return on investment for Creighton Company.

2) What is the advantage of expanding the ROI formula to measure margin and turnover separately? 

Problem 2. Delta Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $100,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $30,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:

  

Delta’s cost of capital is 12%

Required:
1) Calculate the present value index for Project X and for Project Y.

2) Indicate whether each of the projects is an acceptable investment.

3) Which of the two projects should Delta implement?