Title | Accounting Midterm |
---|---|
Author | Alexis Merlino |
Course | Financial Accounting |
Institution | Temple University |
Pages | 30 |
File Size | 2.3 MB |
File Type | |
Total Downloads | 62 |
Total Views | 157 |
Accounting midterm notes...
Chapter 1: Formulas: ● Revenues-Expenses= Net Income ● Liabilities + Stockholders Equity= Assets ○ Stockholders Equity= Common stock + RE ● Beginning RE + Net Income- Dividends = Ending RE ● Change in SE= Issuance of CS + Net Income - Dividends ● Total Change in Cash= Operating Cash Flows + Financing Cash Flows + Investing Cash Flows ○ Ending Cash Amount= Total change in cash + Beg cash amount
Chapter 2 Formulas: Assets= Liabilities + SE SE= Common Stock + RE
Impact of Transactions on the Accounting Equation: Assets = Liabilities Cash, supplies, Accounts Pay AR, Equipment, Deferred Rev Prepaid Rent Notes Pay
+ Stockholder’s Equity Common Stock, RE Service Rev, Dividends Expenses
Journal Entries: *Receive cash for services provided during the current period Debit-Cash Credit- Service Revenue *Invest $ and receive common stock/ Issue shares of common stock Debit- Cash Credit- Common Stock *Pay for next month's rent Debit- Prepaid Rent
Credit- Cash
*Pay cash dividends to stockholders Debit- Dividends
Credit-Cash
*Provide services on account for customers Debit- AR
Credit- Service Rev
*Receive cash from previously billed customers Debit- Cash
Credit- AR
*Pay for supplies previously purchased on account Debit- Accounts Pay
Credit- Cash
*Receive cash in rental fees for the current month Debit- Cash
Credit- Service Rev
*Paint houses in the current month on account Debit-AR
Credit- Service Rev
*Receive cash in advance for following month Debit- Cash
Credit- Deferred Rev
Chapter 3 Remember: Ending Retained Earnings= Beginning Balance + Net Income - Dividends In a balance sheet: Long Term Assets= Equipment, Accumulated Dep (-), Land Total Current Liabilities= Notes Payable
Post closing Trial Balance: All Accounts are transferred over, besides temporary accounts & RE changes RE= Beg Balance + Total Revenues - Total Expenses - Dividends Adjusted Trial Balance: Go through journal entries, pay attention to debit/credit
Adjusting Entries: *Supplies: Purchase of supplies total $2600. Supplies on hand equal 2550. BB= 1050 Available Supplies= supplies purchased + beginning balance Available- ending balance (on hand) = amt. used during month (1100) Supplies Expense
1100
Supplies
1100
*Insurance 1) Insurance cost is $1050 per month Insurance Expense Prepaid Insurance
1050 1050
2) Pay for insurance on May 1, $2750/month record the entry on December 31 2750 * 8 months = 22000
*Salaries 1) Salaries payable of $9100, additional salaries owed at end of the year are $14100 Salaries Expense
14100
Salaries Payable
14100
2) A company pays its employees $400/day ends on Dec. 26, record entry for dec 31 400 x 5 days Salaries Exp Salaries Pay 3)Employees work Monday through Friday, and salaries of $3,200 per week are paid each Friday. The company's year-end falls on Tuesday. Salaries Expense = $3,200 (weekly salary) / 5 (days per week) × 2 (Monday and Tuesday before year-end) = $1,280
*Deferred Revenue 1) A tenant paid $1650 in advance for rent, deferred revenue was credited for the entire amount Entire amount= amt. tenant paid- beginning def rev balance Deferred Revenue
550
Service Revenue
550
2) On Oct 1, company receives $10800 from a customer. Deferred Rev is credited. Record entry for deferred rev at its year end of December 31. 10800 * 3/12 = 2700 Deferred Rev 2700 Service Rev
2700
3) By the end of the year, $275 of the services have been provided Deferred Rev 275 Service Rev
275
*Depreciation Depreciation on the equipment is $5700 per year Depreciation Expense Accumulated Depreciation
5700 5700
*Interest Interest Revenue= Amt. of principal * Annual Rate * Fraction of the year On June 30th, Company lends $37000: Principal and interest at 7% are due in a year 37000 * .07 * 6/12 = 1295 Interest Receivable
1295
Interest Revenue
1295
* Rent 1) Balance of $4920, represents payment on Oct. 31 for rent from November 1 2021, to April 30, 2022 (2 months used of 6 months prepaid) 4920 * 2/6 = 1640 Rent Expense
1640
Prepaid Rent
1640
2)Three months of rental space has expired Total Rent for one year= 17000 17000 * 3/12 = 4250 Rent Expense
4250
Prepaid Rent
4250
Closing Entries: Only for temporary accounts: Revenue, Expenses, and Dividends 1. Revenue: Has a credit balance, close out with a debit For amt of service rev Service Revenue
D
Retained Earnings
C
2. Expenses: Have debit balances, close them out with a credit Retained Earnings
D
All Expenses
C
3. Dividends: Have debit balances, close out with credit Retained Earnings Dividends
D C
Cash Vs Accrual Basis Net Income
Accrual basis accounting: Received $12,000 cash from customers for services to be provided next month. $0 Revenue
Chapter 4
Increase Cash= Notes Receivable and Interest Revenue Decrease Cash= Service Fee expense, NSF ( AR) 3% Charge on CC Sales, 1% Charge on Debit Total CC Sales * .97= Total DC Sales * .99= Using a CC= Accounts Payable ; Using a Debit Card = Cash
Chapter 5 *Mar. 12 Provide Services on account for $10,000 Discount terms: 3/10, n/30 Sales Discount= 10,000 * .03 March 12
AR
10,000
Service Rev March 20
10,000
Cash
9700
Sales Discount
300
AR
10,000
Service Rev Less: sales allowance =Net Revenue
Direct Write Off Method: ●
Estimated Uncollectible Accounts (Total) = AR * %
●
Bad Debt Expense= Estimated UA - Credit Adjustment + Debit Adjustment
●
Bad Debt Expense= Ending Allowance for UA - Beg UA - Write Off
●
Bad Debt Expense= Total estimated Amount uncollectible - Credit Adj +Debit Adj
●
Allowance for Uncollectible Amounts= Bad Debt Expense + Credit Balance - Debit Balance
●
Net Accounts Receivable: Total AR Less: Allowance for Uncollectible Accounts (-) =Net AR
Adjusting Entry: 1)Bad Debt Expense D Allowance for Uncollectible Accounts
C
2) Customers accounts totaling 7600 are written off as uncollectible Bad Debt Expense
7600
AR
7600
No attempt made to estimate or record future uncollectible accounts Ending AR= No entry required Allowance Method: Ending AR= Year 1 Beg Balance + Service Rev - Cash Collected Bad Debt Expense= Ending AR * Percentage 1)Estimate that UA total 20% of ending AR Bad Debt Expense
D
Allowance for Uncoll. Accts
C
2) Customers accounting totaling 7600 are written off as uncollectible Allowance for UA 7600 Accounts Receivable
7600
Effect on Net Income between 2 methods Year 1
Year 2
Allowance method:
(Bad Debt Expense)
$0
Direct Write off:
$0
(Bad Debt Expense)
Notes Received
Percentage of Receivables Method: Bad Debt Expense= AR * % of receivables - Credit + Debit Bad Debt Expense Allowance for UA Percentage of Credit Sales Method Credit Sales * Credit % Bad Debt Expense Allowance for UA Effect on Net Income of both methods= All Decreased by same # as bad debt expense
Trade discount Trade Discount =Services provided ($) * %
Sales price= Services provided ($) - Trade Discount AR Service Rev
Chapter 6:
Periodic Inventory System: March 1: Purchases books on account from Harold Publishers for $5000, terms 2/10, n/30
Purchases 5000 Accounts Payable 5000 Pays Freight Costs of $200 on books purchased Freight in 200 Cash 200 Pays $430 to Company for freight charges Inventory 430 Cash 430 Return Books with a cost of $500 to Harold because part of the order is incorrect Accounts Payable 500 Purchase Returns 500 May 10: Pays full amount due to Harold, (2/10 , n/30) Accounts Payable 4500 Purchase Discount 90 Cash 4410 Purchases- Returns= Balance Payable Purchase Discount= Balance Payable * 2% Discount Sells all books purchased on May 2 ( less those returned on May 5) for $6000 on account (sale of inventory on account) AR 6000 Sales Revenue 6000 Period End Adjustment: Inventory (Beg) Cost of Goods Sold: 4610 Purchase Returns 500 Purchase Discounts 90 Purchases Freight in Inventory End
5000 200
Sells remaining televisions on account, Record the cost of inventory sold. No entry required Cost of goods sold= Purchases + Freight - Returns - Discount Cost of Inventory on Account: Cost of Goods Sold Inventory
Specific Identification Method: Ending Inventory= Total Cost- Cost of Goods Sold FIFO & LIFO: # of Units Sold= All Units under Sale FIFO: more meaningful measure of inventory, higher profitability cost when inv costs are rising LIFO: Higher probability when inventory costs are decling Weighted Average Beg Inv+ Purchases= Number of Units Weighted Avg Cost= Total Cost/ # of units Gross Profit= Sales Revenue- CGS Cost of goods available for sale= CGS + Ending INV Lifo Adjustment= (LIFO CGS- FIFO CGS) Debit: CGS
Credit: Inventory
Other: Receive insurance services from.. Debit- Insurance Expense
Credit- Prepaid Insurance
Someone paying for money borrowed Debit- Cash
Credit- Notes receivable
Receive cash in rental fees for the current month Debit- Cash
Credit- Service Rev
Three months of the rental space has expired. Rent value * 3/12 Debit- Rent Expense
Credit- Prepaid Rent
Grant allowance on the amt owed Debit- Sales Revenue
Credit- Accounts Receiveable
Chapter 7 1)Straight line, double declining, activity based: Purchased store equipment for $43,000.
10-year service life, the equipment will be worth $4,000. expects to use the equipment for a total of 13,000 hours, used the equipment for 1,200 hours the first year. 2) Purchases a delivery van for $36,800. estimates that at the end of its four-year service life,
the van will be worth $5,400. expects to drive the van 157,000 miles. Actual miles driven each year were 42,000 miles in year 1 and 46,000 miles in year 2.
McCoy's Fish House purchases a tract of land and an existing building for $820,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $1,200. The company also pays $10,400 in property taxes, which includes $7,200 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $3,200 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $41,000 to tear down the old building and
remove it from the site. McCoy is able to sell salvaged materials from the old building for $5,600 and pays an additional $11,300 to level the land.
Red Rock Bakery purchases land, building, and equipment for a single purchase price of $420,000. However, the estimated fair values of the land, building, and equipment are $130,000, $312,000, and $78,000, respectively, for a total estimated fair value of $520,000.
Brick Oven Corporation made the following expenditures during the first month of operations:
Calculate the amount paid for goodwill
On January 1, 2021, Weaver Corporation purchased a patent for $249,000. The remaining legal life is 20 years, but the company estimates the patent will be useful for only six more years. In January 2023, the company incurred legal fees of $69,000 in successfully defending a patent infringement suit. The successful defense did not change the company’s estimate of useful life. Weaver Corporation’s year-end is December 31. 1. Record the purchase in 2021; amortization in 2021; amortization in 2022; legal fees in 2023; and amortization in 2023
41500= 249,000/6
58750=249,000-41,500-41,500+69,000
What is the balance in the patent account?
Abbott Landscaping purchased a tractor at a cost of $37,000 and sold it three years later for $18,800. Abbott
recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account.
Accumulated Depreciation: ($37,000 − $2,500)/5 = $6,900 per year × 3 years = $20,700 Chapter 8 1)
On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $19.3 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a sixmonth, 9% promissory note. Interest is payable at maturity. Trico’s year-end is December 31.
2)On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $19.1 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. FirstBanc Corp.’s year-end is December 31. From the banks side:
3) OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $5.0 million. Interest is payable at maturity.
Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions
5) January January January
2 Sold gift cards totaling $8,400. The cards are redeemable for merchandise within one year of the purchase date. 6 Purchase additional inventory on account, $149,000. 15 Firework sales for the first half of the month total $137,000. All of these sales are on account. The cost of the units sold is $74,800.
January
23 Receive $125,600 from customers on accounts receivable.
January
25 Pay $92,000 to inventory suppliers on accounts payable.
January January
28 Write off accounts receivable as uncollectible, $5,000. 30 Firework sales for the second half of the month total $145,000. Sales include $15,000 for cash and $130,000 on account. The cost of the units sold is $80,500.
January
31 Pay cash for monthly salaries, $52,200.
●
Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $4,500 and a two-year service life.
●
The company estimates future uncollectible accounts. The company determines $13,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
●
Accrued interest expense on notes payable for January.
●
Accrued income taxes at the end of January are $13,200.
●
By the end of January, $3,200 of the gift cards sold on January 2 have been redeemed.
2. Record the adjusting entries on January 31 for the above transactions.
Record closing entries.
Chapter 9 Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $17 million gaming center: 1.
Issue $17 million, 6% note.
2.
Issue 1 million shares of common stock for $17 per share.
Interest expense= 17,000,000 * .06 Income before tax= Operating income- Interest Expense Income tax expense= Income before tax * .3 Net Income= Income before tax- Income tax expense
3) On January 1, 2021, Splash City issues $350,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $350,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021.
4) On January 1, 2021, Splash City issues $460,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 9%, the bonds will issue at $422,536. Face amount= 460,000
Stated Rate= .08
Market Rate= .09
Carrying value= 422,536
Amortization Table:
Semiannually: Divide rates by 2 Cash Paid= Face amount * (Stated Rate/2) Interest Expense= Carrying Value * (Market Rate/2)
Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021.
If there's a decrease in carrying value,
8) On January 1, 2021, White Water issues $590,000 of 6% bonds, due in 20 years, with interest payable annually on December 31 each year. Assuming the market interest rate on the issue date is 6%, the bonds will issue at $590,000. Record the bond issue on January 1, 2021, and the first two interest payments on December 31, 2021, and December 31, 2022.
December 31, 2021: Cash ($590,000 × 6%) = $35,400 December 31, 2022: Cash ($590,000 × 6%) = $35,400 12) On January 1, 2021, Splash City issues $380,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 9% and the bonds issued at $349,051. If the market interest rate drops to 7% on December 31, 2022, it will cost $412,092 to retire the bonds. Record the retirement of the bonds on December 31, 2022.
Chapter 10) 1)
Clothing Frontiers began operations on January 1 and engages in the following transactions during the year related to stockholders’ equity.
Issues 500 Shares of common stock for $48 per share Issues 120 additional shares of common stock for $52 per share
2. Record the transactions, assuming Clothing Frontiers has either $1 par value or $1 stated value common stock.
3) Nathan's Athletic Apparel has 1,700 shares of 6%, $100 par value preferred stock the company issued at the beginning of 2020. All remaining shares are common stock. The company was not able to pay dividends in 2020, but plans to pay dividends of $22,000 in 2021. 1. & 2. How much of the $22,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2021, assuming the preferred stock is cumulative? What if the preferred stock were noncumulative?
4) Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $27 per share February 6 Issues 2200 shares of 7% preferred common stock for $13 per share September 10 Purchases 12,000 shares of its own common stock for $32 per share D...