Acct ch10-12ans PDF

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Review for test 10-12

Group 1 Michael Acierto Garrett Bachmeier Christeen Barsom Nathan Burke Duc Hong Cao Tyler Coffman 79.Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. What entry will Sadowski Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? a. Notes Payable.....................................................................522,500 Cash.............................................................................. 522,500 b. Notes Payable.....................................................500,000 Interest Payable....................................................22,500 Cash................................................................ 522,500 c. Interest Expense....................................................................22,500 Notes Payable.....................................................................500,000 Cash.............................................................................. 522,500 d. Interest Payable.....................................................................15,000 Notes Payable.....................................................................500,000 Interest Expense......................................................................7,500 Cash.............................................................................. 522,500

Ans: B, Solution: $500,000  .06  9/12  $22,500 (Face val.  6%  9/12) 90.The interest charged on a $90,000 note payable, at the rate of 6%, on a 60-day note would be a. $5,400. b. $2,700. c. $1,350. d. $900.

Ans: D, Solution: $90,000  .06  60/360  $900 (Face val.  6%  90/360) Be. 260 Frye Company issued $700,000, 10%, 10-year bonds on January 1, 2017, at 105. Interest is payable annually on December 31. Frye uses the effective-interest method of amortization and has a calendar year end and the bonds were issued for an effective interest rate of 8%. Instructions Prepare all journal entries made in 2017 related to the bond issue. *Solution 260 2017 Jan. 1

Cash.................................................................................... Bonds Payable............................................................ Premium on Bonds Payable........................................

735,000 700,000 35,000*

*(Face val. × 105%) – face val. 1

Review for test 10-12 Dec. 31

Interest Expense.................................................................. 58,800* Premium on Bonds Payable................................................ 11,200 Cash........................................................................... 70,000 ($735,000 × 8% = $58,800) ($700,000 × 10% = $70,000)($70,000 – $58,800 = $11,200)

*(Face val. × 105%) × 8%

Group 2 Felipe Contreras Kimberly Cycon Sidney Do Shauntel Foley Kevin Garcia Jarod Garza 98.A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency? a. $600,000 b. $630,000 c. $31,500 d. $30,000

Ans: D Solution: ($630,000  1.05)  .05  $30,000 (Sal. Rev.  1.05)  5% 114.

The following totals for the month of April were taken from the payroll records of Noll Company. Salaries $120,000 FICA taxes withheld 9,180 Income taxes withheld 25,000 Medical insurance deductions 4,500 Federal unemployment taxes 320 State unemployment taxes 2,160 The entry to record the payment of net payroll would include a a. debit to Salaries and Wages Payable for $79,160.

b. debit to Salaries and Wages Payable for $81,320. c. debit to Salaries and Wages Payable for $72,140. d. credit to Cash for $90,500.

Ans: B Solution: $120,000  $9,180  $25,000  $4,500  $81,320 (Salar. – FICA tax. – inc. tax. – ins. ded.) Ex. 263 On June 1, Huntley Company borrows $50,000 from the bank by signing a 60-day, 6%, interestbearing note. Instructions Prepare the necessary entries below associated with the note payable on the books of Huntley Company.

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Review for test 10-12 (a)

Prepare the entry on June 1 when the note was issued.

(b)

Prepare any adjusting entries necessary on June 30 in order to prepare the monthly financial statements. Assume no other interest accrual entries have been made.

(c)

Prepare the entry to record payment of the note at maturity.

Solution 263 (a)

June 1

(b)

June 30

Cash........................................................................... Notes Payable.................................................... Interest Expense......................................................... Interest Payable................................................. ($50,000 × 6% ÷ 12)

50,000 50,000 250 250

(Amount bor. × 6% ÷ 12) (c)

July 31

Notes Payable............................................................. Interest Payable.......................................................... Interest Expense......................................................... Cash...................................................................

50,000 250 250 50,500*

*(Amount bor. + (amount bor. × 6% × 60/360))

Group 3 Juan Gonzalez Du Ha Joey Ha Bobby Hardigree Nhi Huynh Mayu Kawasaki 129.

Mohling Company typically sells subscriptions on an annual basis, and publishes eight times a year. The magazine sells 60,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions? a. Subscriptions Receivable....................................................600,000 Subscription Revenue.................................................... 600,000 b. Cash .................................................................................600,000 Unearned Subscription Revenue................................ 600,000 c. Subscriptions Receivable..................................................... 75,000 Unearned Subscription Revenue................................... 75,000 d. Prepaid Subscriptions..........................................................600,000 Cash.............................................................................. 600,000

Ans: B Solution: $60,000  $10  $600,000 (Tot. subscr. × subscr. price) 146.

Bonds with a face value of $500,000 and a quoted price of 97¼ have a selling price of a. $486,250. b. $485,125. c. $485,013. d. $487,500.

Ans: A, Solution: $500,000  .9725  $486,250 (Face val. × 97.25%)

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Review for test 10-12 Be. 218 Samson Company had the following transactions. 1. Issued 5,000 shares of $100 par preferred stock at $107 for cash. 2. Issued 8,000 share of common stock with a par value of $10 for $120,000. 3. Purchased 500 shares of treasury common stock for $12,000. Instructions Prepare the journal entries to record the above stock transactions. Solution 218 1. Cash............................................................................................... Preferred Stock....................................................................... Paid-in Capital in Excess of Par Value—Preferred Stock........

535,000 500,000 35,000*

*(Sell. pr./sh. – par val./ sh.) × 5,000 2. Cash............................................................................................... Common Stock....................................................................... Paid-in Capital in Excess of Par Value—Common Stock........

120,000 80,000 40,000*

*[Sell. pr. – (8,000 × par val./ sh.)] 3. Treasury Stock................................................................................ Cash....................................................................................... Group 4

12,000 12,000

Silva Kordab Rita Landavazo Luan Le Yen Le Cassidy Ledford carly Mcnerney 63.A disadvantage of the corporate form of organization is a. professional management. b. tax treatment. c. ease of transfer of ownership. d. lack of mutual agency.

Ans: B, Chapter11 78.If Norben Company issues 6,000 shares of $5 par value common stock for $210,000, the account a. Common Stock will be credited for $210,000. b. Paid-in Capital in Excess of Par Value will be credited for $30,000. c. Paid-in Capital in Excess of Par Value will be credited for $180,000. d. Cash will be debited for $180,000.

Ans: C, Solution: $210,000  (6,000  $5)  $180,000 (Iss. Pr. – (sh. iss. × PV/sh)

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Review for test 10-12 Be. 219 In its first year of operations, Martinez Corporation had the following transactions pertaining to its $10 par value preferred stock. Feb. 1 July 1

Issued 8,000 shares for cash at $24 per share. Issued 6,000 shares for cash at $25 per share.

Instructions (a)

Journalize the transactions.

(b)

Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital in excess of par value—preferred stock at the end of the year.

Solution 219 (a) Feb. 1

Cash .............................................................................. Preferred Stock .................................................... Paid-in Capital in Excess of Par Value—Preferred Stock ................................................................. (Issued 8,000 shares at $24 per share)

192,000 80,000 112,000*

*(Sell. pr./sh. – par val./ sh.) × 8,000

July 1

Cash .............................................................................. Preferred Stock .................................................... Paid-in Capital in Excess of Par Value—Preferred Stock ................................................................. (Issued 6,000 shares at $25 per share)

150,000 60,000 90,000*

*(Sell. pr./sh. – par val./ sh.) × 6,000

(b) (1) (2)

Preferred stock—$80,000 + $60,000 = $140,000. Paid-in Capital in Excess of Par Value—Preferred Stock—$112,000 + $90,000 = $202,000.

Group 5 Aylene Moreira Isabella Nguyen Kevin Nguyen Lanvy Nguyen Phuong Nguyen Molly Pojar

93.Dawson Company issued 800 shares of no-par common stock for $7,200. Which of the following journal entries would be made if the stock has stated value of $2 per share? a. Cash 7,200 Common Stock 7,200 b. Cash 7,200 Common Stock 1,600 Paid-in Capital in Excess of Par 5,600

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Review for test 10-12 c. Cash Common Stock Paid-in Capital in Excess of Stated Value d. Common Stock Cash

7,200 1,600 5,600 7,200 7,200

Ans: C, Solution: 800  $2  $1,600; $7,200  (800  $2)  $5,600 (Sh. iss.  SV/sh.); [Iss. pr.  (sh. iss.  SV/sh)] Chapter 12 52.Investing activities include a. collecting cash on loans made. b. obtaining cash from creditors. c. obtaining capital from owners. d. repaying money previously borrowed.

Ans: a, Be. 177 Lake Norman Company reported net income of $225,000 for the current year. Depreciation recorded on buildings and equipment amounted to $75,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $20,000 $15,000 Accounts receivable 22,000 32,000 Inventory 50,000 60,000 Accounts payable 12,000 18,000 Instructions Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method. Solution 177 Net income ......................................................................................................... $225,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ................................................................................ 75,000 Decrease in accounts receivable ............................................................... 10,000 Decrease in inventory................................................................................. 10,000 Decrease in accounts payable ................................................................... (6,000) Net cash provided by operating activities ................................................... $314,000* *(Net inc. + dep. exp + dec. in A/R + dec. in inven. − dec. in A/P)

Group 6 Cody Reed Jake Robinson Blanca Rojas Darren Rolfe Michael Romero Christine Rufino Luis Sanchez 6

Review for test 10-12 56.Cash flows from operating activities, as reported on the statement of cash flows under the indirect method, would include a. receipts from the sale of investments. b. net income. c. payments for dividends. d. receipts from the issuance of capital stock.

Ans: b 151.

All of the following adjustments would be deducted in determining net cash provided by operating activities except a(n) a. increase in inventories. b. depreciation expense. c. gain on disposal of plant assets. d. decrease in accrued expenses payable.

Ans: b, Be. 179 Assuming a statement of cash flows is prepared using the indirect method, indicate the reporting of the transactions and events listed below by major categories on the statement. Use the following code letters to indicate the appropriate category under which the item would appear on the statement of cash flows. Code Cash Flows From Operating Activities Add to Net Income A Deduct from Net Income D Cash Flows From Investing Activities Cash Flows From Financing Activities

IA FA Category

1.

Common stock is issued for cash at an amount above par value

______

2.

Inventory increased during the period

______

3.

Depreciation expense recorded for the period

______

4.

Building was purchased for cash

______

5.

Bonds payable were acquired and retired at their carrying value

______

6.

Accounts payable decreased during the period

______

7.

Prepaid expenses decreased during the period

______

8.

Treasury stock was acquired for cash

______

9.

Land is sold for cash at an amount equal to book value

______

Patent amortization expense recorded for a period

______

10.

Solution 179

Category 1.

Common stock is issued for cash at an amount above par value

FA 7

Review for test 10-12

2.

Inventory increased during the period

D

3.

Depreciation expense recorded for the period

A

4.

Building was purchased for cash

IA

5.

Bonds payable were acquired and retired at their carrying value

FA

6.

Accounts payable decreased during the period

D

7.

Prepaid expenses decreased during the period

A

8.

Treasury stock was acquired for cash

FA

9.

Land is sold for cash at an amount equal to book value

IA

Patent amortization expense recorded for a period

A

10.

Group 7 Conner Schnicker Sami Shamroukh Kenny Tang Thanh Tang Andrew Vezirian Brad Yuhas Hector Zepeda Ex. 187 Using the indirect method, calculate the amount of cash flows from operating activities from the following data: Net income Beginning accounts receivable Ending accounts receivable Beginning prepaid insurance Ending prepaid insurance Beginning accounts payable Ending accounts payable Depreciation expense Amortization of intangible asset Dividends declared and paid

$199,000 22,000 29,000 5,000 2,000 15,000 14,000 50,000 6,000 11,000

Solution 187 Net income $199,000 – Increase accounts receivable (7,000) + Decrease in prepaid insurance 3,000 – Decrease in accounts payable (1,000) + Depreciation 50,000 + Amortization 6,000 Cash flows from Operating Activities $250,000* *(Net inc. − A/R inc. + prep. ins. dec. − A/P dec. + dep. exp. + qnort. exp.) 8

Review for test 10-12 Ex. 188 Use the following information to perform the calculations below (using the indirect method). Clearly label the amount of each answer as positive or negative and show all your calculations. Net income Depreciation expense Beginning accounts receivable Ending accounts receivable Beginning inventory Ending inventory Beginning prepaid insurance Ending prepaid insurance

$401,000 97,000 420,000 439,000 516,000 550,000 42,000 48,000

Beginning accounts payable Ending accounts payable Purchase of long-term assets Issuance of long-term debt Issuance of stock for cash Issuance of stock for long-term assets Purchase of treasury stock Sale of long-term investment at cost

a. Calculate the amount of cash flows from operating activities. _____________

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$119,000 146,000 612,000 220,000 180,000 110,000 64,000 56,000

Review for test 10-12 Ex. 188

(Cont.)

b. Calculate the amount of cash flows from investing activities. _____________

c. Calculate the amount of cash flows from financing activities. _____________

a. Calculate the net change in cash. _____________ Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Solution 188

(20 –25 minutes)

a. Cash flows from operating activities Net income Depreciation expense Increase in accounts receivable Increase in inventory Increase in prepaid insurance Increase in accounts payable Cash flows from operating activities *(Net inc. + dep. exp. − A/R inc. inv. inc. − prep. ins. inc + A/P inc.)

$401,000 97,000 (19,000) (34,000) (6,000) 27,000 $466,000*

b. Cash flows used in investing activities Purchase of long-term assets Sale of long-term investments Cash flows used in investing activities

$(612,000) 56,000 $(556,000)

c. Cash flows from financing activities Issue of long-term debt Issue of stock for cash Purchase of treasury stock Cash flows from financing activities *(Long term debt iss. + st. iss. − trea. st. pur.)

$220,000 180,000 (64,000) $336,000*

d. Net change in cash Increase from operating activities Decrease from investing activities Increase from financing activities Net increase in cash *(oper. act. inc. − invest. act. doc. + fin. act. inc.)

$466,000 (556,000) 336,000 $246,000*

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