Government and Not-for-Profit Accounting
E. 9-3 Internal service funds are accounted for similarly to businesses
William County opted to account for its duplication service center in an internal service fund. Previously the center had been accounted for in the county’s general fund. During the first month in which it was accounted for as an internal service fund the center engaged in the following transactions:
1. Five copiers were transferred to the internal service fund from the government’s general capital assets. At the time of transfer the copiers had a book value (net of accumulated depreciation) of $70,000.
2. The general fund made an initial cash contribution of $35,000 to the internal service fund.
3. The center borrowed $270,000 from a local bank to finance the purchase of additional equipment and renovation of its facilities. It issued a three-year note.
4. It purchased equipment for $160,000 and paid contractors $100,000 for improvements to its facilities.
5. It billed the county clerk’s office $5,000 for printing services, of which the office remitted $2,500.
6. It incurred, and paid in cash, various operating expenses of $9,000.
7. The fund recognized depreciation of $1,500 on its equipment and $900 on the improvements to its facilities.
a. Prepare journal entries in the internal service fund to record the transactions.
b. Comment on the main differences resulting from the shift from the general fund to an internal service fund in how the center's assets and liabilities would be accounted for and reported
Click here for the solution: William County opted to account for its duplication service center in an internal service fund
Showing posts with label account. Show all posts
Showing posts with label account. Show all posts
Monday, April 18, 2016
Monday, March 21, 2016
At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account
E16-24 (Balance Sheet Classification)
At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:
1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Bad debt expense, $25 million: allowance method for accounting; direct write-off for tax purposes.
Required:
Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.
Click here for the solution: At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account
At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:
1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Bad debt expense, $25 million: allowance method for accounting; direct write-off for tax purposes.
Required:
Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.
Click here for the solution: At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account
Thursday, January 14, 2016
On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
Wednesday, November 11, 2015
Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account
E19-3 (One Temporary difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account. At the end of 2008, the related cumulative difference amounts to $350,000 and it will reverse evenly over the next 2 years. Pretax accounting income for 2008 is $525,000, the tax rate for all years is 40% and taxable income for 2008 is $405,000.
Instructions
a.) Compute income taxes payable for 2008
b.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2008.
c.) Prepare the income tax expense section of the income statement for 2008 beginning with the line "Income before income taxes"
Click here for the solution: Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account
Instructions
a.) Compute income taxes payable for 2008
b.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2008.
c.) Prepare the income tax expense section of the income statement for 2008 beginning with the line "Income before income taxes"
Click here for the solution: Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account
Rolanda Marshall Company, organized in 2007, has set up a single account for all intangible assets
E12-6 (Recording and Amortization of Intangibles) Rolanda Marshall Company, organized in 2007, has set up a single account for all intangible assets. The following summary discloses the debit entries that been recorded during 2008.
1/2/08 Purchased patent (8 yr life) $350,000
4/1/08 Purchased goodwill (indefinite life) $360,000
7/1/08 Purchased franchise with 10 yr life; expires 7/1/18 $450,000
8/1/08 Payment of copyright (5 yr life) $156,00
9/1/08 Research and development costs $215,000
Total: $1,531,000
Instructions:
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types pf intangibles. Make the entries ad of 12/31/08 recording any necessary amortization and reflecting all balances accurately as of that date. (Use the straight line amortization)
Click here for the solution: Rolanda Marshall Company, organized in 2007, has set up a single account for all intangible assets
1/2/08 Purchased patent (8 yr life) $350,000
4/1/08 Purchased goodwill (indefinite life) $360,000
7/1/08 Purchased franchise with 10 yr life; expires 7/1/18 $450,000
8/1/08 Payment of copyright (5 yr life) $156,00
9/1/08 Research and development costs $215,000
Total: $1,531,000
Instructions:
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types pf intangibles. Make the entries ad of 12/31/08 recording any necessary amortization and reflecting all balances accurately as of that date. (Use the straight line amortization)
Click here for the solution: Rolanda Marshall Company, organized in 2007, has set up a single account for all intangible assets
Saturday, October 17, 2015
Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007. All balances are as of the end of the year except Retained Earnings.
Accounts Payable.............................................$22,000
Accounts Receivable........................................$34,000
Cash................................................................ $12,000
Common Stock................................................ $50,000
Cost of Goods Sold.......................................... $120,000
Equipment, net of Accumulated Depreciation..... $60,000
Dividends......................................................... $14,000
Income Tax Expense......................................... $10,000
Interest Expense............................................... $7,000
Inventory.......................................................... $23,000
Operating Expenses.......................................... $45,000
Retained Earnings, Jan. 1, 2007........................ $19,000
Sales Revenue.................................................. $220,000
Unearned Revenue............................................ $14,000
Number of shares of stock outstanding at the end of 2007 is 10,000 shares.
Required:
Prepare an accrual basis income statement and a classified balance sheet in proper form.
Click here for the solution: Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Accounts Payable.............................................$22,000
Accounts Receivable........................................$34,000
Cash................................................................ $12,000
Common Stock................................................ $50,000
Cost of Goods Sold.......................................... $120,000
Equipment, net of Accumulated Depreciation..... $60,000
Dividends......................................................... $14,000
Income Tax Expense......................................... $10,000
Interest Expense............................................... $7,000
Inventory.......................................................... $23,000
Operating Expenses.......................................... $45,000
Retained Earnings, Jan. 1, 2007........................ $19,000
Sales Revenue.................................................. $220,000
Unearned Revenue............................................ $14,000
Number of shares of stock outstanding at the end of 2007 is 10,000 shares.
Required:
Prepare an accrual basis income statement and a classified balance sheet in proper form.
Click here for the solution: Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Wednesday, October 14, 2015
On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
Friday, October 9, 2015
Pocras Company buys merchandise on account from Wedell Company
BE5-2 Pocras Company buys merchandise on account from Wedell Company. The selling price of the goods is $900 and the cost of the goods sold is $590. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.
Click here for the solution: Pocras Company buys merchandise on account from Wedell Company
Click here for the solution: Pocras Company buys merchandise on account from Wedell Company
Connecticut Inc. had the following long-term receivable account balances at December 31, 2006
P7-10 (Comprehensive Receivables Problem) Connecticut Inc. had the following long-term receivable account balances at December 31, 2006.
Note receivable from sale of division $1,800,000
Note receivable from officer 400,000
Transactions during 2007 and other information relating to Connecticut’s long-term receivables were as follows.
1. The $1,800,000 note receivable is dated May 1, 2006, bears interest at 9%, and represents the balance of the consideration received from the sale of Connecticut’s electronics division to New York Company. Principal payments of $600,000 plus appropriate interest are due on May 1, 2007, 2008, and 2009. The first principal and interest payment was made on May 1, 2007. Collection of the note installments is reasonably assured.
2. The $400,000 note receivable is dated December 31, 2006, bears interest at 8%, and is due on December 31, 2009. The note is due from Sean May, president of Connecticut Inc. and is collateralized by 10,000 shares of Connecticut’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2007. The quoted market price of Connecticut’s common stock was $45 per share on December 31, 2007.
3. On April 1, 2007, Connecticut sold a patent to Pennsylvania Company in exchange for a $200,000 zero-interest-bearing note due on April 1, 2009. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2007, was 12%. The present value of $1 for two periods at 12% is 0.797 (use this factor). The patent had a carrying value of $40,000 at January 1, 2007, and the amortization for the year ended December 31, 2007, would have been $8,000. The collection of the note receivable from Pennsylvania is reasonably assured.
4. On July 1, 2007, Connecticut sold a parcel of land to Harrisburg Company for $200,000 under an installment sale contract. Harrisburg made a $60,000 cash down payment on July 1, 2007, and signed a 4-year 11% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2008, through July 1, 2011. The land could have been sold at an established cash price of $200,000. The cost of the land to Connecticut was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.
Instructions
(a) Prepare the long-term receivables section of Connecticut’s balance sheet at December 31, 2007.
(b) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Connecticut’s balance sheet at December 31, 2007.
(c) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Connecticut’s income statement for the year ended December 31, 2007.
Click here for the solution: Connecticut Inc. had the following long-term receivable account balances at December 31, 2006
Note receivable from sale of division $1,800,000
Note receivable from officer 400,000
Transactions during 2007 and other information relating to Connecticut’s long-term receivables were as follows.
1. The $1,800,000 note receivable is dated May 1, 2006, bears interest at 9%, and represents the balance of the consideration received from the sale of Connecticut’s electronics division to New York Company. Principal payments of $600,000 plus appropriate interest are due on May 1, 2007, 2008, and 2009. The first principal and interest payment was made on May 1, 2007. Collection of the note installments is reasonably assured.
2. The $400,000 note receivable is dated December 31, 2006, bears interest at 8%, and is due on December 31, 2009. The note is due from Sean May, president of Connecticut Inc. and is collateralized by 10,000 shares of Connecticut’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2007. The quoted market price of Connecticut’s common stock was $45 per share on December 31, 2007.
3. On April 1, 2007, Connecticut sold a patent to Pennsylvania Company in exchange for a $200,000 zero-interest-bearing note due on April 1, 2009. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2007, was 12%. The present value of $1 for two periods at 12% is 0.797 (use this factor). The patent had a carrying value of $40,000 at January 1, 2007, and the amortization for the year ended December 31, 2007, would have been $8,000. The collection of the note receivable from Pennsylvania is reasonably assured.
4. On July 1, 2007, Connecticut sold a parcel of land to Harrisburg Company for $200,000 under an installment sale contract. Harrisburg made a $60,000 cash down payment on July 1, 2007, and signed a 4-year 11% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2008, through July 1, 2011. The land could have been sold at an established cash price of $200,000. The cost of the land to Connecticut was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.
Instructions
(a) Prepare the long-term receivables section of Connecticut’s balance sheet at December 31, 2007.
(b) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Connecticut’s balance sheet at December 31, 2007.
(c) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Connecticut’s income statement for the year ended December 31, 2007.
Click here for the solution: Connecticut Inc. had the following long-term receivable account balances at December 31, 2006
Sunday, October 4, 2015
Kale Thompson, an auditor with Sneed CPAs, is performing a review of Strawser Company's inventory account
Kale Thompson, an auditor with Sneed CPAs, is performing a review of Strawser Company's inventory account. Strawser did not have a good year and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $740,000. However, the following information was not considered when determining that amount.
Instructions Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item.
1. Included in the company's count were goods with a cost of $250,000 that the company is holding on consignment. The goods belong to Superior Corporation.
2. The physical count did not include goods purchased by Strawser with a cost of $40,000 that were shipped FOB destination on December 28 and did not arrive at Strawser's warehouse until January 3.
3. Included in the inventory account was $17,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
4. The company received an order on December 29 that was boxed and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of $30,000.The goods were not included in the count because they were sitting on the dock.
5. On December 29 Strawser shipped goods with a selling price of $80,000 and a cost of $60,000 to District Sales Corporation FOB shipping point. The goods arrived on January 3. District Sales had only ordered goods with a selling price of $10,000 and a cost of $8,000. However, a sales manager at Strawser had authorized the shipment and said that if District wanted to ship the goods back next week, it could.
6. Included in the count was $40,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Strawser's products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, "since that is what we paid for them, after all."
Click here for the solution: Kale Thompson, an auditor with Sneed CPAs, is performing a review of Strawser Company's inventory account
Instructions Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item.
1. Included in the company's count were goods with a cost of $250,000 that the company is holding on consignment. The goods belong to Superior Corporation.
2. The physical count did not include goods purchased by Strawser with a cost of $40,000 that were shipped FOB destination on December 28 and did not arrive at Strawser's warehouse until January 3.
3. Included in the inventory account was $17,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
4. The company received an order on December 29 that was boxed and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of $30,000.The goods were not included in the count because they were sitting on the dock.
5. On December 29 Strawser shipped goods with a selling price of $80,000 and a cost of $60,000 to District Sales Corporation FOB shipping point. The goods arrived on January 3. District Sales had only ordered goods with a selling price of $10,000 and a cost of $8,000. However, a sales manager at Strawser had authorized the shipment and said that if District wanted to ship the goods back next week, it could.
6. Included in the count was $40,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Strawser's products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, "since that is what we paid for them, after all."
Click here for the solution: Kale Thompson, an auditor with Sneed CPAs, is performing a review of Strawser Company's inventory account
Friday, September 25, 2015
Comprehensive Problem: Packard Company has the following opening account balances in its general and subsidiary ledgers
Comprehensive Problem: Chapters 3, 4, 5, 6, and 7
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.
General Ledger
Account Number Account Title January 1 Opening Balance
101 Cash $33,750
112 Accounts Receivable 13,000
115 Notes Receivable 39,000
120 Merchandise Inventory 20,000
125 Office Supplies 1,000
130 Prepaid Insurance 2,000
157 Equipment 6,450
158 Accumulated Depreciation 1,500
201 Accounts Payable 35,000
301 I. Packard, Capital 78,700
Accounts
Receivable Subsidiary Ledger
Accounts
Payable Subsidiary Ledger
Customer
January 1 Opening
Balance
Creditor
January 1 Opening
Balance
R. Draves $1,500 S. Kosko $ 9,000
B. Hachinski 7,500 R. Mikush 15,000
S. Ingles 4,000 D. Moreno 11,000
Jan. 3 Sell merchandise on account to B. Remy $3,100, invoice no. 510, and J. Fine $1,800, invoice no. 511.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
9 Issue credit of $300 to J. Fine for merchandise returned.
10 Summary cash sales total $15,500.
11 Sell merchandise on account to R. Draves for $1,900, invoice no. 512, and to S. Ingles $900, invoice no. 513.
Post all entries to the subsidiary ledgers.
12 Pay rent of $1,000 for January.
13 Receive payment in full from B. Remy and J. Fine.
15 Withdraw $800 cash by I. Packard for personal use.
16 Purchase merchandise on account from D. Moreno for $15,000, from S. Kosko for $13,900, and from S. Yost for $1,500.
17 Pay $400 cash for office supplies.
18 Return $200 of merchandise to S. Kosko and receive credit.
20 Summary cash sales total $17,500.
21 Issue $15,000 note to R. Mikush in payment of balance due.
21 Receive payment in full from S. Ingles.
Post all entries to the subsidiary ledgers.
22 Sell merchandise on account to B. Remy for $3,700, invoice no. 514, and to R. Draves for $800, invoice no. 515.
23 Send checks to D. Moreno and S. Kosko in full payment.
25 Sell merchandise on account to B. Hachinski for $3,500, invoice no. 516, and to J. Fine for $6,100, invoice no. 517.
27 Purchase merchandise on account from D. Moreno for $12,500, from D. Laux for $1,200, and from S. Yost for $2,800.
28 Pay $200 cash for office supplies.
31 Summary cash sales total $22,920.
31 Pay sales salaries of $4,300 and office salaries of $3,600.
Hint: AP, S
Instructions
(a) Record the January transactions in the appropriate journal—sales, purchases, cash receipts, cash payments, and general.
(b) Post the journals to the general and subsidiary ledgers. Add and number new accounts in an orderly fashion as needed.
(c) Prepare a trial balance at January 31, 2010, using a worksheet. Complete the worksheet using the following additional information.
1. Office supplies at January 31 total $700.
2. Insurance coverage expires on October 31, 2010.
3. Annual depreciation on the equipment is $1,500.
4. Interest of $30 has accrued on the note payable.
5. Merchandise inventory at January 31 is $15,000.
Trial balance totals $196,820;
Adj. T/B totals $196,975
(d) Prepare a multiple-step income statement and a statement of owner's equity for January and a classified balance sheet at the end of January.
Net income $9,685
Total assets $126,315
(e) Prepare and post the adjusting and closing entries.
(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
Post-closing T/B totals $127,940
Click here for the solution: Comprehensive Problem: Packard Company has the following opening account balances in its general and subsidiary ledgers
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.
General Ledger
Account Number Account Title January 1 Opening Balance
101 Cash $33,750
112 Accounts Receivable 13,000
115 Notes Receivable 39,000
120 Merchandise Inventory 20,000
125 Office Supplies 1,000
130 Prepaid Insurance 2,000
157 Equipment 6,450
158 Accumulated Depreciation 1,500
201 Accounts Payable 35,000
301 I. Packard, Capital 78,700
Accounts
Receivable Subsidiary Ledger
Accounts
Payable Subsidiary Ledger
Customer
January 1 Opening
Balance
Creditor
January 1 Opening
Balance
R. Draves $1,500 S. Kosko $ 9,000
B. Hachinski 7,500 R. Mikush 15,000
S. Ingles 4,000 D. Moreno 11,000
Jan. 3 Sell merchandise on account to B. Remy $3,100, invoice no. 510, and J. Fine $1,800, invoice no. 511.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
5 Purchase merchandise on account from S. Yost $3,000 and D. Laux $2,700.
7 Receive checks for $4,000 from S. Ingles and $2,000 from B. Hachinski.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Kosko for $9,000 and D. Moreno for $11,000.
9 Issue credit of $300 to J. Fine for merchandise returned.
10 Summary cash sales total $15,500.
11 Sell merchandise on account to R. Draves for $1,900, invoice no. 512, and to S. Ingles $900, invoice no. 513.
Post all entries to the subsidiary ledgers.
12 Pay rent of $1,000 for January.
13 Receive payment in full from B. Remy and J. Fine.
15 Withdraw $800 cash by I. Packard for personal use.
16 Purchase merchandise on account from D. Moreno for $15,000, from S. Kosko for $13,900, and from S. Yost for $1,500.
17 Pay $400 cash for office supplies.
18 Return $200 of merchandise to S. Kosko and receive credit.
20 Summary cash sales total $17,500.
21 Issue $15,000 note to R. Mikush in payment of balance due.
21 Receive payment in full from S. Ingles.
Post all entries to the subsidiary ledgers.
22 Sell merchandise on account to B. Remy for $3,700, invoice no. 514, and to R. Draves for $800, invoice no. 515.
23 Send checks to D. Moreno and S. Kosko in full payment.
25 Sell merchandise on account to B. Hachinski for $3,500, invoice no. 516, and to J. Fine for $6,100, invoice no. 517.
27 Purchase merchandise on account from D. Moreno for $12,500, from D. Laux for $1,200, and from S. Yost for $2,800.
28 Pay $200 cash for office supplies.
31 Summary cash sales total $22,920.
31 Pay sales salaries of $4,300 and office salaries of $3,600.
Hint: AP, S
Instructions
(a) Record the January transactions in the appropriate journal—sales, purchases, cash receipts, cash payments, and general.
(b) Post the journals to the general and subsidiary ledgers. Add and number new accounts in an orderly fashion as needed.
(c) Prepare a trial balance at January 31, 2010, using a worksheet. Complete the worksheet using the following additional information.
1. Office supplies at January 31 total $700.
2. Insurance coverage expires on October 31, 2010.
3. Annual depreciation on the equipment is $1,500.
4. Interest of $30 has accrued on the note payable.
5. Merchandise inventory at January 31 is $15,000.
Trial balance totals $196,820;
Adj. T/B totals $196,975
(d) Prepare a multiple-step income statement and a statement of owner's equity for January and a classified balance sheet at the end of January.
Net income $9,685
Total assets $126,315
(e) Prepare and post the adjusting and closing entries.
(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
Post-closing T/B totals $127,940
Click here for the solution: Comprehensive Problem: Packard Company has the following opening account balances in its general and subsidiary ledgers
Sunday, September 20, 2015
Cardinal Paz Corp. carries an account in its general ledger called Investments
Cardinal Paz Corp. carries an account in its general ledger called
Investments, which contained debits for investment purchases, and no
credits, with the following descriptions.
Feb. 1, 2010 Sharapova Company common stock, $100 par, 200 shares $ 37,400
April 1 U.S. government bonds, 11%, due April 1, 2020, interest payable
April 1 and October 1, 110 bonds of $1,000 par each 110,000
July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030 54,000
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010 using the straight-line method.
(c) The fair values of the securities on December 31, 2010, were:
Sharapova Company common stock $ 31,800
U.S. government bonds 124,700
McGrath Company bonds 58,600
What entry or entries, if any, would you recommend be made?
(d) The U.S. government bonds were sold on July 1, 2011, for $119,200 plus accrued interest. Give the proper entry.
Click here for the solution: Cardinal Paz Corp. carries an account in its general ledger called Investments
Feb. 1, 2010 Sharapova Company common stock, $100 par, 200 shares $ 37,400
April 1 U.S. government bonds, 11%, due April 1, 2020, interest payable
April 1 and October 1, 110 bonds of $1,000 par each 110,000
July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030 54,000
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010 using the straight-line method.
(c) The fair values of the securities on December 31, 2010, were:
Sharapova Company common stock $ 31,800
U.S. government bonds 124,700
McGrath Company bonds 58,600
What entry or entries, if any, would you recommend be made?
(d) The U.S. government bonds were sold on July 1, 2011, for $119,200 plus accrued interest. Give the proper entry.
Click here for the solution: Cardinal Paz Corp. carries an account in its general ledger called Investments
Monday, August 31, 2015
Tests of account balances are intended to obtain audit evidence about the fairness of the inventory accounts
Problem 14-31 Tests of account balances are intended to obtain audit evidence about the fairness of the inventory accounts or, alternatively, identify material misstatements in the amounts presented. Audit procedures can only be selected after the auditor determines specific audit objectives related to management assertions.
Management Assertions
1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation or allocation
5. Presentation and disclosure
Required: For each audit procedure below, identify the related management assertion(s) that the audit procedure tests and explain the audit objective of the procedure.
(a) Trace totals of inventory files to the general ledger, including proper classification as raw materials, WIP, or finished goods.
(b) Test additions to inventory by selecting a sample of recorded purchases from the inventory records and examining supporting documents.
(c) Review consignment contracts and scan inventory records for inclusion of amounts for any consigned items not owned.
(c) Reperform calculations supporting decisions about write-downs or write-offs of inventory and trace any adjustment amounts to the inventory records.
(d) Using computer-assisted auditing techniques reperform calculations testing mathematical accuracy, including totals extensions of price and quantity and unit or batch aggregations; recalculation is based on appropriate application of the client costing method (FIFO, LIFO, weighted average, specific identification, etc.).
Click here for the solution: Tests of account balances are intended to obtain audit evidence about the fairness of the inventory accounts
Management Assertions
1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation or allocation
5. Presentation and disclosure
Required: For each audit procedure below, identify the related management assertion(s) that the audit procedure tests and explain the audit objective of the procedure.
(a) Trace totals of inventory files to the general ledger, including proper classification as raw materials, WIP, or finished goods.
(b) Test additions to inventory by selecting a sample of recorded purchases from the inventory records and examining supporting documents.
(c) Review consignment contracts and scan inventory records for inclusion of amounts for any consigned items not owned.
(c) Reperform calculations supporting decisions about write-downs or write-offs of inventory and trace any adjustment amounts to the inventory records.
(d) Using computer-assisted auditing techniques reperform calculations testing mathematical accuracy, including totals extensions of price and quantity and unit or batch aggregations; recalculation is based on appropriate application of the client costing method (FIFO, LIFO, weighted average, specific identification, etc.).
Click here for the solution: Tests of account balances are intended to obtain audit evidence about the fairness of the inventory accounts
Saturday, August 22, 2015
Property Tax- Record the following transactions in the general ledger account of the Coleman County General Fund
Property Tax- Record the following transactions in the general ledger account of the Coleman County General Fund.
1. Coleman County levied its 20x7 property tax on Jan 1, 20x7. The total tax levy was 80,000,000; 2% is expected to be uncollectible.
2. Coleman collected 55,000,000 of property taxes before the due date. The remaining taxes are past due.
3. Interest and penalties 0f 2,500,000 were assessed on the past due taxes. 6% is expected to be uncollectible.
4. Coleman County collected 20,000,m0000 of delinquent taxes and 2,000,000 of interest and penalties at the end of 20x7, Coleman estimates that it will collect 3,000,000 of delinquent taxes and 300,000 of the previously accrued interest and penalties in the first 60 days of 20x8.
Click here for the solution: Property Tax- Record the following transactions in the general ledger account of the Coleman County General Fund
1. Coleman County levied its 20x7 property tax on Jan 1, 20x7. The total tax levy was 80,000,000; 2% is expected to be uncollectible.
2. Coleman collected 55,000,000 of property taxes before the due date. The remaining taxes are past due.
3. Interest and penalties 0f 2,500,000 were assessed on the past due taxes. 6% is expected to be uncollectible.
4. Coleman County collected 20,000,m0000 of delinquent taxes and 2,000,000 of interest and penalties at the end of 20x7, Coleman estimates that it will collect 3,000,000 of delinquent taxes and 300,000 of the previously accrued interest and penalties in the first 60 days of 20x8.
Click here for the solution: Property Tax- Record the following transactions in the general ledger account of the Coleman County General Fund
Friday, August 21, 2015
The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
Problem 17-3 (Computing Unreserved Fund Balance and Closing Entries) The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009.
Appropriations $3,488,000
Cash 270,000
Due to Other Fund 100,000
Due from Other Funds 250,000
Encumbrances 382,000
Estimated Revenue 3,720,000
Expenditures 3,020,000
Expenditures---2008 296,000
Reserve for Encumbrance 382,000
Reserve for Encumbrances---2008 310,000
Revenue 3,656,000
Taxes Receivable 600,000
Transfers from Other Funds 300,000
Transfers to Other Funds 520,000
Unreserved Fund Balance 422,000
Vouchers Payable 400,000
a. Prepare the necessary closing entries on December 31, 2009.
b. Calculate the amount of both the unreserved fund balance and the total fund balance in the balance sheet (1) on December 31, 2008 and (2) on December 31, 2009.
c. Prepare a schedule reconciling the December 31, 2008, total fund balance with the December 31, 2009, total fund balance by reference to actual inflows and outflow of financial resources
Click here for the solution: The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
Appropriations $3,488,000
Cash 270,000
Due to Other Fund 100,000
Due from Other Funds 250,000
Encumbrances 382,000
Estimated Revenue 3,720,000
Expenditures 3,020,000
Expenditures---2008 296,000
Reserve for Encumbrance 382,000
Reserve for Encumbrances---2008 310,000
Revenue 3,656,000
Taxes Receivable 600,000
Transfers from Other Funds 300,000
Transfers to Other Funds 520,000
Unreserved Fund Balance 422,000
Vouchers Payable 400,000
a. Prepare the necessary closing entries on December 31, 2009.
b. Calculate the amount of both the unreserved fund balance and the total fund balance in the balance sheet (1) on December 31, 2008 and (2) on December 31, 2009.
c. Prepare a schedule reconciling the December 31, 2008, total fund balance with the December 31, 2009, total fund balance by reference to actual inflows and outflow of financial resources
Click here for the solution: The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
Thursday, August 13, 2015
At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable
E 16-10 Deferred tax asset; taxable income given; valuation allowance
At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2011, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2011 is $180 million and the tax rate is 40%.
Required:
1. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that the deferred tax asset will be realized.
2. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized.
Click here for the solution: At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable
At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2011, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2011 is $180 million and the tax rate is 40%.
Required:
1. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that the deferred tax asset will be realized.
2. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized.
Click here for the solution: At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable
Tuesday, August 4, 2015
The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
P12-2A The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end.
2012 2011
Common stock, 10,500 and 10,000 shares, respectively, for 2012 and 2011 $160,800 $140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 270,000
A small stock dividend was declared and issued in 2012. The market value of the shares was $8,800. Cash dividends were $20,000 in both 2012 and 2011. The common stock has no par or stated value.
Determine cash flow effects of changes in equity accounts.
Instructions
a. What was the amount of net income reported by Patil Corp. in 2012?
b. Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2012.
c. Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.
Check: (a) Net income $58,800
Click here for the solution: The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
2012 2011
Common stock, 10,500 and 10,000 shares, respectively, for 2012 and 2011 $160,800 $140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 270,000
A small stock dividend was declared and issued in 2012. The market value of the shares was $8,800. Cash dividends were $20,000 in both 2012 and 2011. The common stock has no par or stated value.
Determine cash flow effects of changes in equity accounts.
Instructions
a. What was the amount of net income reported by Patil Corp. in 2012?
b. Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2012.
c. Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.
Check: (a) Net income $58,800
Click here for the solution: The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
Wednesday, July 8, 2015
At the end of 2013, Jackson Tank Company’s account showed a $66,000 credit balance in manufacturing overhead control
(Under applied or over applied overhead) At the end of 2013, Jackson Tank Company’s account showed a $66,000 credit balance in manufacturing overhead control. In addition, the company had the following account balances:
Work in Process Inventory $384,000
Finished Goods Inventory $96,000
Cost of Goods Sold $720,000
a. Prepare the necessary journal entry to close the overhead account if the balance is considered immaterial.
b. Prepare the necessary journal entry to close the overhead account if the balance is considered material.
c. Which method do you believe in more appropriate for the company, and why?
Click here for the solution: At the end of 2013, Jackson Tank Company’s account showed a $66,000 credit balance in manufacturing overhead control
Work in Process Inventory $384,000
Finished Goods Inventory $96,000
Cost of Goods Sold $720,000
a. Prepare the necessary journal entry to close the overhead account if the balance is considered immaterial.
b. Prepare the necessary journal entry to close the overhead account if the balance is considered material.
c. Which method do you believe in more appropriate for the company, and why?
Click here for the solution: At the end of 2013, Jackson Tank Company’s account showed a $66,000 credit balance in manufacturing overhead control
At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
(Underapplied or overapplied overhead) At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year end follows:
Work in process inventory finished inventory cost of goods sold
Direct material $20,000 $80,000 $120,000
Direct labor $10,000 $40,000 50.000
Factory overhead 20,000 80,000 100,000
Total 50,000 200,000 270,000
a. What predetermined OH rate was used during the year?
b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at the year end
c. Prorate the overhead account balance based on the relative balances of the appropriate accounts
d. Identify some possible reasons that the company had a debit balance in the overhead account at the end of the year.
Click here for the solution: At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
Work in process inventory finished inventory cost of goods sold
Direct material $20,000 $80,000 $120,000
Direct labor $10,000 $40,000 50.000
Factory overhead 20,000 80,000 100,000
Total 50,000 200,000 270,000
a. What predetermined OH rate was used during the year?
b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at the year end
c. Prorate the overhead account balance based on the relative balances of the appropriate accounts
d. Identify some possible reasons that the company had a debit balance in the overhead account at the end of the year.
Click here for the solution: At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
Thursday, July 2, 2015
The general ledger account for Accounts Receivable shows a debit balance of $40,000
The general ledger account for Accounts Receivable shows a debit balance of $40,000. The Allowance for Uncollectible Accounts has a credit balance of $2,000. Net sales for the year were $250,000. In the past, 3 percent of net sales have proved uncollectible. An aging of accounts receivable results in an estimate of $9,000 of uncollectible accounts receivable.
Calculate (1) Uncollectible Accounts Expense and (2) the ending balance of the Allowance for Uncollectible Accounts using (a) the percentage of net sales method and (b) the accounts receivable aging method.
Create an Excel spreadsheet to submit your assignment.
Click here for the solution: The general ledger account for Accounts Receivable shows a debit balance of $40,000
Calculate (1) Uncollectible Accounts Expense and (2) the ending balance of the Allowance for Uncollectible Accounts using (a) the percentage of net sales method and (b) the accounts receivable aging method.
Create an Excel spreadsheet to submit your assignment.
Click here for the solution: The general ledger account for Accounts Receivable shows a debit balance of $40,000
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