Under generally accepted accounting principles, management has the choice of
physically counting inventory on hand at the end of the year or using the gross profit
method to estimate the ending inventory.
Answer:
Goodwill is an unusual asset in that it cannot be sold individually apart from a business
as a whole. If goodwill is an intangible asset, why can’t it be sold like other intangible
assets such as copyrights and patents? Briefly explain what makes goodwill different.
Answer:
The following information for Wilson Company is available on June 30, 2015, the end
of a monthly accounting period. You are to prepare the necessary adjusting journal
entries for Wilson Company for the month of June for each situation given. Appropriate
adjusting entries had been recorded in previous months. You may omit journal entry
explanations.
1> Wilson Company purchased a 2-year insurance policy on February 1, 2015 and
debited Prepaid Insurance for $4,800.
2> On January 1, 2015, a tenant in an apartment building owned by Wilson Company
paid $4,200 which represents six months’ rent in advance. The amount received was
credited to the Unearned Rent account.
3> On June 1, 2015, the balance in the Supplies account was $200. During June, office
supplies costing $580 were purchased. A physical count of office supplies at June 30
revealed that there was $140 still on hand.
4> On March 31, 2015, Wilson Company purchased a truck for $54,000. It is estimated
that the annual depreciation will be $9,000.
5> Wilson Company has two employees who earn $100 and $120 per day, respectively.
They are paid each Friday for a five-day workweek that begins each Monday. Assume
June 30 is a Wednesday in 2015.
Answer:
Preferred stock has contractual provisions that give it a preference over common stock
as to ___________________ and to ___________________ in the event of liquidation.
Answer:
The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2015 includes
the following accounts: Accumulated Depreciation, $6,000; Depreciation Expense,
$2,000; Notes Payable $7,500; Interest Expense $150; Utilities Expense, $300; Rent
Expense, $500; Service Revenue, $19,600; Salaries and Wages Expense, $6,000;
Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600. Prepare
an income statement for the month of December.
Answer:
On October 1, 2015, Ellington Company establishes an imprest petty cash fund by
issuing a check for $200 to Erin Angelo, the custodian of the petty cash fund. On
October 31, 2015, Erin Angelo submitted the following paid petty cash receipts for
replenishment of the petty cash fund when there is $32 cash in the fund:
Freight-In $28
Supplies Expense 42
Entertainment of Clients 65
Postage Expense 30
Instructions
Prepare the journal entries required to establish the petty cash fund on October 1 and
the replenishment of the fund on October 31.
Answer:
Queen Company issued bonds with a face amount of $2,000,000 in 2012. As of January
1, 2015, the balance in Discount on Bonds Payable is $6,000. At that time, Queen
redeemed the bonds at 102.
Instructions
Assuming that no interest is payable, make the entry to record the redemption.
Answer:
Distinguish among the three types of activities reported in the statement of cash flows
The three activities are:
Answer:
Describe the process of preparing a trial balance. What is the purpose of preparing a
trial balance? If a trial balance does not balance, identify what might be the reasons
why it does not balance. If the trial balance does balance, does that insure that the
ledger accounts are correct? Explain.
Answer:
Identify the impact on the accounting equation of each of the following transactions.
1> Purchase office supplies on account.
2> Paid secretary weekly salary.
3> Purchased office furniture for cash.
4> Received monthly utility bill to be paid at later time.
Answer: