The following information pertains to Blue Flower Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
What is the return on common stockholders’ equity for this company?
a.33.3%
b.16.7%
c.26.7%
d.36.7%
Wilson Company uses FIFO for inventory costing. During 2014, price levels increased.
Which statement is true concerning the amounts reported on Wilson€s balance sheet
and income statement?
a.The costs allocated to inventory on Wilson€s balance sheet reflect inventories that
approximate current costs.
b.The costs allocated to inventory on Wilson€s balance sheet may be significantly
understated in terms of current cost.
c.The costs allocated to cost of goods sold on Wilson€s income statement may be
significantly overstated in terms of current cost.
d.The costs allocated to cost of goods sold on Wilson€s income statement will reflect
the costs that most closely approximate current costs.
What does the balance of the Accumulated Depreciation account represent?
a.The decline in value of plant assets
b.The accumulation of funds needed to replace the assets at the end of their useful life
c.The portion of the cost allocated as an expense since the asset was acquired
d.The fair value of the asset that is being depreciated
Garrison Company issued $2,000,000, 7%, 20-year bonds on January 1, 2014, at 105.
Interest is payable annually on January 1. Garrison uses straight-line amortization for
bond premium or discount.
Instructions
Prepare the journal entries to record the following events.
(a)The issuance of the bonds.
(b)The accrual of interest and the premium amortization on December 31, 2014.
(c)The payment of interest on January 1, 2015.
(d)The redemption of the bonds at maturity, assuming interest for the last interest period
has been paid and recorded.
Elston Company compiled the following financial information as of December 31,
2014:
Elston’s retained earnings on December 31, 2014 are
a.$375,000.
b.$450,000.
c.$400,000.
d.$ 25,000.
At December 31, 2014 Howell Company’s inventory records indicated a balance of
$858,000. Upon further investigation it was determined that this amount included the
following:
– $168,000 in inventory purchases made by Howell shipped from the seller 12/27/14
terms FOB destination, but not due to be received until January 2nd
– $111,000 in goods sold by Howell with terms FOB destination on December 27th. The
goods are not expected to reach their destination until January 6th.
– $9,000 of goods received on consignment from Westwood Company
What is Howell’s correct ending inventory balance at December 31, 2014?
a.$690,000
b.$849,000
c.$570,000
d.$681,000
The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2
and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies
indicated only $1,000 on hand. The adjusting entry that should be made by the company
on June 30 is:
a.debit Supplies Expense, $1,000; credit Supplies, $1,000.
b.debit Supplies, $5,500; credit Supplies Expense, $5,500.
c.debit Supplies, $1,000; credit Supplies Expense, $1,000.
d.debit Supplies Expense, $5,500; credit Supplies, $5,500.
Adams Company is a retailer and uses a perpetual inventory system. Which statement is
correct?
a.Returns of merchandise by Adams Company to a manufacturer are credited to
Inventory.
b.Freight paid to get merchandise to Adams Company’s store is debited to Freight
Expense.
c.A return of merchandise by one of Adams Company’s customers is credited to
Inventory.
d.Discounts taken by Adams Company’s customers are credited to Inventory.
Belcanto Corporation experienced a fire on December 31, 2014, in which its financial
records were partially destroyed. It has been able to salvage some of the records and has
ascertained the following balances.
Additional information:
1)The inventory turnover is 4.2 times
2)The return on common stockholders€ equity is 14%. The company had no additional
paid-in-capital.
3)The accounts receivable turnover is 10.2 times.
4)The return on assets is 12.5%.
5)Total assets, Dec. 31, 2013 = 604,750.
Instructions
Compute the following values for 2014.
(a)Cost of goods sold.
(b)Net credit sales.
(c)Net income.
(d)Total assets.
Tito Corporation had net income of $2,000,000 and paid dividends to common
stockholders of $500,000 in 2014. The weighted average number of shares outstanding
in 2014 was 500,000 shares. Tito Corporation’s common stock is selling for $50 per
share on the NASDAQ. Tito Corporation’s payout ratio for 2014 is
a.$5 per share.
b.20%.
c.25%.
d.10%.
A company sells $900,000 of accounts receivable to a factor for cash less a 2% service
charge. The entry to record the sale should not include a
a.debit to Interest Expense for $18,000.
b.debit to Cash for $882,000.
c.debit to Service Charge Expense for $18,000.
d.credit to Accounts Receivable for $900,000.
On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of
notes payable, of which $175,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2014, is
a.Current liabilities, $700,000.
b.Long-term debt, $700,000.
c.Current liabilities, $175,000; Long-term Debt, $525,000.
d.Current liabilities, $525,000; Long-term Debt, $175,000.
Wave Rider Company completed its first year of operations on December 31, 2014. Its
initial income statement showed that Wave Rider had revenues of $207,000 and
operating expenses of $108,000. Accounts receivable and accounts payable at year-end
were $80,000 and $28,000, respectively. Assume that accounts payable related to
operating expenses. Ignore income taxes.
Instructions
Compute net cash provided by operating activities using the direct method.
Equipment was acquired on January 1, 2011, at a cost of $170,000. The equipment was
originally estimated to have a salvage value of $10,000 and an estimated life of 10
years. Depreciation has been recorded through December 31, 2013, using the
straight-line method. On January 1, 2014, the estimated salvage value was revised to
$16,000 and the useful life was revised to a total of 8 years.
Instructions
Determine the depreciation expense for 2014.
The petty cash fund of $200 for Tomkins Company appeared as follows on December
31, 2014
Instructions
Perez Co. receives $2,200,000 when it issues a $2,200,000, 8%, mortgage note payable
to finance the construction of a building at December 31, 2014. The terms provide for
semiannual installment payments of $140,820 on June 30 and December 31.
Instructions
Prepare the journal entries to record the mortgage loan and the first two installment
payments.
Doane Company receives a $7,000, 3-month, 6% promissory note from Ray Company
in settlement of an open accounts receivable. What entry will Doane Company make
upon receiving the note?
The following estimated information is available for Advanced Motors for the month of
October:
The cash balance at September 30 is $4,300. Management wishes to maintain a
minimum cash balance of $4,000.
Instructions
Prepare a basic cash budget for the month of October.
1)ACCOUNTS RECEIVABLE-UNCOLLECTIBLE ACCOUNTS
Instructions: Present the journal entries specified below. Show supporting calculations.
Each item should be considered independently.
The trial balance of Priority Paints at December 31, 2014, includes the following:
A.If Priority Paints uses the aging method and estimates that $2,200 of receivables will
be uncollectible, prepare the adjusting entry.
B.If Priority Paints estimates uncollectibles at 2.2% of accounts receivable and the
allowance account had a $500 credit balance instead of a $500 debit balance, prepare
the appropriate adjusting entry.
C.Assume that on February 3, 2015, the specific account of George Bush with a balance
of $320 is deemed uncollectible. Record the write-off.
D.Assume that on May 4, 2015, George Bush pays the above balance in full. Record the
appropriate entries.
2)SALE OF ACCOUNTS RECEIVABLE
Instructions: Present the journal entries specified below.
A.Hardy Lumber Company sells $150,000 of accounts receivable to Buyout Factors
Inc. for cash less a 2.5% service charge. Record the sale.
B.Hardy Lumber Company sold merchandise for $4,200 and accepted the customer’s
VISA card. VISA charges a 3.5% service charge. Record the sale.
Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a
9-month, 12% interest note. If Young prepares it financial statements as of December
31, 2014, what adjusting entry must it make?
Malibu Company uses the chart of accounts shown below.
Instructions: Use the numbers preceding each account title to create journal entries for
each situation. Account titles may be used more than once, or not at all, and journal
entries may have multiple accounts. Item 0 is provided as an example.
Rosen Company receives a $5,000, 3-month, 6% promissory note from Bay Company
in settlement of an open accounts receivable. What entry will Rosen Company make
upon receiving the note?
One part of an adjusting entry is given below.
Instructions:
Indicate the account title for the other part of the entry.
1>Unearned Service Revenue is debited.
2>Prepaid Rent is credited.
3>Accounts Receivable is debited.
4>Depreciation Expense on equipment is debited.
5>Utilities Expense is debited.
6>Interest Payable is credited.
7>Service Revenue is credited (give two possible debit accounts).
8>Interest Receivable is debited.