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Assets
Cash $500,000
Accounts Receivable 700,000
Inventory 300,000
Property, Plant & Equipment 900,000
Accumulated Depreciation (100,000)
Total Assets $2,300,000
Liabilities & Equity
Accounts Payable $300,000
Notes Payable 1,000,000
Common Stock 500,000
Retained Earnings 500,000
Total Liabilities & Equity $2,300,000
Journal Entries for January 2013
Transaction 1: Sales Return
The buyer returns merchandise to the seller.
Journal Entry: Dr. Cr.
Sales Returns & Allowances 22,000
Accounts Receivable 22,000
Transaction 2: Sales Discounts
Description: Recorded collection within 2/10, n/30 period.
Journal Entry: Dr. Cr.
Cash 24,500
Sales Discounts 500
Accounts Receivable 25,000
Journal Entry: Dr. Cr.
Cash 155,000
Sales Revenue 155,000
Transaction 4: Cost Flow Assumption
Recorded cost of goods sold under one of the cost flow assumptions.
Journal Entry: Dr. Cr.
Cost of Goods Sold 45,000
Inventory 45,000
Transaction 5: Recording Estimated Uncollectible
Description: The credit manager estimates that $16,000 of sales will be uncollectible.
Journal Entry: Dr. Cr.
Bad Debts Expense 16,000
Allowance for Doubtful Accounts 16,000
Transaction 6: Write-off of an uncollectible account
Description: The credit manager authorizes a write-off of a $5,500 balance owed by a customer.
Journal Entry: Dr. Cr.
Allowance for Doubtful Accounts 5,500
Accounts Receivable 5,500
Transaction 7: Depreciation Expense
Recorded depreciation expense under one of the depreciation methods.
Journal Entry: Dr. Cr.
Depreciation Expense 12,000
Accumulated Depreciation 12,000
Transaction 8: Investment by Stockholders Description: Invested $55,000 cash in the business in exchange for common stock. Journal Entry: Dr. Cr.
Cash 55,000
Common Stock 55,000
Transaction 9: Dividends
Description: The corporation pays a dividend of $4,700 in cash to the stockholders.
Journal Entry: Dr. Cr.
Dividends 4,700
Cash 4,700
Transaction 10: Purchase of Equipment
Description: Purchases computer equipment for $7,800 cash.
Journal Entry: Dr. Cr.
Equipment 7,800
Cash 7,800
Transaction 11: Purchase of Supplies on Credit
Description: Purchases $4,800 of inventory on credit.
Journal Entry: Dr. Cr.
Inventory 4,800
Accounts Payable 4,800
1. What is the ending cash balance?
A. $750,000
B. $767,000
C. $722,000
D. $725,000
2. What is the ending accounts receivable balance net of allowance for doubtful accounts?
$637,000
B. $638,000
C. $652,000
D. $675,000
3. What is the ending inventory balance?
A. $241,900
B. $259,800
C. $249,600
D. $245,300
4. What is the ending equipment balance net of accumulated depreciation?
A. $773,000
B. $776,800
C. $786,000
D. $795,800
5. What is the ending accounts payable balance?
A. $304,800
B. $314,000
C. $316,800
D. $320,000
6. What is the ending retained earnings balance?
A. $500,000
B. $545,000
C. $554,800
D. $567,800
7. What is the net income?
A. $48,500
B. $59,500
C. $65,000
D. $68,200
8. What is the amount of total expenses?
A. $63,000
B. $75,000
C. $73,000
D. $81,000
9. What is the net increase in cash for the period?
A. $222,000
B. $225,000
C. $300,000
D. $325,000
10. What is the net cash provided by operating activities?
A. $179,500
B. $186,500
C. $183,400
D. $178,300
11. What is the net cash used by investing activities?
A. $(7,200)
B. $(9,200)
C. $(8,900)
D. $(7,800)
12. What is the net cash provided by financing activities?
A. $40,300
B. $50,500
C. $50,300
D. $40,200
Questions 13 to 15 cover the inventory methods:
13. January 1, 2013: Purchased 10 units at $6
January 15, 2013: Purchased 10 units at $9
Sold 14 units: What is the cost of goods sold under LIFO?
A. $114
B. $120
C. $126
D. $132
14. January 1, 2013: Purchased 10 units at $6
January 15, 2013: Purchased 10 units at $9
Sold 13 units: What is the cost of goods sold under FIFO?
A. $81
B. $87
C. $93
D. $99
15. January 1, 2013: Purchased 10 units at $6
January15, 2013: Purchased 10 units at $9
Sold 8 units: What is the cost of goods sold under average-cost?
A. $50
B. $55
C. $60
D. $65
Use the following information for questions 16 to 20:
Cost: $10,000
Salvage $1,000
Useful life: 5 years
Units over life: 36,000
16. What is the depreciation expense under straight-line?
A. $1,700
B. $1,800
C. $1,900
D. $2,000
17. What is the second year depreciation expense under declining-balance = 200%?
A. $4,000
B. $1,440
C. $864
D. $2,400
18. What is the fourth year depreciation expense under sum-of-years digits?
A. $2,400
B. $1,000
C. $1,100
D. $1,200
19. Assume the asset produced 13,000 units. What is the depreciation expense under the units of production method?
A. $1,300
B. $2,500
C. $3,250
D. $4,250
20. Assume the declining-balance = 200% method is used. What is the residual book value at the end of year 2?
A. $6,000
B. $3,600
C. $2,160
D. $1,296
Answer & Explanation
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