Accounting Final Open-ended Questions

Gordon Chemicals Company acquires a delivery truck at a cost of $31,000 on January 1, 2022. The truck is expected to have a salvage value of $4,000 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.

(Cost- Salvage Value) / Useful Years (31,000 -4,000) / 4 useful years = $6,750 Jan. 1 Debit: Depreciation Expense 6,750 Credit: Accumulated Depreciation 6,750 *Same thing for future years*

Bramble University sells 3,500 season basketball tickets at $80 each for its 10-game home schedule. Give the entry to record (a) the sale of the season tickets and (b) the revenue recognized after playing the first home game.

A) Debit: Cash 280,000 Credit: Unearned Revenue 280,000 (3,500 x 80) B) Debit: Unearned Revenue 28,000 Credit: Ticket Revenue 28,000 (280,000 / 10)

Betsy Strand's regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Betsy works 47 hours. Betsy's federal income tax withholding is $95, and she has no voluntary deductions. Prepare the employer's journal entry to record (a) Betsy's pay for the period and (b) the payment of Betsy's wages. Use January 15 for the end of the pay period and the payment date. Assume that the FICA tax rate is 7.65%.

A) Jan. 15 Debit: Payroll Tax Expense 61.81 Credit: FICA Tax Payable 61.81 (FICA = 808 x 7.65%) B) Jan. 15 Debit: FICA Tax Payable 123.62 Credit: Cash 123.62 (61.81 + 61.81)

Busch Company has these obligations at December 31: (a) a note payable for $100,000 due in 2 years with an annual interest of 6%, (b) interest payable of $6,000 on a long-term note payable due next year, and (c) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability, long-term liability, or both.

A) Long-term liability B) Current liability C) Current liability

Angie Baden is studying for her accounting midterm examination. Identify for Angie the advantages of the corporate form of business organization.

Advantages: Separate legal existence Limited liability of stockholders Transferable ownership rights Ability to acquire capital Continuous life Corporation management

These expenditures were incurred by Dobbin Company in purchasing land: cash price $60,000, assumed accrued taxes $5,000, attorney's fees $2,100, real estate broker's commission $3,300, and clearing and grading $3,500. What is the cost of the land?

Cost of Land= Cash + Taxes + Attorney's fees + Real Estate + Clearing Cost of Land= $73,900

Thoms Company incurs these expenditures in purchasing a truck: cash price $24,000, accident insurance (during use) $2,000, sales taxes $1,080, motor vehicle license $300, and painting and lettering $1,700. What is the cost of the truck?

Cost of Truck= Cash + Taxes + Painting and Lettering Cost of Truck= 26,780

Layes Inc. issued 8,000 shares of $100 par value preferred stock for cash at $106 per share. Journalize the issuance of the preferred stock.

Debit: Cash 848,000 Credit: Preferred Stock 800,000 Pain in Capital in Excess of Par Value- Preferred Stock 48,000 (8,000 x $106) (8,000 x $100) (848,000 - 800,000)

Gordon Chemicals Company acquires a delivery truck at a cost of $31,000 on January 1, 2022. The truck is expected to have a salvage value of $4,000 at the end of its 4-year useful life. Assume the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.

Debit: Depreciation Expense 15,500 Credit: Accumulated Depreciation 15,500 (31,000 x .5) Debit: Depreciation Expense 7,750 Credit: Accumulated Depreciation 7,750 (15,500 x .5)

Lei Inc.'s $10 par value common stock is actively traded at a market price of $15 per share. Lei issues 5,000 shares to purchase land advertised for sale at $85,000. Journalize the issuance of the stock in acquiring.

Debit: Land 75,000 Credit: Common Stock 50,000 Paid in Capital in Excess of Par Value- Common Stock 25,000 (5,000 x $15) (5,000 x $10) (75,000 - 50,000)

Basse Corporation has 7,000 shares on common stock outstanding. It declares a $1 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend.

Declaration Date: Nov. 1 Debit: Cash Dividend 7,000 Credit: Dividend Payable 7,000 (7,000 x $1) Date of Record: Dec. 1 No Entry Payment Date Dec. 31 Debit: Dividend Payable 7,000 Credit: Cash 7,000

Angie Baden is studying for her accounting midterm examination. Identify for Angie the disadvantages of the corporate form of business organization.

Disadvantages: Corporation management Government regulations Additional taxes

Betsy Strand's regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Betsy works 47 hours. Betsy's federal income tax withholding is $95, and she has no voluntary deductions. Compute Betsy Strand's gross earnings and net pay for the pay period. Assume that the FICA tax rate is 7.65%.

Jan. 15 Debit: Salaries and Wage Expense 808 Credit: FICA Tax Payable 61.812 Federal Income Tax Payable 95 Salaries and Wages Payable 651.19 ((16 x 40) Reg. Pay + (7 x 24) Overtime = 808 Gross earnings) (808 - (7.65%) - 95 = 651.19) Jan. 15 Debit: Salaries and Wages Payable 651.19 Credit: Cash 651.19

Hive Company borrows $90,000 on July 1 from the bank by signing a $90,000, 7%, 1-year note payable. Interest will be repaid at maturity. Prepare the journal entries to record (a) the proceeds of the note and (b) accused interest at December 31, assuming adjusting entries are made only at the end of the year.

Jul. 1 Debit: Cash $90,000 Credit: Notes Payable $90,000 Dec. 31 Debit: Interest Expense $3,150 Credit: Interest Payable $3,150 (90,000 x 7% x 6/12) = 3,150

On July 1, Raney Corporation purchases 500 shares of its shares of its $5 par value common stock for the treasury at a cash price of $9 per share. On September 1 it sells 300 shares of treasury stock for cash at $11 per share. Journalize the two treasury stock transactions.

Jul. 1 Debit: Treasury Stock 4,500 Credit: Cash 4,500 (500 x$9) Sep. 1 Debit: Treasury Stock 3,300 Credit: Cash 3,300 (300 x $11)

On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share.

Jun. 1 Debit: Cash 24,000 Credit: Common Stock 4,000 Paid in Capital in Excess of Stated Value- Common Stock 20,000 (4,000 x $6) (4,000 x $1) (24,000-4,000)

Greenspan Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $10,388. All sales are subject to a 6% sales tax. Compute sales taxes payable and make the entry to record sales taxes payable and sales.

Mar. 16 Debit: Cash 10,388 Credit: Sales Revenue 9,800 Sales Taxes Payable 588 (10,388/ 1.06) = 9,800 Sales 9,800 (Sales) + 588 (Sales tax 6%) = 10,388 (Gross Amount)

On May 10, Pilar Corporation issues 2,500 shares of $5 par value common stock for cash at $13 per share. Journalize the issuance of the stock.

May 10 Debit: Cash 32,500 Credit: Common Stock 12,500 Pain in Capital in Excess of Par Value- Common Stock 20,000 (2,500 x $13) (2,500 x $5) (32,500 -12,500)