Accounting quiz 1

Indicate whether each account has a normal debit or credit balance

CREDIT: Capital stock, Service revenue, income summary w net income, sales DEBIT: land, rent expense, dividends, income summary w net loss, sales discounts, sales returns and allowances, costs of goods sold, freight-out DEALER (debit) (go up when debited, down when credited) D- Dividends E- Expenses A- Assets (credit) (go up when credited, down when debited) L- Liabilities E- Owners Equity R- Revenue

dividends

Calculate the beginning stockholders' equity: Beginning stockholders' equity=Beginning assets - Beginning liabilities=$40,000 - $24,000=$16,000 Calculate the ending stockholders' equity: Ending stockholders' equity=Ending assets - Ending liabilities=$75,000 - $38,000=$37,000 Calculate the change (increase or decrease) in stockholders' equity: Change in stockholders' equity=Ending stockholders' equity - Beginning stockholders' equity=$37,000 - $16,000=$21,000 Increase in stockholders' equity=Issuance of stock + Revenues - Expenses - Dividends To solve for dividends, modify the equation as follows. Dividends=Issuance of stock + Revenues - Expenses - Increase in stockholders' equity=$15,200 + $27,600 - $12,900 - $21,000=$8,900

Expenses

Calculate the beginning stockholders' equity: Beginning stockholders' equity=Beginning assets - Beginning liabilities=$54,000 - $34,000=$20,000 Calculate the ending stockholders' equity: Ending stockholders' equity=Ending assets - Ending liabilities=$84,000 - $48,000=$36,000 Calculate the change (increase or decrease) in stockholders' equity: Change in stockholders' equity=Ending stockholders' equity - Beginning stockholders' equity=$36,000 - $20,000=$16,000 Increase in stockholders' equity=Issuance of stock + Revenues - Expenses - Dividends To solve for expenses, modify the equation as follows. Expenses=Issuance of stock + Revenues - Dividends - Increase in stockholders' equity=$12,700 + $24,000 - $9,500 - $16,000=$11,200

Revenues

Calculate the beginning stockholders' equity: Beginning stockholders' equity=Beginning assets - Beginning liabilities=$79,000 - $54,000=$25,000 Calculate the ending stockholders' equity: Ending stockholders' equity=Ending assets - Ending liabilities=$99,000 - $56,000=$43,000 Calculate the change (increase or decrease) in stockholders' equity: Change in stockholders' equity=Ending stockholders' equity - Beginning stockholders' equity=$43,000 - $25,000=$18,000 Increase in stockholders' equity=Issuance of stock + Revenues - Expenses - Dividends To solve for revenues, modify the equation as follows. Revenues=Increase in stockholders' equity - Issuance of stock + Expenses + Dividends=$18,000 - $15,700 + $13,800 + $8,000=$24,100

The primary objective of financial reporting is to provide information:

Calculate the beginning stockholders' equity:Beginning stockholders' equity=Beginning assets - Beginning liabilities=$47,000 - $27,000=$20,000 Calculate the ending stockholders' equity:Ending stockholders' equity=Ending assets - Ending liabilities=$84,000 - $58,000=$26,000 Calculate the change (increase or decrease) in stockholders' equity:Change in stockholders' equity=Ending stockholders' equity - Beginning stockholders' equity=$26,000 - $20,000=$6,000 Increase in stockholders' equity=Issuance of stock + Revenues - Expenses - Dividends To solve for Issuance of stock, modify the equation as follows. Issuance of stock=Increase in stockholders' equity - Revenues + Expenses + Dividends=$6,000 - $7,800 + $3,600 + $3,300.=$5,100

As the accounting consultant for Martin Company, a merchandising company, you have been asked to assist management in determining the proper accounting for items related to merchandise inventory. Required: For each of the following four items, determine whether or not each would be included in the cost of ending merchandise inventory.

Included: insurance during shipment of purchased inventory, freight in, cost of goods consigned out Not included: sales commissions, cost of painting warehouse, (cost of goods in transit, purchased, terms FOB destination), fright out (delivery expense), cost of goods consigned in, cost of taking physical inventory

Permanent and temporary accounts

Permanent: Liabilities, Assets, accounts payable, cash, accounts receivable, accumulated depreciation equipment, capital stock Temporary: Revenue, Expense, service revenue, rent expense

On November 1, Green Company paid $8,400 for one year of advertising, in advance. Green Company recorded the transaction by debiting Prepaid Advertising and crediting Cash. Required:Journalize the adjusting entry on December 31. Note: Assume that the advertising is used evenly throughout the year.

monthly advertising expense= cost of adv. purchased/months of coverage $8400/12= $700 per month Total advertising expense=Monthly advertising expense×Months used in the fiscal year=$700 × 2 Months=$1,400.

For the following transaction, answer the questions that follow in accordance with the rules of journalizing and the double-entry accounting system: Transaction: Miller Company paid $3,000 for monthly salaries.

which two accounts are affected?

For the following transaction, answer the questions that follow in accordance with the rules of journalizing and the double-entry accounting system: Transaction: Perez Company paid $270,000 for land purchased.

which two accounts are affected?

On January 1, Bennett Company purchased a large piece of equipment for $31,000. It has an estimated useful life of 10 years. Required:Journalize the adjusting entry on December 31. Note: Use straight-line depreciation with no salvage value.

yearly dep= cost/useful life $31,000/10= $1300

Alexander Company receives money from customers who have been previously billed, on account, $5,950. Required: What is the effect of this transaction on individual asset accounts, individual liability accounts, the Capital Stock account, and the Retained Earnings account? Check all that apply.

1. prepaid rent (debit) 1040 cash (credit) 1040 2. rent expense (debit) 280 prepaid rent (credit) 280 3. supplies (debit) 1120 cash (credit) 1120 4. supplies expense (debit) 405 supplies (credit) 405 Ending Cash balance=$29,200 - $1,040 - $1,120=$27,040 Ending Prepaid Rent balance=$1,040 - $280=$760 Ending Rent Expense balance = $280 Ending Supplies balance=$1,120 - $405=$715 Ending Supplies Expense balance = $405

Gonzales Company uses the gross method and a perpetual inventory system. Assuming the following entries, compute the amount that Gonzales Company received on August 13. August3Sold goods costing $9,000 to Foster Company on account, $15,000, terms 3/10, n/30. The goods are shipped FOB Shipping Point, Freight Prepaid by Seller, $160.August9Foster Company returned undamaged merchandise previously purchased on account, $2,300.August13Received the amount due from Foster Company.

Amount due from Foster Company on August 13:$ What was the original cost of goods? On August 13, the original sale was $15,000. Were there any returns? On August 3, goods were returned with a sales price of $2,300.Hence, the net sales are $15,000 - $2,300 = $12,700. Did the buyer pay in time to qualify for the discount? Since Gonzales Company was paid within 10 days, the customer will receive the cash discount. This is computed on the net sale (the sale less the return). The terms of the sale were 3/10, n/30. So the discount is 3% of $12,700, which is $381. Who pays for shipping? Since the terms of the sale are FOB Shipping Point, the buyer is responsible to pay for shipping, even though the seller paid for the shipping in advance (as a courtesy to the buyer). Note: There is no discount on freight and that is why the shipping costs are not part of the discount computation. Here is a summary of the problem. Original Sale$15,000 Return-2,300 Sales Discount-381 Freight (Shipping)+160 Amount due from buyer$12,479

On January 2, 2022, Hernandez Company purchased land that cost $430,000, a building on the land that cost $750,000, and equipment that cost $29,000. The building has an estimated useful life of 30 years. The equipment has an estimated useful life of 8 years. Required: Prepare the property, plant, and equipment section of the balance sheet as of December 31, 2022. Note: Use straight-line depreciation with no salvage value.

Annual depreciation amount= (Cost - Salvage value)/Useful life Yearly depreciation =CostYears of life =$750,000/30= $25,000. Book value of buildings=Buildings (cost) - Accumulated depreciation, buildings=$750,000 - $25,000=$725,000. (find depreciation for both years) yearly depreciation= $29,000/8=$3625 Book value of equipment=Equipment (cost) - Accumulated depreciation, equipment=$29,000 - $3,625=$25,375. otal property, plant, and equipment=Land+Book value of buildings+Book value of equipment=$430,000 + $725,000 + $25,375=$1,180,375

For each of the following accounts used by a retail business, determine its classification: asset, contra-asset, liability, revenue, contra-revenue, or expense.

Asset Contra- asset-accumulated depreciation Liability- deferred sales revenue revenue- sales contra revenue- sales returns and allowances, sales discounts expense- cost of goods sold, freight- out

Classify

Asset: land, supplies, prepaid insurance Liability: notes payable, deferred revenue, accounts payable Stockholders equity: service revenue, co. issuances stock, salaries expense, dividends

On December 31, Gray Co. had the following list of accounts and their respective annual balances. Additional Resources Accounts Payable$28,200Entertainment Expense$3,100Accounts Receivable60,300Legal Expense4,200Beginning Retained Earnings34,500Prepaid Rent17,700Capital Stock37,400Rent Expense9,500Cash43,900Service Revenue68,900Deferred Revenue13,400Supplies22,900Dividends12,200Supplies Expense8,600 Complete the statement of changes in retained earnings below.

Beginning retained earnings + Net income (from income statement) - Dividends = Ending balance of retained earnings Beginning retained earnings is given: $34,500Dividends is given: $12,200 Net income = Total revenue - Total expensesTotal revenue = Service revenue (given): $68,900 Total expenses=Entertainment expense + Legal expense + Rent expense + Supplies expense=$3,100 + $4,200 + $9,500 + $8,600=$25,400 Net income (loss)=Total revenue - Total expenses=$68,900 - $25,400=$43,500

Financial Statements

Deferred rent revenue- balance sheets Service Revenue- income statement Beginning Retained earnings- statement of changes... Net income- income statement & statement of changes Rent revenue- Income statement accounts receivable- balance sheet Capital stock- balance sheet Expenses- income statement Salaries payable- balance sheet dividends- statement of changes ending retained earnings- balance sheet & statement of changes supplies- balance sheet what a business owns- balance sheet

Ending Stockholders equity

Ending stockholders' equity = Beginning stockholders' equity + Change in stockholders' equity Change in stockholders' equity=Issuance of stock + Net income - Dividends=$1,900 + $3,200 - $400=$4,700 Ending stockholders' equity=Beginning stockholders' equity + Change in stockholders' equity=$12,100 + $4,700=$16,800

Prices rising (will result in HIGHER value..)

FIFO- gross profit LIFO- Costs of goods sold Not affected- accounts receivable

Prices falling (will result in HIGHER value)

FIFO: costs of goods sold, LIFO: income tax expense, net income, gross profit Not affected: accounts payable, sales, purchases, accounts receivable,

Wilson Company had the following account balances for the current year. Prepare a multiple-step income statement.

Net Sales=Sales - (Sales Discounts + Sales Returns and Allowances) =$109,000 - ($2,700 + $2,600)=$103,700. Gross Profit=Net Sales - Cost of Goods Sold=$103,700 - $49,700=$54,000. Total Operating Expenses=Selling Expenses+General and Administrative Expenses=$7,500 + $7,700=$15,200. Net Income=Gross Profit - Total Operating Expenses=$54,000 - $15,200=$38,800.

Martinez Company has the following account balances at the end of its fiscal year. Compute Net Sales, Gross Profit, and Net Income (ignore taxes).

Net Sales=Sales - Discounts - Returns and Allowances.=$125,500 - $2,500 - $3,100=$119,900 Gross Profit=Net Sales - Cost of Goods Sold.=$119,900 - $48,900=$71,000 otal Operating Expenses=Selling Expenses + General and Administrative Expenses.=$8,500 + $9,800=$18,300 Thus, Net Income=Gross Profit - Total Operating Expenses.=$71,000 - $18,300=$52,700

Griffin Company has the following account balances, extracted from its multiple-step income statement for the current year. Required: Compute the missing amounts.

Net sales= Sales - Sales discounts - Sales returns and allowances= $119,400 - $4,800 - $2,600= $112,000 Gross profit=Net sales - Cost of goods sold=$112,000 - $63,400=$48,600 Net income=Gross profit - Total operating expenses Therefore, to solve for total operating expenses: Total operating expenses=Gross profit - Net income=$48,600 - $25,800=$22,800 Total operating expenses =Selling expenses+ General and administrative expenses Therefore, to solve for selling expenses: Selling expenses=Total operating expenses - General and administrative expenses=$22,800 - $12,500=$10,300