Accounting Final Review

Excluding any other changes, which of the following is NOT possible when properly recording a transaction?

-A liability increases and an asset decreases -You can't fool me! All of these are possible -Stockholders' equity decreases and an asset decreases. -One asset increases and another asset decreases. -Stockholders' equity increases and an asset increases. -Stockholders' equity decreases and a liability increases.

Which of the following is a correct understanding of an accrual?

-Revenue/expense recognition is made prior to the cash changing hands -Cash changes hands prior to revenue/expense recognition. -Revenue/expense recognition and cash exchange occur in the same period. Reasoning: Accrual = recognition before cash; Deferral = cash before recognition

An ambitious entrepreneur turned 20 years old on January 1, 2020. She plans to retire at 30 on January 1, 2030. Because of expected advances in technology...and her youthful hubris...she plans to live forever and therefore wants to have an investment perpetuity of $100,000 per month beginning January 31, 2030 and at the end of every month thereafter to sustain her lifestyle. Her investments earn compound interest of 1% each month. To provide the funds for this investment, she invested an initial $1,000,000 on January 1, 2020 and will invest the remaining value through 120 equal monthly installments beginning January 31, 2020 through December 31, 2029. How much must each monthly investment be in order to provide the necessary funds for the retirement perpetuity? Round to the nearest dollar.

$29,124 A $100,000 per month perpetuity beginning January 31, 2030 requires $10,000,000 to be invested at the beginning of that month. To determine this, use the basic perpetuity formula: $100,000 / .01 = $10,000,000. The investor will get there by the combination of the initial investment at January 1, 2020 of $1,000,000 (PV) plus the 120 monthly contributions (PMT). You also know the interest rate of 1% (I). So simply solve for PMT. N = 120 PV = -1,000,000 FV = 10,000,000 I = 1 PMT = SOLVE The amount she needs to invest monthly is $29,124.

On December 1, 2020, Eastside Bank accepted a $10,000 note from a customer. The note is due in 90 days and bears a 12% annual interest rate. Eastside accrues interest revenue only at the end of the fiscal year (December 31st). When the note matures on March 11th, Eastside will record how much interest revenue?

$300 Eastside would accrue $100 of interest revenue at December 31st for the first 30 days ($10,000 x .12 x 30/360). Since monthly accruals are not made, the remainder of the interest will be recognized when the note matures. On March 11th, Eastside will recognize the 60 days of interest from January 1 through March 11th ($200, calculated as $10,000 x .12 x 60/360). Entry at maturity: Cash $10,300Note receivable $10,000Interest receivable $100 (December's interest already accrued)Interest revenue $200 (Jan 1 - March 11 interest)

Karen Statement (Miss Statement) does the period-end inventory counts for Statement Enterprises, Inc. while texting, and thus, miscounted on-hand inventory by the following amounts: 12/31/2019 $8,700 overstated12/31/2020 $2,000 understated Additionally, although the purchase or sale for the following transactions was otherwise correctly recorded, Karen did NOT include the following items in the ending inventory count - which may or may not be an error: a) Statement shipped $200 of inventory to customer on 12/28/2020 with terms FOB Shipping Point. Goods received 01/02/2021.b) Statement shipped $700 of inventory to customer on 12/28/2020 with terms FOB Destination Point. Goods received 01/02/2021.c) Statement purchased $150 of inventory from supplier on 12/28/2020 with terms FOB Shipping Point. Goods received 01/02/2021.d) Statement purchased $95 of inventory from supplier on 12/28/2020 with terms FOB Destination Point. Goods received 01/02/2021.e) Statement holds $2,000 of inventory on consignment for a dear friend. By what amount will net income for 2020 be overstated (or understated)? If overstated enter as a positive; if understated enter as a negative.

-11550 The $8,700 overstatement at 12/31/2019 error becomes a beginning inventory overstatement for 2020. An additional error occurs in the 12/31/2020 ending inventory count. The physical count of on-hand inventory was understated by $2,000. On top of that, some items in transit are excluded, which should have been included. Item B ($700 of in-transit inventory sold FOB Destination Point) and Item C ($150 of in-transit inventory purchased FOB Shipping Point) should have been included in ending inventory. So the actual misstatement in ending inventory is $2,850. If you combine a beginning inventory error of $8,700 and an ending inventory error of $2,850, it translates to an understatement of net income by $11,550.

Assume a corporate tax rate of 35% and an individual tax rate of 33%. Perryton Corp. earned $15,000,000 before income taxes during the year. Perryton kept 60% of after-tax profits inside the company to support future growth, and paid the rest as a dividend. How much total tax would have been paid to the Internal Revenue Service (IRS) by all related parties?

-6537000 Perryton $15,000,000 x .35 = $5,250,000 corporate income tax $15,000,000 - $5,250,000 = $9,750,000 after-tax profits $9,750,000 x .4 = $3,900,000 dividend $3,900,000 x .33 = $1,287,000 shareholder dividend tax $5,250,000 + $1,287,000 = $$6,537,000 total

By the end of 12 years, you want three times the money you have today. What annual compound interest rate do you need to earn in order to make this happen? Round to one decimal place.

9.6 N = 12 PV = -1,000 (or any number) FV = 3,000 (or 3x PV) PMT = 0 I = SOLVE

This may or may not be a personal story... A loving father goes to the grocery store every Sunday to buy his daughter a fresh gallon of milk (the good stuff, not generic). Milk typically lasts for 10 days before spoilage so often there are two gallons in the refrigerator. Earlier today, I...I mean the father...opened the refrigerator and observed both gallons. The gallon expiring on October 30th was 90% empty, while the gallon expiring on November 6th was 90% full. Which violation, potentially punishable by grounding, did my daughter commit?

-A violation of FIFO -A violation of both FIFO and LIFO -A violation of neither FIFO nor LIFO...she's a perfect kid -A violation of LIFO Since the new milk was consumed prior to the old milk being finished, a FIFO violation occurred. Don't waste milk, use the old stuff first! You cannot conclude that a LIFO violation occurred as some/most of the milk expiring October 30th was likely consumed prior to the new milk being purchased.

How does the concept of conservatism inform accounting practice?

-Actual results should be used rather than estimates. -UC Berkeley accountants should not recognize "conservatism." -Financial statements will not be released until the accountants are sure that every dollar is properly accounted for. -Accountants will recognize expected losses but wait to recognize expected gains.

What is the primary difference between an asset and an expense?

-An asset is purchased in cash, while an expense is financed on account. -Assets are temporary accounts, while expenses are permanent. -An asset has a debit balance, while an expense has a credit balance. -An asset has future value, while an expense is used up in the current period. -Companies should try to maximize assets, while minimizing expenses. -An expense shows up on the balance sheet, while an asset shows up on the income statement.

If a wise investor can choose any one of the following investments, which would she never select?

-An investment in a start-up business that sells previously owned dog clothes -Each of the above investments may make sense in different scenarios. -A risk-free investment paying 2% quarterly compound interest -A risk-free investment paying 8% annual compound interest -A risk-free investment paying 10% simple interest

The accounting concept of "matching" refers to ensuring that which related accounts are recorded in the same period?

-Assets and liabilities -Revenues and expenses -Liabilities and stockholders' equity -Stocks and bonds -Common stock and Retained earnings

Which of the following items will increase when a company sells shares of common stock for the first time?

-Authorized Shares -Issued Shares -Outstanding Shares -Treasury Shares Authorized shares are fixed by the corporate charter. Treasury shares increase when stock is repurchased. The issued shares and outstanding shares will increase due to an initial stock sale. If this was for a subsequent stock sale out of treasury shares rather than an initial sell, only outstanding shares would increase.

Which of the following financial statements reports the changes in common stock and retained earnings during a period?

-Balance Sheet -Stock and Earnings Report -Income Statement -Statement of Stockholders' Equity -Statement of Cash Flows

Issuing common stock would absolutely, without question, affect the balances reported on which financial statement(s)?

-Balance Sheet -Income Statement -Statement of Stockholders' Equity -Statement of Cash Flows

Which of the following statements is true?

-Both the allowance method and the direct write-off method are GAAP-approved. -The direct write-off method will only record an allowance when an account is deemed uncollectible. -The allowance method requires management make an estimate of uncollectibility. -When an account is written off under the allowance method, bad debts expense will be recorded. -The direct write-off method will typically overstate accounts receivable on the balance sheet. -Compared to the direct write-off method, the allowance method is considered to be a better application of the matching principle. -The book value (or carrying value) of Accounts receivable which appears on the balance sheet is calculated by adding the Accounts receivable balance to the Allowance for uncollectible accounts balance. The book value (or carrying value) of Accounts receivable which appears on the balance sheet is calculated by adding the Accounts receivable balance to the Allowance for uncollectible accounts balance. Incorrect

Which of the following accounts would be closed each period with a credit?

-Cash -Wages Expense -Sales Revenue -Dividends -Accounts payable -Prepaid insurance Only temporary accounts (revenues, expenses, and dividends) are closed. To close an account, you do the opposite from its normal balance. Expenses and dividends are closed with credits.

In addition to the financial statement audit, Sarbanes Oxley requires publicly-traded firms to have an audit of which component of their operations?

-Corporate Social Responsibility -Diversity and inclusion -Human Resource policies -Hiring and termination practices -Social Activism -Internal Controls (SOX Section 404 requires an audit of internal controls)

Tomlin and Company provide music for special occasions. On January 14th, the Garcia family hired Tomlin for an upcoming wedding for an agreed-upon fee of $5,000. The wedding was scheduled for May 23rd. As part of the agreement, the Garcias paid Tomlin half of the fee at the end of April with the remaining amount due by the end of June. Assuming Tomlin provided the service and properly keeps his books each month, how would Tomlin record the receipt of the final payment in June?

-Credit to Account receivable -Credit to service revenue -Debit to unearned revenue -Credit to cash

The phrase "Based on my knowledge, this report does not contain any untrue statement of a material fact..." comes from where?

-Donald Trump's State of the Union address -a CFO certification in her company's 10-K -Bernie Madoff's fraud trial in September 2009 -an auditor's report filed with the 10-K -the CEO pledge in the Proxy statement

Oakland Industries adjusts and closes its books every month. On September 10th, Oakland paid employees $7,000 for salaries which had been earned in August. If Oakland was properly following GAAP, what are the effects of the September 10th transaction on the accounting equation?

-Expenses increase and liabilties increase. -Assets decrease and expenses decrease. -Expenses decrease and liabilities decrease. -Expenses increase and assets decrease. -Assets decrease and liabilities decrease. Reasoning: Since the books are closed every month, the expense and liability would have been recorded in August when incurred. On September 10th, Cash (asset) is decreased and Wages payable (liability) is decreased.

Which financial statement is a snapshot as of a certain date, rather than showing activity over a period?

-Income Statement -Statement of Cash flows -Balance Sheet: The balance sheet is the only major financial statement as of a certain date; the others are over the period. -Statement of Stockholders' Equity

Which of the following is NOT a violation of GAAP?

-Intentionally overstating earnings for a period -Recording employee wages incurred as an asset -Expensing the full cost of a vehicle with a ten-year life in the period in which it is purchased -Preparing the financial statements by using the cash basis of accounting -Deducting Dividends expense on the Income Statement -Intentionally understating earnings for a period -Recognizing revenue from an individual contract over multiple accounting periods

In which way(s) can stockholders typically earn a return on their investment?

-Interest -dividends -Capital Gains -Salary

When a bond is issued above par, which of the following explains the relationship between interest paid and interest expense during any given period?

-Interest expense > Interest paid -Early in the bond's life, interest expense will be greater than interest paid, but the relationship will reverse in the latter part of the bond's life. -Interest expense < interest paid -Interest expense = Interest paid

Southwest Airlines sold a ticket to a customer on January 26th. Southwest collected cash for the ticket on February 4th and the flight took place on March 10th. According to the revenue recognition principle, in which month should Southwest recognize this revenue?

-January -February -March (Revenue should be recognized when earned (i.e. when the flight is made). -Revenue should be recognized in equal one-third installments in each month, January through March. -Revenue should be recognized in equal one-half installments in both months, February and March.

Luna's Tuna stock currently trades for $50 and they have never resold treasury shares. Luna's reports the following items in its shareholders' equity section: Common stock, $5 par value (50,000 shares authorized) $50,000Additional paid-in capital (APIC) $25,000Retained earnings $180,000Treasury stock (2,000 shares) ($40,000)Total shareholders' equity $255,000 Which of the following statements are definitely true?

-Luna's issued 10,000 shares at an average price of $7.50 per share. -Luna's has 8,000 shares outstanding. -Treasury stock was repurchased for an amount greater than the original issue price. -If Luna's declares a 10% stock dividend, the new APIC balance would be $61,000.

Which of the following is NOT a temporary account?

-Merchandise revenue -Rent Expense -Unearned Revenue (liability that is permanent) -Dividends -All of the above accounts are temporary accounts

Home State Bank is a small, family-owned bank in Redding, California. On each employee's first day, he or she meets the owner, receives a bank t-shirt, and is given the key to the vault. Which piece of the fraud triangle is increased as a result of this practice?

-Motivation -Opportunity -Rationalization -Culture Access to the vault should be restricted. Providing every employee the key to the vault increases the opportunity for fraud.

Murray Trucking, a transportation company, reported very high profits in its first three years of operations. In its fourth year, however, Murray began selling some of the company's trucks, each at a significant loss. As the new auditor for Murray, what might you suspect regarding the company's accounting for depreciation?

-Murray may have used the double-declining balance method but should consider the straight-line method to avoid these losses. -Murray may have overestimated the trucks' useful lives. -Murray may have underestimated the trucks' useful lives. -Murray may have overestimated the trucks' salvage values. -Murray may have underestimated the trucks' salvage values.

As discussed in lecture, which of the following words is part of the acronym NEEEEEGBSV?

-Negative -Each -GO -Before -Subtract -Variance Never ever ever ever ever ever go below salvage value...I hope you're participating or watching the lectures.

Which of the following is true regarding the effects of a 5-for-1 stock split?

-Outstanding shares will increase. -The par value of shares will increase. -Total stockholders equity will remain the same. -The market value of a share will decrease. -Retained earnings will decrease.

Which of the following transactions would cause an increase in both the assets and liabilities of a company?

-Purchase a building by issuing a note payable. -Purchase equipment by issuing common stock. -Pay for inventory purchased 90 days ago. -Pay for the current month's rent. -Provide services on account. -Purchase land for cash.

Pawn Shops Unlimited records the following transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual basis or cash basis accounting?

-Purchased $500 of office supplies on account (supplies were used in May). -Paid $1,800 for a six-month insurance policy covering the period July 1st - December 31st. -Paid $1,800 for a six-month insurance policy covering the period July 1st - December 31st. -Received $300 from customers for services performed in March. -Received $800 from customers for services to be performed in May. -Billed customer $2,000 for services performed (customer will pay in May). Reasoning: Since supplies were purchased on account, no cash was paid in April. Likewise, since the supplies were not used until May, no expense recognition would occur under accrual basis during April. For each of the other transactions, there's a timing difference between the recognition of the revenue/expense and the cash changing hands, resulting in a different net income under accrual basis and cash basis.

Rexton Industries began operations in 2015. Using the Accounts Receivable analysis method, Rexton Industries recognizes bad debt expense only at the end of each fiscal year on December 31st. Which of the following would NOT be a potential cause for Rexton having a debit balance in the Allowance for Uncollectible Accounts on December 15, 2020?

-Rexton intentionally underestimated its uncollectability at December 31, 2019. -New legislation passed on March 1, 2020 made the declaration of bankruptcy more difficult than it had previously been. -Rexton increased its credit sales during the year by 60%. -Rexton's accountant made a recording error. -The COVID-19 pandemic resulted in a significant number of Rexton's customers having severe liquidity challenges.

If the market interest rate declines after a bond has been issued, which of the following will occur?

-The bond's semi-annual interest payment will decrease. -The bond's fair value will decrease. -All of the above. -None of the above. -The bond's face value will decrease. Explanation When the market interest rate decreases, the value of the bond will increase since the remaining cash flows are now discounted at a lower rate and have a higher PV than before. The semi-annual payment and the face value do not change.

How should outstanding checks be reported on a bank reconciliation?

-They should be deducted from the book balance. -They should be added to the bank balance. -They should be added to the book balance. -They should be deducted from the bank balance. -They should be applauded for their outstandingness.

Whe comparing the statement of cash flow under the direct and indirect methods, how many sections differ between the two approaches?

-Three -Four -Two -One

Which of the following taxes will an employee NOT typically see deducted from his or her paycheck?

-Unemployment tax -Federal income tax -State income tax -Social security and Medicare tax (FICA)

When a company issues 36,000 shares of $5-par value common stock for $50 per share, the journal entry would include:

-a credit to Additional paid-in capital (APIC) for $1,620,000. -a debit to Cash for $180,000. -a credit to Common stock for $1,800,000. -a debit to Additional paid-in capital (APIC) for $180,000. Explanation The required journal entry would be: Cash $1,800,000Common Stock $180,000APIC $1,620,000 Only par value (36,000 x $5) is put into the Common stock account, the excess goes into APIC.

Receiving a dividend from an investment is classified as a(an) _________ cash flow, while paying a dividend on common stock is classified as a(an) _________ cash flow.

-investing; financing -operating; investing -operating; financing -financing; investing -operating; operating -investing; investing -financing; operating -investing; operating -financing; financing Explanation Receiving a dividend creates dividend income (on the income statement) so receipt is an operating cash flow. Paying a dividend is not an expense, as it's a transaction with shareholders not outsiders. Paying a dividend is a return to shareholders for providing financing, thus it's a financing cash flow.

The lower of cost or net realizable value (LCNRV) method was developed to:

-report accounts receivable on the balance sheet for the amount the company actually expects to receive. -prevent the company from selling inventory below its original cost. -prevent the company from selling inventory to customers who are not likely to pay. -avoid reporting inventory at an amount that exceeds the benefits it provides. -provide an alternative to the FIFO, LIFO, and average cost methods.

The primary difference between an ordinary annuity and an annuity due is:

-that the former is received from the government, while the latter from a private party. -the amount of the payments. -the timing of the payments. -that the former is paid in stock, while the latter is paid in cash. Explanation An ordinary annuity is paid at the end of each period, while an annuity due is paid at the beginning of each period.

For a petty cash fund, expenses are typically recorded in the books when:

-the fund is established -incurred -the fund is replenished -the receipt is returned by the employee

NOTE: The following information (DATA SET B) will be used in three exam questions, each asking for a different response. For the month of October, Andrew Industries has the following inventory ledger: Beginning inventory 20 units @ $25 eachOctober 3rd purchase 30 units @ $30 eachOctober 14th purchase 25 units @ $32 eachOctober 28th purchase 25 units @ $35 each During the month, Andrew Industries had two sales: October 6th sale 28 units @ $60 eachOctober 30th sale 37 units @ ? each An ending inventory count revealed 32 units on hand at October 31st. If the periodic method is used, how much greater is ending inventory under FIFO than it is under Average Cost?

115 To price out 32 units under FIFO, 25 units x $35 + 7 units x $32 = $1,099 FIFO To price out 32 units under average cost, first find the average cost per unit. Total cost of $3,075 / 100 units = $30.75 per unit $30.75 per unit x 32 units on hand = $984 Average cost $1,099 FIFO - $984 Average cost = $115 greater.

Surf's Up, LTD. issues 1,000 shares of 6%, $100-par value, cumulative preferred stock at the beginning of 2020. All remaining shares are common shares. The company was not able to pay dividends in 2020, but paid a dividend of $21,000 in 2021. How much of the $21,000 dividend will be paid to preferred stockholders?

12000 Cumulative preferred stock will require a catch up on missed years prior to common stockholders receiving money. The preferred stockholders should receive 1,000 shares x $100-par per share x 6%, or $6,000, each year. They'll be paid $12,000: $6,000 for both 2020 and 2021.

Wainright Industries reports the following transactions during its first month of operations: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Received cash of $8,500 for services to be provided to customers in the following month. 6. Purchased $800 of office supplies on account. 7. Paid employees $10,000 for their first month's salaries. 8. Paid off half of balance due to office supplies vender. What was the total amount of Wainright's liabilities following these transactions?

14300 $12,000 + $8,500 + $800 - $400 (half of $800) = $20,900

Newton, Inc. has the following information:1. Par value of common stock is $1 per share.2. Shares authorized: 10,000; Shares issued: 6,0003. 2,000 shares of treasury stock were purchased for $10 per share; 600 of those shares were resold to outsiders for $22 per share. No other treasury stock transactions have occurred.4. Total net income since inception: $250,0005. Additional paid-in capital balance: $70,0006. Dividends declared since inception: $160,000 What amount of total stockholders' equity should Newton report?

152000 Common stock $6,000 (6,000 shares x $1) APIC $70,000 (given) Retained Earnings $90,000 ($250,000 net income - $160,000 dividends) Treasury Stock ($14,000) ((2,000 shares purchased - 600 resold) x $10 cost) Total: $152,000

Talmore, Inc. uses the percentage of credit sales method to record its uncollectible accounts, estimating that 1.5% of credit sales will not be collected. During 2020, Talmore recorded $1,000,000 of credit sales. At December 31, 2020, Talmore's ledger shows the following unadjusted balances: Accounts receivable $185,000 debit Allowance for uncollectible accounts $2,200 credit What net book value of Accounts Receivable should Talmore report on its December 31, 2020 balance sheet?

167800 $1,000,000 x 1.5% = $15,000 adjustment at end of year.$2,200 unadjusted allowance balance + $15,000 adjustment = $17,200 adjusted allowance balance$185,000 AR - $17,200 allowance = $167,800 net book value

Betson, Inc. had the following transactions for September: 1. Collected a $46,000 payment in advance for work to be performed in October. 2. Paid $6,000 for rent covering September through November. 3. Performed services; received 25% now and billed customer for the rest. 4. Incurred utility charges of $3,000; paid some now and will pay the rest in October. 5. Collected $8,000 of previous billing to customer (from #3). Betson's management calculates net income under both cash basis and accrual basis. Using the method which is GAAP (you should know which this is), Betson reported just $10,000 of net income, while Betson reported $50,000 of net income under the non-GAAP method. How much of the utility bill was paid in transaction #4?

1750 Reasoning: 1. Solve to find the missing value for accrual basis net income: - $2,000 rent expense + ? services performed - $3,000 utilities incurred = $10,000 accrual basis net income Services performed = $15,000 2. Calculate that 25% of the $15,000 services performed = $3,750 (which was collected) 3. Solve to find the missing value for cash basis net income: $46,000 collected - $6,000 rent paid + $3,750 cash collected - ? utilities paid + $8,000 collected = $50,000 cash basis net income Utlities paid = $1,750

Sammy's Pizza reports the following cash transactions:Dividends paid $4,000Issued bonds $12,000Purchased equipment $60,000Issued common stock $20,000Cash received from customers $115,000Cash paid for rent $8,000Sold land $80,000Purchased treasury stock $9,200 What amount would Sammy's report for net cash from financing activities?

18800 Dividends paid ($4,000) + Issue bonds $12,000 + Issue common stock $20,000 + Purchase treasury stock ($9,200) = $18,800

On October 1st, Lakeside Industries sold goods to a customer with terms 5/20, n/60 FOB Destination Point at an agreed upon price of $5,000. On October 12th, the customer paid Lakeside $2,033 cash toward the balance owed. On October 15th, Lakeside granted the customer an allowance of $400 for partially damaged goods. On October 30th, the customer paid the remaining balance. How much did Lakeside receive on October 30th?

2460 Lakeside offers a 5% discount on any amount paid off during the first 20 days. The payment on the 12th occurs during the discount period; therefore, $2,033 paid equates to $2,140 of account paid off ($2,033 / .95). $5,000 initial balance - $2,140 paid off - $400 returned = $2,460 final amount owed (paid after the discount period has ended)

NOTE: The following information (DATA SET A) will be used in four exam questions, each asking for a different response. Prior to preparing the financial statements for its first year of operations, a clumsy accountant accidently deleted some of Tick Tock Clocks' financial information. The following information remains (all accounts shown): Accounts payable $3,000Accounts receivable $7,000Beginning inventory ?Cash ?Cost of goods sold $60,200Ending inventory $18,500Freight-in $1,800Gross profit $55,400Common stock $10,000Dividends $4,200Net income $37,000Purchases $72,000Purchases returns $2,000Rent expense $4,000Sales returns $1,200Sales revenue ?Wages expense ?Wages payable $4,600 What balance would Tick Tock Clocks report for Cash?

24900 Here you need to know the calculation of Retained earnings and the balance sheet equation. Step 1: Determine Retained earnings$0 beg Retained earnings (first year of operations) + $37,000 Net income - $4,200 Dividends = $32,800 Ending Retained earningsStep 2: Determine Cash using A = L + SECash? + $7,000 Accounts receivable + $18,500 Inventory = $3,000 Accounts payable + $4,600 Wages payable + $10,000 Common stock + $32,800 Retained earnings Cash = $24,900

NOTE: The following information (DATA SET B) will be used in three exam questions, each asking for a different response. For the month of October, Andrew Industries has the following inventory ledger: Beginning inventory 20 units @ $25 eachOctober 3rd purchase 30 units @ $30 eachOctober 14th purchase 25 units @ $32 eachOctober 28th purchase 25 units @ $35 each During the month, Andrew Industries had two sales: October 6th sale 28 units @ $60 eachOctober 30th sale 37 units @ ? each An ending inventory count revealed 32 units on hand at October 31st. How many units would be classified as "shrink"

3 The 100 units sold - 65 units sold - 32 units on hand = 3 units shrink

Miller Industries purchased a delivery van at a cost of $50,000. The van is estimated to last ten years or 100,000 miles at which point it is estimated to have a salvage value of $10,000. Miller used the double-declining balance method. What will the delivery van's net book value be at the end of Year 2?

32000 Since the asset has a ten year expected life, 20% of the beginning book value will be taken as depreciation each period under double-declining method. In the first year, $10,000 of depreciation expense will be recorded ($50,000 x .2). In the second year, the book value starts at $40,000. The depreciation expense for the second year is $8,000 ($40,000 x .2). Therefore the book value is $32,000 ($50,000 original cost - $18,000 accumulated depreciation).

Grams Corp. is a furniture retailer allowing customers to buy either on cash or credit. Grams uses the Accounts Receivable analysis method to recognize uncollectible accounts, adjusting only at the end of the year. Because economic times are tough, Grams' management increased its uncollectability percentage from 7% of Accounts Receivable in fiscal 2019 to 10% of Accounts Receivable in fiscal 2020. Grams has the following accounting data: Revenues on a cash basis $350,000Bad Debts Expense 2020 $6,720Account Receivable, 1/1/2020 $35,000Account Receivable 12/31/2020 $50,000 What total amount of revenue (on an accrual basis) would Grams report for 2020?

369170

Dell, Inc., which reported a net income of $525,000 for 2020 has the following additional information for the year: Beginning balance Ending balanceRetained earnings $800,000 $950,000Common stock $1,500,000 $2,000,000Dividends payable $10,000 $0 Dell only offers cash dividends, not stock dividends. What amount of dividends did Dell pay to shareholders during 2020?385000

385000 Walk the retained earnings and dividends t-account forward. Retained earnings t-account:Beginning $800,000 + Net income $525,000 - ?? Dividends declared = Ending $950,000 Dividends declared = $375,000 Dividends payable t-account:Beginning $10,000 + Dividends $375,000 - ?? dividends paid = Ending $0 Dividends paid = $385,000

The accountant for Langston Industries correctly, and successfully, prepared the company's bank reconciliation for the month of August 2020. All of the items shown on the bank reconciliation are shown below: Unadjusted bank statement balance, August 31st $12,832Unadjusted book balance of cash, August 31st $12,207Interest earned on balance $75Discover bank error: Deposit of $320 was processed by the bank as $200Note and interest collected by the bank $550 Deposit made on August 23rd, but which does not appear on bank statement $990Chargeback for customer NSF check $30Rent check written to J. Harris, which has not yet cleared $1,200Fee for NSF check $20Bank service charge ? What was the amount of the bank service charge for the month?

40 The reconciled balance is $12,742. Bank $12,832 + $120 + $990 - $1,200 = $12,742 = Book $12,207 + $75 + $550 - $30 - $20 - ???. To balance, you need a service charge of $40.

For the last several years, Facebook CEO, Mark Zuckerberg's annual salary has just been $1. According to Facebook's revelant SEC filing, what was Zuckerberg's salary in the year before he began receiving just $1 each year?

503205 The proxy statement ("Def 14A" when looking up on SEC database) reports the compensation of top executives. Mark Zuckerberg received a salary of $503,205 in 2012 before shifting to $1 per year.

Fast Money Lending (FML), represented by the legal firm of Dewey, Cheatem, & Howe, offers adjustable rate mortgages. Jose and Erika Maxwell used FML to underwrite their $720,000 mortgage. The terms of FML mortgages are as follows: All mortgages are for 30 years.There are no fees to process the mortgage and for the first six months, no interest is charged!The annual interest rate adjusts upwards by 2% each six months thereafter (ex: 2% annual rate for months 7-12; 4% annual rate for months 13-18, etc.) The Maxwells made their first 24 payments but were unable to make the 25th. The bank foreclosed on their home and the Maxwells were forced to move in with Erika's mother who never really liked Jose. How much was the 25th required payment that was missed? Round to the nearest dollar.

5138 Payment for Months 1-6:n-360, i - 0, PV - 720,000, solve for PMT and get $2,000 (this makes since because there's no interest and $720,000 / 360 months = $2,000).That will leave you with a balance of $708,000 after six months. Payment for Months 7-12:n-354, i - 2/12, PV - 708,000, solve for PMT and get $2,649.30.That will leave you with a balance of $699,147.39 after 12 months.Payment for Months 13-18:n-348, i - 4/12, PV - 699,147.39, solve for PMT and get $3,397.67.That will leave you with a balance of $692,690.72 after 18 months.Payment for Months 19-24:n-342, i - 6/12, PV - 692,690.72, solve for PMT and get $4,232.18.That will leave you with a balance of $688,020.32 after 24 months.Payment for Months 25:n-336, i - 8/12, PV - 688,020.32, solve for PMT and get $5,137.85.

The following table contains Asbury Inc.'s adjusted trial balance: Cash $12,000 Supplies $4,500 Prepaid rent $2,000 Salaries expense $4,500 Equipment $65,000 Service revenue $18,000 Rent expense $20,000 Dividends $3,000 Merchandise revenue $12,000 Accounts payable $5,000 Common stock $68,000 Retained earnings $8,000 What is Asbury's net income for the period?

5500 (Service revenue ($18,000) + Merchandise revenue ($12,000) - Salaries expense ($4,500) - Rent expense ($20,000) = $5,500 net income)

On January 1, 2020, when the market rate of interest was 6%, Fargo, Inc. issued $1,000,000 face value, 10-year bonds with a stated rate of 5%. Interest is paid semi-annually on June 30th and December 31st. Fargo received $925,613 when the bonds were issued.How much interest expense will Fargo record for 2020? Round to the nearest dollar.

55620 Use Bond Spread Sheet

Miller Industries purchased a delivery van at a cost of $50,000. The van is estimated to last ten years or 100,000 miles at which point it is estimated to have a salvage value of $10,000. Miller uses the straight-line method. After two years, Miller changed its depreciation estimates. The salvage value of the truck was increased to $12,000 and the useful life was reduced three years to seven years total. What depreciation expense would Miller record for year 3?

6000 Depreciation expense for years 1 and 2 would be $4,000 (($50,000 - $10,000) / 10). At the beginning of year 3, the book value would be $42,000 ($50,000 - $4,000 x 2). Given the estimate change, the goal now is to reduce the $42,000 book value to the new $12,000 salvage value over the remaining useful life, which is five. So for years 3-7, the depreciation expense would be $6,000 (($42,000 - $12,000) / 5).

Roget, Inc. reports the following information on the statement of cash flows:Net income $60,000Depreciation expense $15,000Purchase of equipment $20,000Gain on sale of equipment $4,000Sale of common stock $30,000Increase in accounts receivable $7,000Increase in accounts payable $2,500 What amount would Roget report for net cash from operating activities?

66500 Net income $60,000 + Depreciation expense $15,000 + Gain ($4,000) + Increase in AR ($7,000) + Increase in AP $2,500 = $66,500

On January 1, 2020, Grove, Inc.'s Retained earnings had a balance of $5,000. During the year, Grove earned revenue of $8,000, incurred expenses of $3,400, sold stock to investors for $12,000, purchased land for $6,400, and paid dividends of $800. What is the final balance of Retained earnings at December 31, 2020 once closing entries have been recorded?

8800 ($5,000 + $8,000 - $3,400 - $800 = $8,800)

Jolly Giant Burgers purchased a commercial dishwasher by paying cash of $8,000. The dishwasher's fair value on the date of the purchase was $10,000. The company incurred $600 in transportation costs, $500 installation fees, and paid $300 annual insurance on the equipment. For what amount will Jolly Giant Burgers record the dishwasher?

9100 All costs to get the asset ready for use should be capitalized. This includes the purchase price, transportation, and installation. The estimated fair value is ignored. The annual insurance should be expensed in the first year, not capitalized and spread over the dishwasher's life.

NOTE: The following information (DATA SET C) will be used in three exam questions, each asking for a different response. Miller Industries purchased a delivery van at a cost of $50,000. The van is estimated to last ten years or 100,000 miles at which point it is estimated to have a salvage value of $10,000. Miller used the units of activity method. In year 1 and year 2, the truck was driven 21,000 and 27,000 miles, respectively. On the first day of Year 3, the truck is sold for $31,750. What gain (or loss) would Miller record?

950 Under the units of activity method, Miller would depreciation $0.40 per mile (($50,000 - $10,000) / 100,000 miles). Having driven the truck 48,000 miles in the first two years, accumulated depreciation would be $19,200 ($0.40 x 48,000 miles) resulting in a net book value of $30,800 ($50,000 - $19,200). More cash was received on the sale, so a gain of $950 ($31,750 cash - $30,800 book value) results.

You are presented with the following unadjusted trial balance and additional information for Berkeley Aeronautics, Inc. for December 31, 2019. The company adjusts the books only at end of year. Accounts payable $5,000 Accounts receivable $4,000 Cash $26,000 Common stock $20,000 Dividends $3,000 Equipment $16,000 Government contract revenue $17,000 Prepaid rent $4,000 Private sector revenue $8,000 Retained earnings $10,000 Supplies $2,000 Unearned revenue $5,000 Wages expense $10,000 Information needed for adjustments: 1. Prepaid Rent was recorded on November 21st when the company paid four months rent in advance for December 1st through March 31st. 2. A count of supplies on December 31st determined that $850 remain. 3. In early December, the company received $5,000 from the State of California for services in advance. During the month, Berkeley Aeronautics earned 70% of the revenue. 4. Wages of $14,000 are paid at the end of every week. The current pay period is December 30th - January 5th. After adjusting entries, what is Berkeley Aeronautic's net income for the period year?

Explanation The adjustments have the following income statement effects: Increase Rent expense $1,000 (portion of the $4,000 which has been used) Increase Supplies expense $1,150 (amount used during the period) Increase Government contract revenue $3,500 (portion of the $5,000 unearned revenue which has been earned) Increase Wages expense $4,000 ($14,000 x 2/7 incurred on Dec 30 & 31) Government contract revenue $20,500 + Private sector revenue $8,000 - Wages expense $14,000 - Rent expense $1,000 - Supplies expense $1,150 = $12,350 net income

Companies with a very high likelihood of theft should maximize the number of internal controls present in order to offset this risk.

False All controls should pass the cost/benefit test. Maximizing the number of possible controls would surely result in many controls which do not provide as much benefit as they cost. One control might be to hire The Rock to guard the inventory...I bet he's quite expensive. It would be better to instead take a small inventory loss.