Accounting final

Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method. April 2 Purchased $4,600 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point. April 3 Paid $300 cash for shipping charges on the April 2 purchase. April 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $600. April 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. April 18 Purchased $8,500 of merchandise from Frist Corporation with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination. April 21 After negotiations over scuffed merchandise, received from Frist a $500 allowance toward the $8,500 owed on the April 18 purchase. April 28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.

1. Apr 02 Debit merchandise inventory- 4600 Credit accounts payable- Lyon- 4600 2. Apr 03 Debit merchandise inventory- 300 Credit cash- 300 3. Apr 04 Debit accounts payable- Lyon- 600 Credit merchandise inventory- 600 4. Apr 17 Debit accounts payable-Lyon (4600-600)- 4000 Credit merchandise inventory (4000 x 0.02)- 80 Credit cash (4000-80)- 3920 5. Apr 18 Debit merchandise inventory- 8500 Credit accounts payable- Frist- 8500 6. Apr 21 Debit accounts payable- Frist- 500 Credit merchandise inventory- 500 7. Apr 28 Debit accounts payable- Frist (8500-500)- 8000 Credit merchandise inventory (8000 x 0.01)- 80 Credit cash (8000-80)- 7920

The ledger of Mai Company includes the following accounts with normal balances as of December 31: Retained Earnings $9,000; Dividends $800; Services Revenue $13,000; Wages Expense $8,400; and Rent Expense $1,600. Prepare its December 31 closing entries. Record the entry to close revenue accounts. Record the entry to close expense accounts. Record the entry to close the income summary account. Record the entry to close the dividends account.

1. Dec 31 Debit service revenue- 13000 Credit income summary- 13000 2. Dec 31 Debit income summary (add wages and rent expense)- 10000 Credit wages expense- 8400 Credit rent expense- 1600 3. Dec 31 Debit income summary (13000-10000)- 3000 Credit retained earnings- 3000 4. Dec 31 Debit retained earnings- 800 Credit dividends- 800

Pablo Management has five employees, each of whom earns $250 per day. They are paid on Fridays for work completed Monday through Friday of the same week. Near year-end, the five employees worked Monday, December 31, and Wednesday, Thursday, and Friday, January 2, 3, and 4. New Year's Day (January 1) was an unpaid holiday. Prepare the December 31 year-end adjusting entry for wages expense and record payment of the employees' wages on Friday, January 4. Record the December 31 year-end adjusting entry for wages expense. Record payment of the employees' wages on Friday, January 4.

1. Dec 31 Debit wages expense- 1250 (250 x 5) Credit wages payable- 1250 2. Jan 04 Debit wages expense- 3750 Debit wages payable- 1250 Credit cash- 5000

Following are the transactions of Sustain Company. June 1 T. James, owner, invested $11,000 cash in Sustain Company in exchange for common stock. June 2 The company purchased $4,000 of furniture made from reclaimed wood on credit. June 3 The company paid $600 cash for a 12-month prepaid insurance policy on the reclaimed furniture. June 4 The company billed a customer $3,000 for sustainability services provided. June 12 The company paid $4,000 cash toward the payable from the June 2 furniture purchase. June 20 The company collected $3,000 cash for services billed on June 4. June 21 T. James invested an additional $10,000 cash in Sustain Company in exchange for common stock. June 30 The company received $5,000 cash in advance of providing sustainability services to a customer. Prepare general journal entries for the above transactions.

1. June 01 Debit cash- 11,000 Credit common stock- 11,000 2. June 02 Debit furniture- 4,000 Credit account payable- 4,000 3. June 03 Debit prepaid insurance- 600 Credit cash- 600 4. June 04 Debit accounts receivable- 3,000 Credit service revenue- 3,000 5. June 12 Debit accounts payable- 4,000 Credit cash- 4,000 6. June 20 Debit cash- 3,000 Credit accounts receivable- 3,000 7. June 21 Debit cash- 10,000 Credit common stock- 10,000 8. June 30 Debit cash- 5,000 Credit unearned service- 5,000

Dexter Company uses the direct write-off method. March 11 Dexter determines that it cannot collect $45,000 of its accounts receivable from Leer Company. March 29 Leer Company unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt. Prepare journal entries to record the above transactions.

1. March 11 Debit bad debts expense- 45,000 Credit accounts receivable- Leer Company- 45,000 2. March 29 Debit accounts receivable- Leer Company- 45,000 Credit bad debts expense- 45,000 3. March 29 Debit cash- 45,000 Credit accounts- Leer Company- 45,000

Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products. May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000). May 5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000. May 7 Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory. May 8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 to compensate for the damage. May 15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method.

1. May 03 Debit merchandise inventory- 20000 Credit cash- 20000 2. May 05 Debit accounts receivable- 21000 Credit sales- 21000 3. May 05 Debit cost of goods sold- 15000 Credit merchandise inventory- 15000 4. May 07 Debit sales returns and allowances- 1750 Credit accounts receivable- 1750 5. May 07 Debit merchandise inventory- 1250 Credit costs of goods sold- 1250 6. May 08 Debit sales returns and allowances- 300 Credit accounts receivable- 300 7. May 15 Debit Cash (18950 - 379) = 18571 Debit sales discounts (18950 x 0.02) = 379 Credit accounts receivable (21000-1750-300) = 18950

Swiss Group reports net income of $40,000 for the year. At the beginning of the year, Swiss Group had $200,000 in assets. By the end of the year, assets had grown to $300,000.What is Swiss Group's return on assets for the current year? Did Swiss Group perform better or worse than its competitors if competitors average an 11% return on assets?

1. Return on assets= net come/average total assets 40000/(200000+300000)/2 [250000]=16% 2. better

Waupaca Company establishes a $350 petty cash fund on September 9. On September 30, the fund shows $104 in cash along with receipts for the following expenditures: transportation-in, $40; postage expenses, $123; and miscellaneous expenses, $80. The petty cashier could not account for a $3 shortage in the fund. The company uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund, (2) the September 30 entry to reimburse the fund, and (3) an October 1 entry to increase the fund to $400.

1. Sep 09 Debit petty cash- 350 Credit cash- 350 2. Sep 30 Debit merchandise inventory- 40 Debit postage expense- 123 Debit miscellaneous expense- 80 Debit cash over and short- 3 Credit cash- 246 3. Oct 1 Debit petty cash- 50 Credit cash- 50

Accounts receivable $ 18,000 Long-term notes payable $ 21,000 Accounts payable$ 11,000 Office supplies $2,600 Buildings $45,000 Prepaid insurance $3,200 Cash $7,000 Unearned services revenue $3,000 Compute Chavez Company's current ratio using the above information.

1. current assets/current liabilities = current ratio (cash + receivables + supplies + prepaid insurance)/(accounts payable + unearned services revenue) =current ratio 30800/14000 = 2.2

Home Demo reports the following: Total liabilities = $38,633 million and Total assets = $42,966 million.(a) Compute Home Demo's debt ratio.(b) Assuming Lows Hardware (a competitor) has a debt ratio of 60%, which company has higher risk from financial leverage?

1. debt ratio = total liabilities/total assets= 38,633 million/42,966 million = 0.899 or 89.9% 2. Home Demo

Gomez Company reported net income of $48,025 and net sales of $425,000 for the current year.(a) Compute Gomez's profit margin.(b) Assuming Cruz (a competitor) has a profit margin of 15%, which company is generating more profit on each dollar of sales?

1. net income/net sales = profit margin 48025/425000 = 11.3% 2. Cruz is generating more profit on each dollar of sales

Starlight Company has the following purchases and sales during October. Using the LIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 11 units that were sold? October 1 Beginning inventory 8 units @ $200 = $1,600 October 2 Purchase 20 units @ $205 = $4,100 October 4 Sales 11 units sold

11 x 205 = $2,255

On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

1548 x 9/36 = $516 debit Unearned Revenue, $516; credit Subscription Revenue, $516

Starlight Company has the following purchases and sales during October. Using the LIFO perpetual inventory method, what is the value of inventory after the October 4 sale? October 1 Beginning inventory 8 units @ $200 = $1,600 October 2 Purchase 20 units @ $205 = $4,100 October 4 Sales 11 units sold

20-11 = 9 8 x 200 = 1600 9 x 205 = 1845 1600 + 1845 = 3445

On July 1 of the current calendar year, Olive Company paid $7,500 cash for management services to be performed over a two-year period beginning July 1. The adjusting entry on December 31 of the current year for Olive would include:

7500 x 0.5/2 = $1875 A debit an 'expense' and credit to a prepaid expense for $1875

McCarthy Company has the following purchases and sales during the month of October. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 11 units that were sold? October 1 Beginning inventory 8 units @ $200 = $1,600 October 2 Purchase 20 units @ $205 = $4,100 October 4 Sales 11 units sold

8 x 200 = 1600 11 - 8 = 3 3 x 205 = 615 1600 + 615 = 2215

Same numbers used as question 5 Cash $5,100 Accounts Receivable $600 Supplies $2,000 Equipment $14,000 Accounts Payable $6,000 Common stock $6,900 Retained earnings, December 1 $4,000 Dividends $1,000 Services Revenue $16,000 Wages Expense $8,000 Rent Expense $1,500 Utilities Expense $700 Use the above information to prepare a December balance sheet for Hawkin. Hint: Retained Earnings on December 31 equals $8,800.

Hawkin Balance Sheet December 31 Assets -cash (5100) -accounts receivable (600) -supplies (2000) -equipment (14000) total assets: 21,700 Liabilities -accounts payable (6000) total liabilities: 6,000 Equity -common stock (6,900) -retained earnings (8800) total equity: 15,700 total liabilities and equity: 21,700

Same numbers used as question 5 Use the above information to prepare a statement of retained earnings for Hawkin for the month ended December 31. Hint: Net income is $5,800.

Retained earnings, December 1 (4,000) - add net income (5,800) -less dividends (-1000) Retained earnings, December 31 (4800)

On December 31, Hawkin's records show the following accounts. Cash $5,100 Accounts Receivable $600 Supplies $2,000 Equipment $14,000 Accounts Payable $6,000 Common stock $6,900 Retained earnings, December 1 $4,000 Dividends $1,000 Services Revenue $16,000 Wages Expense $8,000 Rent Expense $1,500 Utilities Expense $700 Use the above information to prepare a December income statement for Hawkin.

Revenues -service revenue 16,000 Expenses -wages expense 8,000 -rent expense 1,500 -utilities expense 700 Total expense: 10,200 Net income -5,800

Same numbers as question 15 McCarthy Company has the following purchases and sales during the month of October. Using the FIFO perpetual inventory method, what is the value of inventory after the October 4 sale? October 1 Beginning inventory 8 units @ $200 = $1,600 October 2 Purchase 20 units @ $205 = $4,100 October 4 Sales 11 units sold

Since there were 3 units take 20-3 = 17 17 x 205 = 3485

In its first year of operations, Cloudbox has credit sales of $200,000. Its year-end balance in accounts receivable is $10,000, and the company estimates that $1,500 of its accounts receivable is uncollectible. a. Prepare the year-end adjusting entry to estimate bad debts expense. b. Prepare the current assets section of Cloudbox's classified balance sheet assuming Inventory is $22,000, Cash is $14,000, and Prepaid Rent is $3,000. Note: The company reports Accounts receivable, net on the balance sheet.

a. 1. Dec 31 Debit bad debts expense- 1,500 Credit allowance for doubtful accounts- 1,500 b. Cloudbox Balance Sheet Assets -Current asset cash- 14,000 accounts receivable, net- 8,500 inventory- 22,000 prepaid rent- 3,000