会计英语练习题
Chapter1
1. The Mill Run Golf & Country Club details the following accounts in its financial statements.
(a) (b)
Accounts payable and accrued liabilities ____ ____
Accounts receivable ____ ____
Property, plant, and equipment ____ ____
Food and beverage operations revenue ____ ____
Golf course operations revenue ____ ____
Inventory ____ ____
Long-term debt ____ ____
Office and general expense ____ ____
Professional fees expense ____ ____
Wages and benefits expense ____ ____
Instructions.
(a)Classify each of the above accounts as an asset (A) , liability(L), stockholders’ equity (SE), revenue
(R), or expense (E) item.
(b)Classify each of the above accounts as a financing activity (F), investing activity (I), or operating
activity (O). If you believe a particular account doesn’t fit in any of these activities, explain why.
2.The following information was taken from the 2004 financial statements of pharmaceutical giant
Merck and Co. All dollar amounts are in millions.
Retained earnings, January 1, 2004 $34,142.0
Materials and production expense 4,959.8
Marketing and administrative expense 7,346.3
Dividends 3,329.1
Sales revenue 22,938.6
Research and development expense 4,010.2
Tax expense 2.161.1
Other revenue 1,352.2
Instructions.
(a)After analyzing the data, prepare an income statement and a retained earnings statement for the year
ending December 31,2004.
(b)Suppose that Merck decided to reduce its research and development expense by 50%. What would be
the short-term implications? What would be the long-term implications? How do you think the stock market would react?
3.Kellogg Company is the world’s leading producer of ready-to-eat cereal and a leading producer of
grain-based convenience foods such as frozen waffles and cereal bars. The following items were taken from its 2004 income statement and balance sheet. All dollars are in millions.
_____Retained earnings $2,701.3 _____ Long-term debt $3,892.6 _____Cost of goods sold 5,298.7 _____ Inventories 681.0 _____Selling and administrative expense 2,634.1 _____ Net sales 9,613.9 _____Cash 417.4 _____ Accounts payable 767.2 _____Notes payable 709.7 _____Common stock 103.8 _____Interest expense 308.6 _____ Income tax expense 475.3
_____ Other expense 6.6
Instructions.
Perform each of the following.
(a)In each case identify whether the item is an asset (A), liability (L), stockholders’ equity (SE),
revenue (R), or expense (E).
(b)Prepare an income statement for Kellogg Company for the year ended December 31, 2004.
4.The following items were taken from the balance sheet of Nike, Inc.
(1)Cash $828.0 (7) Inventories $1,633.6
(2)Accounts receivable 2,120.2 (8) Income taxes payable 118.2
(3)Common stock 890.6 (9) Property, plant, and equipment 1,586.9
(4)Notes payable 146.0 (10)Retained earnings 3,891.1
(5)Other assets 1,722.9 (11)Accounts payable 763.8
(6)Other liabilities 2,081.9
Instructions.
Perform each of the following.
(a)Classify each of these items as an asset, liability, or stockholders’ equity. (All dollars are in
millions.)
(b)Determine Nike’s accounting equation by calculating the value of total assets, total liabilities,
and total stockholders’ equity.
(c)To what extent dose Nike rely on debt versus equity financing?
Chapter 2.
1．These items are taken from the financial statements of Donovan Co. at December 31.2007
Building $105,800
Accounts receivable 12,600
Prepaid insurance 4,680
Cash 16,840
Equipment 82,400
Land 61,200
Insurance expense 780
Depreciation expense 5,300
Common stock 62,000
Retained earnings (January 1, 2007) 40,000
Accumulated depreciation-building 45,600
Accounts payable 9,500
Mortgage payable 93,600
Accumulated depreciation-equipment 18,720
Interest payable 3,600
Bowling revenues 19,180
Instructions.
Prepare a classified balance sheet. Assume that $13,600 of the mortgage payable will be paid in 2008.
2. The following items were taken from the 2004 financial statements of Texas Instruments, Inc.(All dollars are in millions.)
Long-term debt $ 368 Cash $ 2,668 Common stock 2,488 Accumulated depreciation 5,655 Prepaid expense 326 Accounts payable 1,444 Property, plant, and equipment 9,573 Other noncurrent assets 1,927
Other current assets 554 Other noncurrent liabilities 943
Other current liabilities 470 Retained earnings 10,575
Long-term investments 264 Accounts receivable 1,696
Short-term investments 3,690 Inventories 1,256
Loans payable in 2005 11
Instructions.
Prepare a classified balance sheet in good form as of December 31, 2004.
3. These financial statement items are for Snyder Corporation at year-end, July 31, 2007.
Salaries payable $ 2,080
Salaries expense 51,700
Utilities expense 22,600
Equipment 18,500
Accounts payable 4,100
Commission revenue 61,100
Rent revenue 8,500
Long-term note payable 1,800
Common stock 16,000
Cash 24,200
Accounts receivable 9,780
Accumulated depreciation 6,000
Dividends 4,000
Retained earnings (beginning of the year) 35,200
Instructions.
(a)Prepare an income statement and a retained earnings statement for the year. Snyder Corporation did
not issue any new stock during the year.
(b)Prepare a classified balance sheet at July 31.
(c)Compute the current ratio and debt to total assets ratio.
(d)Suppose that you are the president of Allied Equipment. Your sales manager has approached you with
a proposal to sell $20,000 of equipment to Snyder. He would like to provide a loan to Snyder in the
form of a 10%, 5-year note payable. Evaluate how this loan would change Snyder’s current ratio and debt to total assets ratio, and discuss whether you would make the sale.
4. The chief financial officer (CFO) of SuperClean Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 007, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as follows.
SUPERCLEAN CORP.
Balance Sheet
December 30, 2007
Current assets Current liabilities
Cash $30,000 Accounts payable $25,000
Accounts receivable 20,000 Salaries payable 15,000 $40,000 Prepaid insurance 10,000 $60,000 Long-term liabilities
Notes payable 80,000
Total liabilities 120,000 Property, plant, and equipment (net) 200,000 Stockholders’ equity
Total assets $260,000 Common stock 100,000
Retained earnings 40,000 140,000
Total liabilities and stockholders equity$260,000
Instructions.
(a)Calculate the current ratio and working capital based on the preliminary balance sheet.
(b)Based on the results in (a), the CFO requested that $25,000 of cash be used to pay off the balance of
the accounts payable account on December 31, 2007. Calculate the new current ratio and working capital after the company takes these actions.
(c)Discuss the pros and cons of the current ratio and working capital as measures of liquidity.
(d)Was it unethical for the CFO to take these steps?
5. The following data were taken from the 2004 and 2003 financial statements of American Eagle Outfitters. (All dollars are in thousands.)
20042003 Current assets $525,623 $427,878
Total assets 865,071 741,339
Current liabilities 189,035 141,586
Total liabilities 221,401 163,857
Total stockholders’ equity 643,670 577,482
Cash provided by operating activities 189,469 104,548
Capital expenditures 64,173 61,407
Dividends paid -0- -0-
Instructions.
Perform each of the following.
(a)Calculate the debt to total assets ratio for each year.
(b)Calculate the free cash flow for each year.
(c)Discuss American Eagle’s solvency in 2004 versus 2003.
(d)Discuss American Eagle’s ability to finance its investment activities with cash provided by operating
activities, and how any deficiency would be met.
Chapter 3.
1．During 2007, its first year of operations as a delivery service, Cheng Corp. entered into the following transactions.
(1)Issued shares of common stock to investors in exchange for $110,000 in cash.
(2)Borrowed $45,000 by issuing bonds.
(3)Purchased delivery trucks for $60,000 cash.
(4)Received $16,000 from customers for services provided.
(5)Purchased supplies for $4,200 on account.
(6)Paid rent of $5,600.
(7)Performed services on account for $8,000.
(8)Paid salaries of $28,000.
(9)Paid a dividend of $11,000 to shareholders.
Instructions
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the right-hand margin.
Assets = Liabilities + Stockholders’Equity
Cash+Accounts+Supplies+Property,Plant, =Accounts +Bonds + Common + Retained Receivable and Equipment Payable Payable Stock Earnings
2.Selected transactions for Welcome Home, an interior decorator corporation, in its first
month of business, are as follows.
(1)Issued stock to investors for $12,000 in cash.
(2)Purchased used car for $8,000 cash for use in business.
(3)Purchased supplies on account for $300.
(4)Billed customers $2,600 for services performed.
(5)Paid $200 cash for advertising start of the business.
(6)Received $1,100 cash from customers billed in transaction(4).
(7)Paid creditor $300 cash on account.
(8)Paid dividends of $400 cash to stockholders.
Instructions
(a)For each transaction indicate (a) the basic type of account debited and credited (asset,
liability, stockholders’ equity); (b) the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); (c) whether the specific account is increased or decreased; and (d) the normal balance of the specific account. Use the following format, in which transaction 1 is given as an example.
Account Debited Account Credited
(a) (b) (c) (d) (a) (b) (c) (d)
Trans- Basic Specific Normal Basic Specific Normal
action Type Account Effect Balance Type Account Effect Balance
1 Asset Cash Increase Debit Stock- Common Increase Credit
holders’stock
equity
(b)Journalize the transaction. Do not provide explanations.
3.This information relates to Matthews Real Estate Agency Corporation.
Oct. (1) Stockholders invested $25,000 in exchange for common stock of the corporation.
(2)Hires an administrative assistant at an annual salary of $42,000.
(3)Buys office furniture for $3,600, on assount.
(6)Sells a house and lot for M.E. Mills; commissions due from Mills, $10,800 (not
paid by Mills at this time).
(10) Receives cash of $140 as commission for acting as rental agent renting an
apartment.
(27) Pays $700 on account for the office furniture purchased on October 3.
(30) Pays the administrative assistant $3,500 in salary for October.
Instructions
Prepare the debit-credit analysis for each transaction as illustrated on pages 119-124.
4.Transaction data for Matthews Real Estate Agency are presented in 3 .
Instructions
Journalize the transaction. Do not provide explanations.
5.Selected transactions for P.F. Quick Corporation during its first month in business are
presented below.
Sept. (1) Issued common stock in exchange for $15,000 cash received from investors.
(5) Purchased equipment for $12,000, paying $2,000 in cash and the balance on account.
(25) Paid $5,000 cash on balance owed for equipment.
(30) Paid $500 cash dividend.
P.F. Quick’s chart of accounts shows: Cash, Equipment, Accounts Payable, Common Stock, and Dividends.
Instructions
(a)Prepare a tabular analysis of the September transaction. The column headings should be:
Cash + Equipment = Accounts Payable + Stockholders’ Equity. For transactions affecting stockholders’ equity, provide explanations in the right margin, as shown on page107.
(b)Journalize the transaction. Do not provide explanations.
(c)Post the transactions to T accounts.
Chapter 4
1．The following independent situations require professional judgement for determining when to recognize revenue from the transaction.
(a)Southwest Airlines sells you an advance-purchase airline ticket in September for
your flight home at Christmas.
(b)Ultimate Electronics sell you a home theatre on a “no monkey down, no interest, and
no payments for one year” promotional deal.
(c)The Toronto Blue Jays sells season tickets online to games in the Skydome. Fans can
purchase the tickets at any time, although the season doesn’t officially begin until April. The major league baseball season runs from April through October.
(d)In August, you order a sweater from Sears using its online catalog. The sweater
arrives in September in full in November.
(e)In August, you order a sweater from Sears using its online catalog. The sweater
arrives in September, and you charge it to your Sears credit card. You receive and pay the Sears bill in October.
Instruction
Identify when revenue should be recognized in each of the above situations.
2.Your examination of the records of a company that follows the cash basis of
accounting tells you that the company’s reported cash basis earnings in 2007 are $33,640. If this firm had followed accrual basis accounting practices, it would have reported the following year-end balances.
2007 2006 Accounts receivable $3,400 $2,300
Supplies on hand 1,300 1,160
Unpaid wages owed 1,500 2,400
Other unpaid amounts 1,400 1,600 Instruction
Determine the company’s net earning on an accrual basis for 2007. Show all your calculations in an orderly fashion.
3.In its first year of operations Bere Company earned $28,000 in service revenue,
$6,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers.
The company incurred operating expenses of $14,500. Of these expenses $13,000 were paid in cash; $1,500 was still owed on account at year-end. In addition, Bere prepaid $3,600 for insurance coverage that would not be used until the second year of operations.
Instructions
(a)Calculate the first year’s net earnings under the cash basis of accounting, and calculate
the first year’s net earning under the accrual basis of accounting.
(b)Which basis of accounting (cash or accrual) provides more useful information for
decision makers?
4．The Radical Edge, a ski tuning and repair shop, opened in November 2006. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2007.
Cash Receipts Cash Payments
Issue of common shares $20,000
Payment for repair equipment $9,200 Rent payments 1,225 Newspaper advertising payment 375 Utility bills payments 970 Part-time helper’s wages payments 2,600 Income tax payment 10,000 Cash receipts from ski and snowboard
repair services 32,150
Subtotals 52,150 24,370 Cash balance 27,780 Totals $52,150 $52,150 You learn that repair equipment has an estimated useful life of 5 years. The company rents space at a cost of $175 per month on a one-year lease. The lease contract requires payment of the first and last month s’ rent in advance, which was done. The part-timer helper is owed $220 at April 30, 2007, for unpaid wages. At April 30, 2007, customers owe The Radical Edge $650 for services they have received but have not yet paid for.
Instructions
(a)Prepare an accrual-basis income statement for the 6 months ended April 30,2007.
(b)Prepare the April 30, 2007, classified balance sheet.
5. MaxPlay, a maker of electronic games for kids, has just completed its first year of operations. The company’s sales growth was explosive. To encourage large national stores to carry its products MaxPlay offered 180-day financing-meaning its largest customers do not pay for nearly 6 months. Because MaxPlay is a new company, its components suppliers insist on being paid cash on delivery. Also, it had to pay up front for 2 years of insurance. At the end of the year MaxPlay owed employees for one full month of salaries, but due to a cash shortfall, it promised to pay them the first week of next year.
Instructions
(a)Explain how cash and accrual accounting would differ for each of the events listed above
and describe the proper accrual accounting.
(b)Assume that at the end of the year MaxPlay reported a favorable net income, yet the
company’s management is concerned because the company is very short of cash. Explain how MaxPlay could have positive net income and yet run out of cash.
6.The ledger of Reliable Rental Agency on March 31 of the current year includes these
selected accounts before adjusting entries have been prepared.
Debits Credits Prepaid Insurance $3,600
Supplies 3,000
Equipment 25,000
Accumulated Depreciation-Equipment $8,400
Notes Payable 20,000
Unearned Rent Revenue 10,200
Rent Revenue 60,000
Interest Expense 0
Wage Expense 14,000
An analysis of the accounts shows the following.
(1)The equipment depreciates $250 per month.
(2)Half of the unearned rent revenue was earned during the quarter.
(3)Interest of $440 is accrued on the notes payable.
(4)Supplies on band total $850.
(5)Insurance expires at the rate of $300 per month.
Instructions
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and supplied Expense.
7.Gene Hoffman, D.D.S., opened an incorporated dental practice on January 1, 2007.
During the first month of operations the following transactions occurred:
(1)Performed services for patients who had dental plan insurance. At January 31, $680 of
such services was earned but not yet billed to the insurance companies.
(2)Utility expenses incurrent but not paid prior to January 31 totaled $520.
(3)Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and
signing a $60,000, 3-year note payable (Interest is paid each December 31). The equipment depreciates $400 per month. Interest is $500 per month.
(4)Purchased a 1-year malpractice insurance policy on January 1 for $18,000.
(5)Purchased $1,750 of dental supplies. On January 31 determined that $350 of supplies
were on hand.
Instructions
Prepare the adjusting entries on January 31. Account titles are: Accumulated Depreciation-Dental Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.
Chapter 5
Exercises
E5-1 The following transactions are for Kale Company.
1.On December 3 Kale Company sold $480000 of merchandise to Thomson Co., terms
1/10,n/30 .The cost of the merchandise sold was 320000.
2.On December 8 Thomson Co. was granted an allowance of $28000 for merchandise
purchased on December 3.
3.on December 13 Kale company received the balance due from Thomson Co. instructions
(a)Prepare the journal entries to record these transactions on the books of Kale Company .Kale uses a perpetual inventory system.
(b)Assume that Kale Company received the balance due from Thomson Co. on January 2 of
the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2.
E5-2 Assume that on September 1 office depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September these transactions occurred.
Sept.6 purchased calculators from black box co. at a total cost of $620,term n/30.
Sept .9 Paid freight of $50 on calculators purchased from Black Box Co.
Sept 10 Returned calculators to black box co. for $38 credit because they did not meet specifications .
Sept 12 Sold calculators costing $520 for $780to University Book Store, terms n/30.
Sept14 Granted credit of $45 to University Book Store for the return of one calculator that was not ordered .The calculator cost $28.
Sept 20 Sold calculators costing $570 for $900 to Campus Card Shop. Instructions
Journalize the September transactions .
E5-3 This information relates to Sherper Co.
1.On April 5 purchased merchandise from Newport Company for
$220000,terms2/10,n/30.
2.On April 6 paid freight costs of $900 on merchandise purchased from Newport.
3.On April 7 purchased equipment on account for $26000.
4.On April 8 returned some of April 5 merchandise of Newport Company which cost
$3600.
5.On April 15 paid the amount due to Newport Company in full.
Instructions
(a) Prepare the journal entries to record the transactions listed above on the books of Sherper
Co. uses a perpetual inventory system.
(b) Assume that Sherper Co. paid the balance due to Newport Company on May 4 instead of April 15.Prepare the journal entry to record this payment.
E5-8 In its income statement for the year ended December 31,2007,Knitz Company reported the following condensed data.
Administrative expenses $435000 selling expenses $ 690000
Cost of goods sold 987000 Loss on sale of equipment 83500
Interest expense 68000 Net sales 2350000
Interest revenue 45000
Instructions
(a)Prepare a multiple-step income statement.
(b)Calculate the profit margin ratio and gross profit rate.
(c)In 2006 Knitz had a profit margin ratio of 9%. Is the decline in 2007 a cause for
concern?
E5-9 In its income statement for the year ended June 30,2004, The Clorox Company report the following condensed data (dollars in millions ).
Selling and Research and
Administrative expenses $ 552 development expense $ 84
Net sales 4324 Income tax expense 294
Interest expense 30 Other income 1
Advertising expense 429 Cost of goods sold 2387 Instructions
(a)Prepare a multiple step income statement.
(b)Calculate the gross profit rate and the profit margin ratio and explain what each means.
(c)Assume by marketing department has presented a plan to increase advertising expenses
by $300 million . It expects thos plan to result in an increase in both net sales and cost of goods sold of 25%. Redo parts (a) and (b) and discuss whether this plan has merit.(Assume a tax rate of 35%,and round all amounts to whole dollars .)
E5-10 The trial balance of Rachel Company at the end of its fisical year , August 31 , 2007, includes these accounts :Merchandise Inventory $19200; Purchases $144000; Sales $190000; Freight-in $8000; Sales Returns and Allowances $3000;Freight-out $1000;and Purchase Returns and Allowances $5000. The ending merchandise inventory is $25000.
Instructions
Prepare a cost of goods sold section for the year ending August 31.
Chapter 6
Exercises
E6-2Dennis Lee ,an auditor with Knapp CPAs, is performing a review of Nathan Company’s inentory account. Nathan did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $740000.However, the following information was not considered when determining that amount.
1.Included in the company’s count were goods with a cost of $250000 that the company is
holding on consignment.The goods belong to Anya Corporation.
2.The physical count did not include goods purchased by Nathan with a cost of $40000
that were shipped FOB shipping point on December 28 and did not arrive at Nathan’s warehouse until January 3
3.Included in the inventory account was $17000 of office supplies that were stored in the
warehouse and were to be used by the company’s supervisors and managers during the coming year
4.The company received an order on December 29 that was boxed and was sitting on the
loading dock awaiting pick-up on Decemeber 31.The shipper picked up the goods on January 1 and deliverde them on January 6.The shipping tems were FOB shipping point.The goods had a selling price of $40000 and a cost of $30000.The goods were not included in the count because they were sitting on the dock.
5.On December 29 Nathan shipped goods with a selling price of $80000 and a cost of
$60000 to Central Sales Corporation FOB shipping point.The goods arrived on January3.
Central Sales had only ordered goods with a selling price of $10000 and a cost of $8000.
However, a sales manager at Nathan had authorized the shipment and said that if Central wanted to ship the goods back next week, it could.
6.Included in the count was $50000 of goods that were parts for a machine that the
company on longer made. Given the higi-tech nature of Nathan’s products,it was unlikely that these obsolete parts had any other use .However, management would prefer to keep them on the books at cost, “since that is what we paid for them ,after all.”
Instructions
Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item.
E6-3 Shippers Inc. had the following inventory situations to consider at January 31.its year end.
(a)Goods held on consignment for MailBoxes Corp. since December 12.
(b)Goods shipped on consignment to Rinehart Holdings Inc. on January 5
(c)Goods shipped to a customer, FOB destination ,on January 29 that are still in transit.
(d)Goods shipped to a customer, FOB shipping point, on January 29 that are still in transit.
(e)Goods purchased FOB destination from a supplier on January 25,that are still in transit.
(f)Goods purchased FOB shipping point from a supplier on January 25,that are still in
transit.
(g)Office supplies on hand at January 31.
Instructions
Identify which of the preceding items should be included in inventory. If the item should not be included in inventory, state where it should be recorded.
E6-4Boarders sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Below if information relating to Boarders’s purchases of Xpert snowboards during September. During the same month, 118 Xpert snowboards were sold. Boarders uses a periodic inventory system.
Instructions
(a)Compute the ending inventory at September 30 using the FIFO and LIFO methods.
Prove the amount allocated to cost of goods sold under each method.
(b)For both FIFO and LIFO ,calculate the sum of ending inventory and cost of goods sold.
What do you notice about the answers you found for each method?
E6-7 Plato Company reports the following for the month of June.
(1)
FIFO,(2)LIFO,and (3) average cost.
(b)Which costing method gives the highest ending inventory? The highest cost of goods
sold ?Why?
(c)How do the average-cost values for ending inventory and cost of goods sold relate to
ending inventory and cost of goods sold for FIFO and LIFO?
(d)Explain why the average cost is not $6
Instructions
Calculate the inventory turnover ratio,days in inventory,and gross profit rate for PepsiCo.,Inc. for 2002,2003, and 2004. Comment on any trends.
E6-9 Cody Camera Shop https://www.sodocs.net/doc/de19080189.html,es the lower of cost or market basis for its inventory. The following data are available at December 31.
Instructions
What amount should be reported on Cody Camera Shop’s financial statements, assuming the lower of cost or market rule is applied?
E6-10Deere&Company is a global manufacturer and distributor of agricultural, construction, and forestry equipment. It reportde the following information in its 2004 annual report.
Instructions
(a)Compute Deere’s inventory turnover ratio and days in inventory for 2004
(b)Compute Deere’s current ratio using the 2004 data as presented, and then again after
adjusting for the LIFO reserve
(c)Comment on how ignoring the LIFO reserve might affect your evaluation of Deere’s
liquidity.
exercises
e-8-3 At the beginning of the current period，Huang Crop. had balances in Accounts Receivable of 200000 and in Allowance for Doubtful Accounts of 9000（credit）. During the period，it had net credit sales of 800000 and collections of 743000. It wrote off as uncollectible accounts receivable of 7000.However，a 4000 account previously written off as uncollectible was recovered before the end before the end of the current period . Uncollectible accounts are estimated to total 25000 at the end of period.
Instructions
（a）Prepare the entries to record sales and collections during the period.
（b）Prepare the entry to record the write-off of uncollectible accounts during the period.
（c）Prepare the entries to record the recovery of the uncollectible account during the period.
（d）Prepare the entry to record bad debts expense for the period.
（e）Determine the ending balances in Accounts Receivable and Allowance for Doubtful accounts. （f）What is the net realizable value of the receivables at the end of period？
E8-4 The ledger of Garcia Company at the end of the current year shows Accounts Receivable 96000；Credit Sales 780000 ；and Sales Returns and Allowances 40000.
Instructions
（a）If Garcia uses the direct write-off method to account for uncollectible accounts ，journalize the adjusting entry at December 31，assuming Garcia determines that Allied’s 900 balance is un collectible.
（b）IF Allowance for Doubtful Accounts has a credit balance of $1100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.
（c）If Allowance for Doubtful Accounts has a debit balance of 500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.
E8-5 Hachey Company has accounts receivable of 95100 at March 31,2007.An analysis of the accounts shows these amounts.
Credit terms are 2/10,n/30.At March 31,2007,there is a $2200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivable basis for estimating uncollectible accounts. The company’s estimates of bad debts as shown on next page.
Instructions
(a)Determine the total estimated uncollectibles.
(b)Prepare the adjusting entry at March 31,2007,to record bad debts expense.
(c)Discuss the implications of the changes in the aging schedule from 2006 to 2007.
E8-6 On December 31,2007,when its Allowance for Doubtful Accounts had a debit balance of $1000,North Star CO. estimates that 9% of its accounts receivable balance of $70000 will become uncollectible and records the necessary adjustment to the Allowance for Doubtful Accounts. On May 11,1008,North Star CO. determined that J.Tory’s account was uncollectible and wrote off $1200.On June 12,2008,Tory paid the amount previously written off.
Instructions
Prepare the journal entries on December 31, 2007, May 11,2008, and June 12,2008.
Chapter 9
E9-1 The following expenditures relating to plant assets were made by Bel Air Company during the first 2 months of 2007
1.Paid $7000 of accrued taxes at the time the plant site was acquired.
2.Paid $200 insurance to cover a possible accident loss on new factory machinery while the machinery
was in transit.
3.Paid $850 sales taxes on a new delivery truck.
4.Paid $21000 for parking lots and driveways on the ne plant site.
5.Paid $250 to have the company name and slogan painted on the new delivery truck.
6.Paid $8000 for installation of new factory machinery.
7.Paid $900 for a 1-year accident insurance policy on the new delivery ryuck.
8.Paid $75 motor vehicle license fee on the new truck.
Instructions
(a)Explain the application of the cost principle in determining the acquisition cost of plant assets.
(b)List the numbers of the transactions,and opposite each indicate the account title to which each
expenditure should be debited.
E9-3 Hillary Company purchased a new machine on September1,2007,at a cost of $96000.The company estimated that machine has a salvage value of $6000.The machine is expected to be used for 70000 working hours during its 8-year life.
Instructions
Compute the depreciation expense under the straight-line method for 2007 and 2008, assuming a
E9-5 Phill Co. has delivery equipment that cost $54000 and has been depereciated $20000.
Instructions
Record entries for the disposal under the following assumptions.
(a)It was scrapped as having no value.
(b)It was sold for $37000.
(c)It was sold for $18000.
E9-8 During 2004 Federal Express reported the following information (in millions):net sales of $24710 and net income of $838. Its balance sheet also showed total assets at the beginning of the year of $15385 and total assets at the end of the year of $19134.
Instructions
Calculate the (a) asset turnover ratio and (b) return on assets ratio.
E9-12 Keshan Company,organized in 2007,has these transactions related to intangible assets in that year: Jan.2 Purchased a patent (5-year life ) $330000
Apr.1 Goodwill purchased (indefinite life)$360000.
July.1 Acquired a 9-year franchise; expiration date July 1,2016,$450000.
Sept.1 Research and development costs $185000.
Instructions
(a) Prepare the necessary entries to record these intangibles. All costs incurred were for cash.
(b) Make the entries as of December 31,2007,recording any necessary amortization.
(c) Indicate what the balances should be on December 31,2007.
Chapter 11
E11-2 Somer Co. had these transactions durig the current period.
June 12 Issued 60,000 shares of $1 par calue common stock for cash of $300,000.
July 11 Issued 1,000 shares of $100 par value preferred stock for cash at $104 per share. Nov. 28 Purchased 2,000 shares of treasury stock for $11,000
Instructions
Prepare the journal entries for the transactions shown on page 567.
E11-4 The stockholders’equity section of MaiStyle Corporatiom’s balance sheet at December 31 is presented here.
MAISTYLE CORPORATION
Balance Sheet (partial)
Stockholders’ equity
Paid-in capital
Preferred stock, cumulative, 10,000 shares authorized,
6,000 shares issued and outstanding $ 900,000
Common stock, no par, 750,000 shares authorized,
600,000 shares issued 1,800,000
Total paid-in capital 2,700,000 Retained earnings 1,158,000
Total paid-in capital and retained earnings 3,858,000
Less: Treasury stock (8,000 common shares) (32,000)
Total stockholders’ eqity $3,826,000 Instructions
From a review of the stockholders’ equity section, answer the following questions.
(a)How many shares of common stock are outsaiding?
(b)Assuming there is a stated value, what is the stated value of the common stock?
(c)What is the par value of the perferred stock?
(d)If the annual dividend on preferred stock is $36,000, what is the dividend rate on
preferred stock?
(e)If dividends of $72,000 were in arrears on preferred stock, what would be the balance
reportrd for retained earnings?
E11-6 On january 1 Weiss Corporation had 75,000 shares of no-par common stock issued and outstanding. Thr stock has a stated value of $5 per share. During the year, the following transactions occurred.
Apr. 1 Issued 8,000 additional shares of shares of common stock for $11 per share.
June 15 Declared a cash dividend of $1.50 per share to stockholders of record on June 30.
July 10 Paid the $1.50 cash dividend.
Dec. 1 Issued 4,000 additional shares of common stock for $12 per.
15Declared a cash dividend on outstanding shares of $1.70 per share to stockholders of record on December 31.
Instructions:
(a)Prepare the entries, if any, on each of the there dates that involved dividends.
(b)How are dividends and dividends payable reported in the financial statements prepared
at December 31?
E11-7 On October 31 the stockholders’ equity section of Davis Company’s balance sheet
consists of common stock $648,000 and retained earning $400,000. Davis is considering the following two courses of action: (1) declaring a 5% stock dividend on the 54,000 $12 par value shares outstanding or (2) effecting a 3-for-1 stock split that will reduce par value to $4 per share. The current market price is $15 per share.
Instructions:
Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’equity and outstanding shares. Use these column headings:Before Action, After Stock Dividend, and After Stock Split.
E11-10 The following accounts appear in the ledger of Sycamore Inc. after the books are closed at December 31,2007.
Common Stock (no-par, $1 stated calue, 400,000 shares authorized, 200,000 shares issued) $ 200,000
Paid-in Capital in Excess of Stated Value—Common Stock 1,200,000 Preferred Stock ($50 par value, 8%, 40,000 shares authorized, 12,000 shares issued)
600,000 Retained Earnings 900,000 Treasury Stock (10,000 common shares) 64,000
Paid-in Capital in Excess of Par Value—Preferred Stock 24,000 Instructions:
Prepare the stockholders’ equity section at December 31, assuming $100,000 of retained earings is restricted for plant expansion. (Use Note R.)
E11-11 The following financial information is available for Sara Lee Corporation.
(in millions) 2004 2003
Average common stockholders’ equity $2,500 $1,897
Dividends declared for common stockholders 594 497
Dividends declared for preferred stockholders 0 0
Net income 1,272 1,221
Instuctions:
Calculate the payout ratio and return on common stockholders’ equity ratio for 2004 and 2003. Comment on your findings.
E11-13 Mann Corporation decided to issue common stock and used the $400,000 proceeds to retire all of its outstanding bonds on January 1,2007. The following information is available for the company for 2006 and 2007.
20072006
Net incme $ 182,000 $ 150,000
Average stockholders’ equity 1,100,000 700,000
Total assets 1,200,000 1,200,000
Currrnt liabilities 100,000 100,000
Total liabilities 100,000 500,000 Instructions:
(a)Compute the return on stockhoder’s equity ratio for both years.
(b)Explain how it is possible that net income increased, but the teturn on common
stockholder’s equity decreased.
(c)Computer the debt to total assets ratio for both years, and commeny on the implica
tions of this change in the company’s solvency.
E11-14 On January 1,2007, Kern Corporation had $1,500,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 30,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year.
Instructions
Journalize the declaration of a 15% stock dividend on December 10, 2007, for the following two independent assumptions.
(a)Par value is $10 and market value is $12.
(b)Par value is $5 and market value is $9.
P11-2B The stockhoders’ equity accounts of Sosa Corporation on January 1, 2007, were as follows.
Preferred Stock (7%, $50 par cumulative, 10,000 shares authorized) $ 400,000 Common Stock ($1 stated value, 2,000,000 shares authoriZzed) 1,000,000
Paid-in Captital in Excess of Par Value—Preferred Stock 80,000
Paid-in Captital in Excess of Stated Value—Common Stock 1,400,000 Retained Earnings 1,716,000 Treasury Stock—Oommon (10,000 shares) 30,000 During 2007 the corporation had these transactions and events pertaining to its stockholders’ equity.
Feb. 1 Issued 15,000 shares of common stock for $60,000
Nov. 10 Purchased 4,000 shares of common stock for the treasury at a cost of $1800.
Nov. 15 Declared a 7% cash dividend on preferred stock, payable December 15.
Dec. 1 Declared a $0.30 per share cash dividend to stockholders of record on