Complete the following exam by answering the questions and compiling your answers into a word-processing document. When you’re ready to submit your answers, refer to the instructions at the end of your exam booklet. Be certain to indicate the proper question number before each of your answers. Remember to show your work if an answer requires a mathematical solution.
Part A: Answer each of the following questions. Each answer is worth 20 points.
1. The following information was made available from the income statement and balance sheet of Lauren Company.
Item 12/31/10 12/31/09
Accounts Receivable $53,400 58,600
Accounts Payable 35,600 32,700
Merchandise Inventory 85,000 79,000
Sales (2010) 243,000
Interest Revenue (2010) 5,600
Dividend Revenue (2010) 1,200
Tax Expense (2010) 12,300
Salaries Expense (2010) 28,000
COGS (2010) 65,000
Interest Expense (2010) 3,600
Operating Expenses 28,500
Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.
2. Given the following balance sheet, complete a horizontal analysis. Compute the percentage to the nearest tenth of a percent.
Comparative Balance Sheet
For Years Ended December 31, 2011 and 2010
(in thousands) 2011 2010 Difference Percentage
Cash and Equivalents $72 $94
Accounts Receivable, net 122 104
Inventory 288 232
Total Current Assets 482 430
Property, Plant and Equipment 638 358
Total Assets $1,120 $788
Accounts Payable $242 $148
Accrued Liabilities 48 66
Total Current Liabilities 290 214
Long-Term Liabilities 346 208
Total Liabilities 636 422
Common Stock 70 60
Retained Earnings 414 306
Total Stockholders’ Equity 484 366
Total Liabilities and
Part B: Answer each of the following questions. Each answer is worth 4 points.
1. Record the following transactions using the accounting equation.
Assets = Liabilities + Equity XXXX(cash) XXXX(accounts payable)
A. Amanda invests $17,000 cash into her merchandising business.
B. She buys $6,500 of office equipment and $3,000 of office supplies with cash from Office Depot.
C. Additional purchases were supplies for $35,000 on account from various suppliers.
2. Journalize the following transactions and omit the explanations.
A. ABC Corporation purchased $15,000 of office furniture by putting $7,000 down in cash and the rest on account on
B. The corporation paid $60,000 for a two-year lease on
C. The corporation had sales of $45,000, of which $35,000 were on account on April 20.
D. The corporation borrowed $25,000 by signing a note payable on April 22.
E. The corporation paid $1,250 on one of its accounts payable on April 26.
3. Prepare a trial balance from the following information for
Learn a New Language, Inc. for December 31, 2012.
Accounts payable $5,012
Common stock $9,692
Notes payable $1,439
Wages expense $777
Marketing expense $493
Accounts receivable $1,142
4. Compute the missing information from this post-closing trial balance.
Accounts Receivable 9,467
Prepaid Rent 5,000
Prepaid Insurance (A)
Accounts Payable $5,389
Wages Payable (B)
Common Stock 37,049
Retained Earnings 8,234
Total $52,356 $52,356
5. Journalize the following transactions using the perpetual inventory method.
Aug. 6 Purchased $830 of inventory on account from Johnston with terms of 2/10, n/30.
Aug. 8 Purchased $2,611 of inventory for cash from
Aug.15 Paid for August 6 purchase from Johnston.
Aug. 17 Purchased $1,743 of merchandise on accountfrom Luis Company with Terms of 3/15, n/45.
6. Given the following information, prepare a balance sheet for
Isaiah’s Tool Shed for the year ending December 31, 2012.
Cash $65,750 Retained Earnings $179,319
Common Stock $35,000 Equipment $27,500
Accounts Receivable $11,478 Accounts Payable $29,450
Land $30,000 Inventory $78,311
Prepaid Supplies $7,357 Income Taxes Payable $4,209
Office Computers $11,345 Other PPE $31,446
Accum. Depr. (all) $23,459 Prepaid Insurance $8,250
7. Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows:
(Note: The company uses a perpetual system of inventory.)
Units Unit Price Total Cost
January 1—Beginning inventory 18 $24 $432
March 12—Sold 13
April 11—Purchase 45 $29 $1,305
June 20—Sold 33
Aug 16—Purchase 35 $27 $945
Sept 11—Sold 29
Total Cost of Inventory
Ending inventory is 23 units. $2,682
What is the cost of goods sold for Rick Company for 2012 using LIFO?
8. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated for Years 1 and 2.
Item Year 1 Year 2
Ending inventory ___________ _____________
Beginning inventory ___________ _____________
Cost of goods sold ___________ _____________
9. Below is a list of treatments of accounting topics. Place GAAP on the line if the treatment is GAAP-based and place IFRS on the line if the treatment is IFRS-based.
A. Interest and dividend income are reported in the investing section of the cash flow statement.__________
B. Interest expense is reported in the financing section of the cash flow statement. ___________
C. The use of LIFO is prohibited. ___________
10. Record the necessary journal entries from the following bank reconciliation information for July 31, 2011:
Bank Balance, July 31, 2011 $36,739
Checkbook Balance, July 31, 2011 36,444
Bank collection of note receivable
1,200 + 165interest
Bank service charge 35
Deposits in transit 2,400
Outstanding checks 1,245
NSF check from customer 330
Correction of book error (check #456 written for $160, recorded at $610)—gas expense
11. Journalize the following transactions for Tammy Company:
Sept. 1 Sold $3,500 of merchandise to Jim on account
Oct. 1 Exchanged Jim’s account receivable for a fourmonth,
8% note for $3,500
Dec. 31 Recorded accrued interest on Jim’s note
Feb. 1 Jim paid off his note with interest (round to nearest dollar)
12. A truck was purchased on January 2 at a cost of $60,000.
It’s expected to be used for five years and to have a residual value of $5,000 after 120,000 miles of service. The truck was driven for 23,000 miles the first year and 25,000 miles the second year. Calculate the depreciation expense to the nearest dollar for the first and second years.
Method Year 1 Year 2
Straight-line ________ ________
Double-declining-balance ________ ________
Units-of-production ________ ________
13. Prepare the general journal entries for the following transactions:
Jan. 2, 2011 Purchased land with a building on it for $750,000. The land is worth $300,000.
Paid $150,000 cash down and signed a mortgage payable for the balance.
Dec. 31, 2011 Depreciation is computed using the straight-line method. The estimated salvage value of the building is $75,000 and has an estimated life of 20 years.
July 1, 2012 The building and land are sold for $825,000 cash.
14. Journalize the following treasury stock transactions:
June 3 Reacquired 350 shares of $12 par common stockat $10 per share.
June 7 Sold 180 shares of treasury stock for $16 per share.
June 8 Sold 150 shares of treasury stock for $9 per share.
15. Lowry Landscapes had net income of $50,000 for 2010.
Land was sold for $40,000, of which $3,000 was a gain.
The beginning cash balance was $53,000, and the ending cash balance was $151,000. Depreciation expenses were $11,000. Prepare a statement of cash flows for the year ended December 31, 2010, for Lowry Landscapes using the indirect method.
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