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3. (4 pts) Acme Companys total owners equity at the beginning of the year was $300,000.
During the course of the year revenues were $500,000 and expenses were $350,000.
Dividends (withdrawals) of $30,000 were paid out. What was owners equity at the END
of the year?
Answer: 300k+500k-350k-30k=420k
**** Add expenses-revenues-dividends****
4. (4 pts) Total assets and liabilities of Hog Company at the beginning and end of the year
are shown. Calculate Hog Companys net income for the year, assuming that during the
year the owner withdrew $10,000 to take his family on a vacation to Disney World
Beginning of year
End of year
Assets:
$400,000
$500,000
Liabilities
$250,000
$300,000
_______
________
Subtract--
150k
200k
Remember: Net income- add withdrawals + Subtract Contributions=Answer
200k-150k=50k
50k
+10k
------=60K
5. (5 pts) Use the following accounts to prepare a balance sheet for Buddys Pet Shop (a
sole proprietorship). The date is December 31, 2014. It is possible that not all accounts
will be used. Make sure that you use good form.
Accounts payable: $50,000
Liability
Accounts receivable: $70,000
Asset
Cash: $30,000
Asset
Land: $400,000
Asset
Office equipment: $50,000
Asset
Notes payable: $100,000
Liability
Total revenue for the year: $600,000
Total expenses for the year: $400,000
Balance in the owners equity account: unknown
BS
#5 Answer:
Buddys Pet Shop
Balance Sheet
December 31, 2014
_________________
Assets
Cash 30k
AR 70k
Equipment 50k
Land 400k
_________+
=550K
_________
_________
Liabilities
Accounts Payable 50k
Notes Payable 100k
__________________+
150k
_________+
Owners Equity
400k
_________
=550K
_________
_________
8. (2 pts each) Prepare in good form journal entries for each of the following:
A. Made a sale to a customer on credit. The amount of the sale was $10,000
D
Accounts Receivable 10k
Revenue
C
10k
Supplies
Cash
C
500$
D
1,000$
C
1,000$
D. Borrowed money from a bank, and signed a promissory note to repay the loan one
year from date. The amount of the loan was $100,000 and the annual interest rate
was 5%
D
C
Cash
100k
Unearned Revenue
95k?? I did .05x100K=5K 100k-5k=95k
5,000$
Unearned Revenue
9. (3 pts each) It is now December 31, 2014, and time to make adjusting entries. Make the
necessary adjusting entries for each of the following independent cases:
A. At the beginning of the year office supplies had a balance of $10,000. During the
course of the year $42,000 of supplies were purchased. A physical count shows that
only $5,000 of office supplies are still on hand.
D
Supplies expense 47K
Supplies
C
47K
B. On November 1, 2014, your company prepaid a one year insurance policy, paying the
insurance company $24,000. The policy went into effect on November 1, 2014.
Formula
24,0000/12= 2,000 x 2= 4,000$
Insurance expense
Prepaid Insurance
D
4,000$
C
4,000$
C. A one year bank loan was made on October 1, 2014. The amount borrowed was
$100,000. Interest of $1,000 per month is called for by the terms of the contract.
Both interest and the face amount of the loan will be paid when the note falls due on
October 1, 2015.
D
3,000$
C
3,000$
D
6,000$
Revenue
6,000$
E. Salaries earned by employees have not been recorded. Weekly salaries (Monday
through Friday work week) are $25,000 and were last paid on December 28, a Friday.
Make the adjusting entry to be made on Monday, December 31 (yes, this is a
workday!)
Note: Since its still December, Expense -- Payable.
After Dec. 31, Payable -- Expense
Salaries Expense
Salary Payable
D
5,000$
C
5,000$
10. (3 pts) Below is a partial listing of Acme Corporations accounts as of December 31,
2014.
Cash: $125,000
Accounts receivable: $30,000
Accounts payable: $25,000
Drawing: $15,000
Expenses: $70,000
Retained earnings: $270,000
Revenue: $135,000
Prepare the necessary closing entries for this corporation. It is possible that not all
accounts will be used.
There are 3 steps unless there are no drawings AKA dividends.
If there are no Dividends then only do the first 2 Steps.
1. Revenue
Retained Earnings
2. Retained Earnings
Expenses
D
135,000$
C
5,000$
70,000$
3. Retained Earnings
15,000
(Drawings) Dividends
70,000$
15,000$
11. (2 pts each) You are the accountant for Wonderful Company. It is now December 31,
2014, and time to make adjusting entries. Wonderful has an ongoing loan agreement with
a local bank wherein interest in the amount of $30,000 is paid to the bank every three
months. (The principal of the loan is not repaid at that time; it simply rolls over). The
last payment was made on October 31, 2014, and the next payment of interest is due on
January 31, 2015. Wonderful uses reversing entries.
A. Make the adjusting entry to be made on December 31, 2014
Note: STILL DECEMBER 31. Watch for that on test
D
Interest Expense
20,000
Interest Payable
C
20,000
C
20,000
C. Now make the entry to be made on January 31, 2015 when Wonderful pays the bank
the $30,000 of interest that is due at that time.
D
Interest Payable
30,000
Interest Expense
C
30,000
12. (4 pts) Hog Company uses the indirect method to prepare the Statement of Cash
Flows. Use the following to calculate cash flows from operations:
Accrual net income: $800,000
Decrease in current assets: $40,000
Increase in current liabilities: $20,000
Depreciation expense: $30,000
Formula= 800k+40k+20k+30k=890K
13. (2 pts each) Your employer has asked you to prepare the necessary journal entries to
establish a petty cash fund. She would like the fund to be in the amount of $1,000.
A. Make the journal entry necessary to establish the petty cash fund.
Petty Cash
Cash
D
1,000
C
1,000
B. At the end of the month there is $50 left in the petty cash fund. There are receipts in
the fund totaling $900 (all of the receipts are categorized as miscellaneous expense.).
Make the journal entry necessary to fully replenish the fund.
Petty Cash
Cash Short
Cash
D
900$
50$
C
950$
14. (3 pts) Use the following information to prepare the BOOK side of a bank
reconciliation:
Balance per book: $30,000
Deposits in transit: $3,000
Outstanding checks: $2,000
Bank service charge: $50
Interest paid to us by the bank: $25
Error in recording a check for supplies purchased. The actual amount of the check was $900
but the amount the check was recorded for was $800
Bank
________
30K
(50)
(100)
________
29,875$
Multiple choice: Mark your answer on your scantron sheet. (2 pts each)
1. Which of the following correctly describes GAAP?
I.
It is a product of statutes passed by Congress not long after the founding of the
republic
II.
It is a product of uniform statutes passed by the individual states
III.
It is a set of standards developed by the accounting profession which are generally
accepted and commonly practiced
A. I only. B. II only. C. III only. D. I and II only. E. I, II and III
2. Which of the following would NOT be considered an internal user of accounting
information?
A. Marketing managers
B. Investors
C. Production supervisors
D. Members of the Board of Directors
E. Company officers
3. Acme Company purchased land 5 years ago, with the intention of eventually building a
new office building on the land. Acme paid $400,000 for the land. A current appraisal
indicates that the current value of the land is $500,000. If Acmes balance sheet should
value the land at $500,000 (market value) this would:
A. Be completely consistent with GAAP, since the balance sheet must present all assets
at their current value
B. Violate the matching principal
C. Violate the going concern principal
D. Violate the accrual accounting principal
E. Violate the historical cost principal
---YOU MUST VALUE YOUR LAND ON YOUR BALANCE SHEET OR IT
VIOLATES GAAP
4. Which of the following entities has as its primary mission is to establish and improve the
standards of financial accounting?
A. SEC
B. IASB
C. AICPA
D. FASB
Financial Accounting Standards Board
E. GAAP
F. OMG
Go back over:
Separation of Duties
Trial Balance
Posting is transferring entries in the general journal to an individual account
When to Double Line
*****2 Ways to Account for cash: Bank Reconciliation & Petty Cash
Fund*****
1. Bank Reconciliation
Bank
25,700
27,675
25,700
27,675
+ 3,500
-1,500
+25$
+50
____________
27,700
___________
27,700
Book
22,490
22,970
+1885
(55)
(1,460)
________
________
22,915
22,915
_________
_________
_________
_________
C
500
Cash
500
50
400
400
Cash
2. Misc. Expense
400
370
Cash
370
4950
Service Fee
50
Service Revenue
2,000