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UNIVERSITA BOCCONI

Department of Accounting

Accounting and Financial Statement Analysis


30005

REVIEW SESSION N1

CHAPTER 1
Exercise 1
For each of the following items that appear below, identify each as a Balance Sheet item (A),
Income Statement item (B), Statement of stockholders' equity item (C), or Statement of Cash Flows
item (D).
Expenses
Cash Flow from Investing Activities
Assets
Dividends
Revenues
Cash Flow from Operating Activities
Liabilities
Cash Flow from Financing Activities

________________
________________
________________
________________
________________
________________
________________
________________

Exercise 2
For each of the following items that appear on the balance sheet, identify each as an asset (A),
liability (L), or element of stockholders' equity (SE). For any item that would not appear on the
balance sheet, write the letter, N.
Retained earnings
Accounts payable
Selling expense
Contributed capital
Accounts receivable
Income tax expense
Dividends
Property and equipment

________________
________________
________________
________________
________________
________________
________________
________________

Exercise 3
Parker Pool Supply, Inc. reported the following items for the year ended December 31, 2013:
Wages and salary expense
Cost of Good Sold
Rent Expense
Sales Revenue
Interest Expense
Income Tax Expense
Accounts Receivable

$ 527,000
1,124,000
395,000
2,564,000
30,000
121,000
27,000

Requirements: Prepare an income statement for the year ended December 31, 2013.

Exercise 4
During 2013, Winterset Company performed services for which customers paid or promised to
pay $587,000. Of this amount, $552,000 had been collected by year-end. Winterset paid $340,000 in
cash for employee wages and owed the employees $15,000 at the end of the year for work that had
been done but had not paid for.
Winterset paid interest expense of $3,000 and $195,000 for other service expenses. The income tax
rate was 35%, and income taxes had not yet been paid at the end of the year. Winterset declared
and paid dividends of $20,000. There were no other transactions that affected cash.
Requirements:
1. What was the amount of the increase or decrease in cash during the year?
2. Prepare an income statement for Winterset for the year.
3. At the beginning of 2013, Wintersets retained earnings were $90,000. Prepare a statement of
retained earnings.

CHAPTER 2
Exercise 1
Complete the following schedule for Red Eye Company.
Transaction
Beginning Balances
Borrowed $ 20,000 cash by signing a note
payable with a bank.
Collected accounts receivable for cash,
$7,000.
Paid accounts payable, $ 8,000 cash.
Purchase office supplies on credit, $ 2,000.
Sold stock to new investors for $ 20,000
cash.
Paid income taxes payable of $ 12,000.
Ending Balances

Assets

Liabilities

Stockholders Equity

$ 200,000

$ 80,000

$120,000

Exercise 2
The ABC Corporation was formed on January 1, 2014. The three initial owners invested $100,000
cash and received shares of stock. Below are selected transactions that were completed during
January, 2014.
1. Sold stock to the owners.
2. Borrowed $80,000 on a one-year note payable.
3. Purchased land by signing a $70,000 note payable.
4. Paid $10,000 of accounts payable.
5. Purchased two service vehicles for cash at a cost of $24,000 each.
6. Purchased $2,000 of supplies on credit.
Requirement: Prepare the journal entry on ABC's books for each transaction.
3

CHAPTER 3
Exercise 1
Complete the chart below for Monticello Corporation by placing an X in the appropriate boxes to
indicate how the transaction should be recorded.
Transaction
a.
b.
c.
d.
e.
f.
g.

Investors purchase
Monticello stock with cash.
Used supplies previously
acquired.
Earned Service Revenue.
Purchased equipment on
account.
Paid expenses as incurred.
Paid a liability.
Recorded utility bill, but did
not pay it.

Assets
Increase
Decrease

Liabilities
Increase
Decrease

Stockholders Equity
Increase
Decrease

Exercise 2
World Services Inc. has provided the following information pertaining to the month ended
October 31, 2014:
Sales revenue
Interest expense
Cost of Good Sold
Dividends paid
Advertising expense
Dividends declared
Unearned revenues

$ 100,000
6,900
60,000
5,000
4,500
7,100
6,100

Supplied expense
Rent expense
Salaries expense
Utilities expense
Loss on sale of land
Income tax expense

1,500
4,000
9,500
1,100
3,200
3,800

Requirement:
Prepare an income statement through operating income for the month ended October 31, 2014.

CHAPTER 4
Exercise 1
On July 1, 2014, Bass Company paid a two-year insurance premium. On that date the following
journal entry was made:
Prepaid insurance 4,800
Cash 4,800
The annual accounting period ends on December 31, 2014.
A. How much of the premium should be reported as expense on the 2014 income statement?
B. What is the amount of prepaid insurance which should be reported on the balance sheet at
December 31, 2014?
C. Prepare the adjusting entry that should be made on December 31, 2014, assuming no adjusting
entries have been made during the year.
Exercise 2
Below are four transactions that were completed during 2014 by Timber Lodge. The annual
accounting period ends on December 31. Each transaction will require an adjusting entry at
December 31, 2014.
You are to provide the 2014 adjusting entries required for Timber Lodge.
A. On July 1, 2014, Timber Lodge paid a two-year insurance premium for a policy on its facilities.
This transaction was recorded as follows:
Prepaid insurance 8,000
Cash 8,000
B. On December 31, 2014 a tenant renting some storage space from Timber Lodge had not paid the
rent of $750 for December 2014.
C. On September 1, 2014, Timber Lodge borrowed $25,000 cash and gave a one-year, 10 percent,
note payable. The interest is payable on the due date, August 31, 2015. The September 1, 2014
transaction was recorded as follows:
Cash 25,000
Note payable 25,000

D. On October 1, 2014, Timber Lodge collected $3,600 from a tenant for two years rent beginning
October 1, 2014. The $3,600 collection was recorded as follows:
Cash 3,600
Unearned rent revenues 3,600
Exercise 3
Johnson Corporation is completing the accounting information processing cycle at the end of the
fiscal year, June 30, 2010. Johnson has provided the following trial balances as of June 30, 2010:

Account Title
Cash
Accounts Receivable
Prepaid Insurance
Equipment
Accumulated Depreciation
Wages Payable
Capital Stock
Retained Earnings
Service Revenue
Wage Expense
Depreciation Expense
Insurance Expense
Total

June 30th, 2010


Unadjusted Trial Balance
Debit
Credit
$ 13,000
1,500
600
60,000
16,500

16,000
$ 91,100

25,000
11,600
38,000

$ 91,100

Adjusted Trial Balance


Debit
Credit
$ 13,000
1,800
200
60,000
22,000
100
25,000
11,600
38,300
16,100
5,500
400
$ 97,000
$ 97,000

Requirements:
A. Reconstruct the adjusting entries and give a brief explanation of each.
B. What is the amount of net income?

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