Accounting Homework

Due Saturday at 11P EST

Mid-term Exam | 3

Accounting Basics for Managers

Problem 1: Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement(s) on which the item can usually be found.

 

 

   

Problem 2: At the beginning of the current fiscal year, the balance sheet of Arches Co. showed liabilities of $380,000. During the year liabilities increased by $10,000, assets increased by $55,000, and paid-in capital increased $20,000 to $165,000. Dividends declared and paid during the year were $60,000. At the end of the year, owners’ equity totaled $402,000. Calculate net income or loss for the year. 

 

Problem 3: Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+) or subtraction (-). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting owners’ equity.

(1.) The firm borrowed $2,000 from the bank; a short-term note was signed.
(2.) Merchandise inventory costing $750 was purchased; cash of $200 was paid and the balance is due in 30 days.
(3.) Employee wages of $1,000 were accrued at the end of the month.
(4.) Merchandise that cost $350 was sold for $450 in cash.
(5.) This month’s rent of $700 was paid.
(6.) Revenues from services during month totaled $6,500. Of this amount, $2,000 was received in cash and the balance is expected to be received within 30 days.
(7.) During the month, supplies were purchased at a cost of $520, and debited into the Supplies (asset) account. A total of $400 of supplies were used during the month.
(8.) Interest of $240 has been earned on a note receivable, but has not yet been received.

   

Problem 4: The following is a portion of the current assets section of the balance sheets of The Sweet Cafe at December 31, 2011 and 2010:

  

(a.) If bad debts expense for 2011 totaled $16,400, what was the amount of accounts receivable written off during the year?
(b.) The December 31, 2011 Accounts receivable account balance includes $4,400 for a past due account that is not likely to be collected. This account has not been written off. If it had been written off, what would have been the effect of the write off on:
(1.) The current ratio at December 31, 2011?
(2.) Net income and ROE for the year ended December 31, 2011?
(c.) What do you suppose was the level of The Sweet Cafe’s sales in 2011, compared to 2010? Explain your answer. 

Problem 5: Lone Star Sales & Service acquired a new machine that cost $42,000 in early 2010. The machine is expected to have a five-year useful life and is estimated to have a salvage value of $7,000 at the end of its life. (Round your final answers to the nearest dollar).
(a.) Using the straight-line depreciation method, calculate the depreciation expense to be recognized in the second year of the machine’s life and calculate the accumulated depreciation after the third year of the machine’s life.
(b.) Using the double declining balance depreciation method, calculate the depreciation expense for the third year of the machine’s life and the net book value of the machine at this point in time.
(c.) Using the sum-of-the-years digits depreciation method, calculate the amount of accumulated depreciation after the third year of the machine’s life.