Reference no: EM132293823

Question: Answer the following questions:

1. (CO 3) Adjusting entries are required at the end of the period for some accounts. (1) Explain why this process is required (15 points), and (2) develop the adjusting entry at the end of the period for salary payable to employees $2,400 (10 points).

2. (CO 2) (1) Explain how the debit/credit rules are used when developing journal entries (15 points), and (2) provide an example of the application of the debit/credit rules in the form of a journal entry (10 points).

3. (CO 4) Thomas Manufacturing had four units of their product in inventory at $250 per unit to start the month. During the month, they purchased an additional seven units at $250 per unit and another 12 units at $275 per unit. Also, at the end of the month, they sold 15 units and ended the month at eight units. Calculate their ending inventory and cost of goods sold using one of the following: LIFO, FIFO, or average cost methods. Show all computations.

4. (CO 4) Inventory valuation methods determine the cost of goods sold and the inventory balance. (1) Explain how the first in first out (FIFO) method is applied (15 points), and (2) provide an example of the impact that this method of inventory valuation will have on gross profit (10 points).

5. (CO 1) If you want to evaluate a company's liquidity and short-term debt paying ability, what ratio would you compute? What is the formula for that ratio? If the result of this ratio is 2, what does that tell you about the company?

6. (CO 6) BagODonuts Company bought a used delivery truck on January 1, 2010, for $19,200. The van was expected to remain in service 4 years (30,000 miles). BagODonuts' accountant estimated that the truck's residual value would be $2,400 at the end of its useful life. The truck traveled 8,000 miles the first year, 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth year.

Calculate depreciation expense for the truck for each year (2010-2013) using the following.

a. Straight-line method

b. Double-declining balance method

c. Units of production method

(For units-of-production and double-declining balance, round to the nearest two decimals after each step of the calculation.)

Which method best tracks the wear and tear on the van?

Which method would BagODonuts prefer to use for income tax purposes? Explain in detail why BagODonuts prefers this method.

7. (CO 7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock.

Preferred stock: 7%, par value $100 per share, 100,000 shares.

Common stock: $1 par value, 500,000 shares.

The following transactions occurred during the year.

1/19/12 Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 Repurchased 30,000 shares of common stock for $22 cash per share.
12/1/12 Declared and paid a total dividend of $95,000.

Required: 1. Prepare the journal entry for each transaction listed above.

2. In your own words, explain the main differences between common and preferred stock.

8. (CO 5) Internal control procedures are in place to protect the assets of every business as mentioned in the textbook and our discussions. Of the seven internal control procedures, list five of these controls, and describe how each procedure is implemented (6 points each with 3 points for listing and 3 points for a description).

9. (CO 2) Below are the accounts of Super Pool Service, Inc. The accounts have normal balances on June 30, 2012. The accounts are listed in no particular order.

Account Balance

Common stock $5,100

Accounts payable $4,400

Service revenue $17,100

Land $28,800

Note payable $9,500

Cash $5,200

Dividends $6,100

Utilities expense $2,100

Accounts receivable $10,600

Delivery expense $700

Retained earnings $25,600

Salary expense $8,200

Prepare the company's trial balance as of June 30, 2012, listing accounts in proper sequence, as illustrated in the chapter. For example, accounts receivable comes before land. List the expense with the largest balance first, the expense with the next largest balance second, and so on.

10. (TCO 4) Palomino Enterprises has the following items available for sale during the year were as follows:

Jan 1 Inventory 18 units at $ 140

Feb 19 Purchase 29 units at $ 143

Aug 28 Purchase 27 units at $ 147

Nov 25 Purchase 26 units at $ 151

There are 33 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of goods sold by the following methods:

A. FIFO (First-In, First-Out Method)

B. LIFO (Last-In, First-Out Method)

C. Weighted Average Cost Method.