1. Graham Robert started a business, Candies Unlimited, in January, 2018. The transactions that occurred in January are listed below.

1/1/18 Graham opened a bank account in the name of a new business, Computer Repairs, by making a deposit of $45,000 cash in exchange for 25,000 shares of $1 par value common stock.

1/3/18 The company paid the first month rent in the amount of $2,400 for the store space he was using.

1/3/18 The company bought a computer for $3,000, and paid cash.

1/3/18 The company purchased and installed store fixtures for $18,000. The company paid $3,600 in cash and signed a 1 year note for the balance.

1/5/18 The company purchased some inventory for $15,000 on credit.

1/15/18 The company recorded sales for the first half of the month. Cash sales were $9,000 and credit sales were $3,000. The cost of the inventory sold was $7,200.

1/20/18 The company paid cash for the initial electric bill, in the amount of $530.

1/24/18 The company collected $1,750 in cash on the credit sales recorded on 1/15.

1/31/18 The company recorded sales for the second half of the month. Cash sales were $5,000 and credit sales were $2,000. The cost of the inventory sold was $4,200.

Required (15 points):

a. Prepare journal entries for these transactions. b. Post them to T-accounts. c. Prepare the Trial Balance as of January 31, 2018.

2. Vaden Company reported revenue of $85,000 and expenses of $58,000 for the year ended December 31, 2017, before making any year-end adjusting entries. The following data are provided regarding adjusting entries:

i. On October 1, 2017, Vaden Company paid $13,500 for one years liability insurance beginning on that date. The rent payment was recorded as follows:

October 1, 2017: Prepaid insurance $13,500 Cash $13,500

ii. On November 1, 2017, Vaden purchased office supplies that cost $800 and placed the supplies in a storeroom for use as needed. The purchase was recorded as follows:

November 1, 2017: Office supplies inventory $800 Cash $800

At December 31, 2017, a count showed unused office supplies of $270 in the storeroom. At the beginning of 2015, there was $135 worth of office supplies on hand.

iii. As of December 31, 2017, there was $8,600 in payroll costs related to work that had been performed during December 2017. These wages will not be paid until the next payroll date which is January 7, 2018.

iv. On December 1, 2017, Vaden rented some office space to another party. Vaden collected $800 rent for the two month period December 1, 2017 to February 1, 2018. The rent collected was recorded as follows:

December 1, 2017: Cash $800 Unearned revenue 800

v. On December 31, 2017 a tenant renting some storage space from Vaden had not paid the rent of $250 for December 2017. This has not been recorded.

Required (10 points):

Prepare the required adjusting entries for each of these situations. Note that an adjusting entry is required for each item.

3. Below is the adjusted trial balance for Dulcinea Corporation at December 31, 2017.

Dulcinea Corporation Trial Balance December 31, 2017 Debit Credit Cash $26,300 Accounts receivable 19,000 Inventory 23,000 Office supplies 700 Prepaid insurance 2,400 Land 75,000 Building, net 153,000 Trademark 7,000 Accounts payable 46,875 Wages payable 12,000 Interest payable 1,250 Note payable (due in 4 years) 100,500 Capital stock 45,000 Retained earnings 66,000 Dividends 4,000 Sales Revenue 233,000 Cost of goods sold 93,200 Selling expenses 37,000 Administrative expenses 42,400 Interest expense 5,025 Income tax expense 16,600 $504,625 $504,625

Required (15 points):

a. Prepare the financial statements for Dulcinea Corporation, including a multiple step income statement, Statement of Stockholders Equity and a classified balance sheet. Do not prepare the Statement of Cash Flows. b. Calculate the Current Ratio for Dulcinea Corporation.

4. At the end of the year, the unadjusted trial balance of Mikell Company included the following accounts:

Debit Credit

Sales (80% represent credit sales) $2,650,000 Accounts Receivable $325,000 Allowance for Doubtful Accounts 2,540

Required (15 points):

a. If Mikell uses the accounts receivable aging approach to estimating bad debt expense. Mikell aged the accounts receivable into four categories as follows: Current - $150,000; 3060 days past due - $125,000; 60-90 days past due - $40,000 and >90 days past due - $10,0000. The company estimated the amount to be uncollectible from each category as Current 5%; 30-60 10%; 60-90 15% and >90 20%. Prepare the journal entry to record the bad debt expense for the year and determine the balance in Allowance for Doubtful Accounts after you have made this journal entry.

b. If the percentage of net sales approach is used, and bad debt expense is estimated to be 1.5% of net credit sales, prepare the journal entry to record the bad debt expense for the year and determine the balance in Allowance for Doubtful Accounts after you have made this journal entry.

c. Describe the different philosophical approaches to each of these methods for estimating uncollectible accounts expense. Include in your discussion the advantages and disadvantages of each.

d. There is another method for accounting for bad debt expense called the direct write-off method. Discuss why this method is not acceptable under GAAP.

5. The Mojito Computer Store had the following transactions in May 2018.

Required (5 points):

For each transaction, indicate in the space provided how much, if any, revenue or expense should be recorded in May 2018.

a. Sold a computer to a customer in the amount of $2,100. Delivered the computer in May. Customer paid in June 2018.

Amount of revenue to be recorded in May______________

b. Collected $1,200 in May from a customer for a computer to be delivered in June. Amount of revenue to be recorded in May ______________

c. Paid $400 in sales commissions to sales persons related to sales that were made in April 2018.

Amount of expense to be recorded in May ______________

d. Paid $2,400 in May for a 6-month insurance policy to cover the period from May 1, 2018 - October 31, 2018.

Amount of expense to be recorded in May ______________

e. Received an electric bill for May in the amount of $230. The bill is not due for payment until June 15.

Amount of expense to be recorded in May ______________