Accounting Principles 2 - Exercises

Question 1: On February l, 201?, Tessa Williams and Audrey Xie formed a partnership in Ontario. Williams contributed $30,000 cash and Xie contributed land valued at $120,000 and a small building valued at $130,000. Also, the partnership assumed responsibility for Xie's $130,000 longterm note payable associated with the land and building. The partners agreed to share prot or loss as follows: Williams is to receive an annual salary allowance of $90,000, both are to receive an annual interest allowance of 20% of their original capital investments, and any remaining prot or loss is to be shared equally. 011 November 20, 201?, Williams withdrew cash of $50,000 and Xie withdrew $45,000. After the adjusting entries and the closing entries to the revemte and expense accounts, the Income Summary account had a credit balance of $l0,000. Required .' 1. Present general journal entries to record the initial capital investments of the partners, their cash withdrawals, and the December 31 closing of the Income Summary andwithdrawals accounts- 2. Determine the balances of the partners' capital accolmts as of the end of 201?. Question 2: Dallas and Weiss formed a partnership to manage rental properties, by investing $115,000 and $135,000, respectively- During its rst year, the partnership recorded prot of $3 94,000- Required: Prepare calculations showing how the prot should be allocated to the partners under each of the following plans for sharing prot and losses: a. The partners failed to agree on a method of sharing prot. b. The partners agreed to share prots and losses in proportion to their initial investments- c. The partners agreed to share prot by allowing a $140,000 per year salary allowance to Dallas, a $10,000 per year salary allowance to Weiss, 25% interest on their initial investments, and sharing the balance equally. Question 3: Talent, a local HR consulting firm, has total partners' equity of $760,000, which is made up of Hall, Capital, $600,000, and Reynolds, Capital, $160,000. The partners share profit (losses) in a ratio of 75% to Hall and 25% to Reynolds. On July 1, Morris is admitted to the partnership and given a 20% interest in equity. Required: Prepare the journal entry to record the admission of Morris under each of the following unrelated assumptions, in which Morris invests cash of: a. $190,000 b. $230,000 c. $110,000 Question 4: Keri & Nick Consulting's partners' equity accounts reflected the following balances on August 31, 2017: Keri Lee, Capital... $ 50,000 Nick Kalpakian, Capital . 145,000 Lee and Kalpakian share profit/losses in a 2:3 ratio respectively. On September 1, 2017, Liam Court is admitted to the partnership with a cash investment of $105,000. Required: Prepare the journal entry to record the admission of Liam under each of the following unrelated assumptions, where he is given: a. A 30% interest in equity b. A 20% interest in equity c. A 50% interest in equityQuestion 5: Given the following information, calculate the net pay (show calculations) and journalize the payroll entries for both employees and employer. Employee Hourly Rate Hours worked Fed. Code Prov. Code 1 $ 19.00 38 1 A 2 5 16.00 40 A 3 $ 20.00 38 2 B 4 $ 15.80 44 3 C 5 $ 16.10 40 1 A 6 $ 17.25 40 7 $ 18.00 45 8 $ 16.75 41 9 $ 16.95 40 10 $ 16.00 47 11 $ 18.00 46 12 $ 18.25 40 13 $ 19.00 43 14 $22.00 40 15 6 21.50 40 2 16 5 22.15 40 1 A 17 $ 14.90 44 A 18 $ 15.90 37 A 19 $ 15.20 40 3 20 $ 17.60 40 2Question 6: The cash receipts and the cash payments of Spinners Bowling for November 2020 are as follows: Cash Receipts Cash Payments Date Cash Debit Cheque No. Cash Credit Nov. 5 $ 3,436 1221 $ 1,819 7 470 1222 1,144 13 1,723 1223 429 15 1,065 1224 111 19 441 1225 816 24 10,875 1226 109 30 2,598 1227 4,468 Total $20,608 1228 998 1229 330 1230 2,724 Total $12,948 The Cash account of Spinners Bowling shows a balance of $26,983 on November 30, 2020. Outstanding amounts from the previous month's bank reconciliation were cheque number 1219 for $500, cheque number 1218 for $400, and an October 31 deposit in the amount of $2,000. On December 3, 2020, Spinners Bowling received this bank statement:BANK STATEMENT FOR NOVEMBER 2020 Description Withdrawals Deposits Date Balance Balance Forward Nov01 18,223 Deposit 2,000 Nov01 20,223 EFT Rent Collection 880 Nov01 21, 103 Deposit 3,436 Nov06 24,539 NSF Cheque 433 Nov08 24, 106 Chq#001221 1,819 Nov09 22,287 Deposit 470 Nov10 22,757 Chq#001222 1,144 Nov13 21,613 Chq#001223 429 Nov14 21, 184 Deposit 1,723 Nov14 22,907 Chq#001224 111 Nov15 22,796 Deposit 1,065 Nov15 23,861 EFT Insurance 275 Nov19 23,586 Deposit 441 Nov20 24,027 Chq#001225 816 Nov22 23,211 Deposit 10,875 Nov25 34,086 Chq#001226 109 Nov29 33,977 Chq#001227 4,968 Nov30 29,009 Bank Collection 1,430 Nov30 30,439 Chq#001219 500 Nov30 29,939 Service Charge 25 Nov30 29,914 10,629 22,320 Explanations: EFT-electronic funds transfer, NSF-nonsufficient funds Additional data for the bank reconciliation is as follows: a. The EFT deposit was a receipt of monthly rent. The EFT debit was payment for monthly insurance.b. The NSF cheque was received late in October from a customer. c. The $1,430 bank collection of a note receivable on November 30 included $100 interest revenue. d. The correct amount of cheque number 1227, a payment on account, is $4,968. (Spinners Bowling's accountant mistakenly recorded the cheque for $4,468.) Required: 1. Prepare the bank reconciliation of Spinners Bowling at November 30, 2020. 2. Describe how a bank account and the bank reconciliation help Spinners Bowling's managers control the business's cash. 3. How are outstanding items from the previous month's bank reconciliation that clear on the November bank statement dealt with? Question 7: The October 31, 2020, bank statement of Jazzera Distributors has just arrived. To prepare Jazzera Distributors' bank reconciliation, you gather the following data: a. The October 31 bank balance is $38,212. b. The bank statement includes two deductions for NSF cheques from customers. One was for $168 and the other was for $370. c. The following Jazzera Distributors' cheques are outstanding at October 31:Cheque No. Amount 312 $1,098 522 1,086 534 114 539 112 540 416 541 894 d. A few customers pay their accounts by EFT. The October bank statement lists a $12,732 deposit against customer accounts. e. The bank statement includes two special deposits: $1,766, which is the amount of GST refund (GST Receivable), the bank received on behalf of Jazzera Distributorsand $160, the interest revenue Jazzera earned on its bank balance during October. f. Jazzera's owner wrote a cheque for $818 for the purchase of auction equipment items. The cheque was processed by the bank, but the owner did not notify his accounting staff until they discovered the blank cheque stub, so the cheque was not recorded until after October 31. g. On October 31, the company deposited $932, but this deposit does not appear on the bank statement. h. The bank statement includes an $818 deduction for a cheque drawn by Jazz Communications. Jazzera promptly notified the bank of its error i. The bank statement lists a $132 subtraction for the bank service charge. j. Jazzera's Cash account shows a balance of $23,072 on October 31. Required: 1. Prepare the bank reconciliation for Jazzera Distributors at October 31, 2020. 2. Record in general journal form the entries necessary to bring the book balance of Cash into agreement with the adjusted book balance on the reconciliation. Include an explanation for each entry.Question 8: Matiere Co. completed the following transactions during 2019 and 2020: 2019 Dec. 31 Estimated that bad debt expense for the year was 3 percent of credit sales of $385,000 and recorded that amount as expense. 31 Made the closing entry for bad debt expense. 2020 Mar. 26 Sold inventory to Mabel Sanders, $10,037.50, on credit terms of 2/10, n/30. Ignore cost of goods sold. Sep 15 Wrote off Mabel Sanders's account as uncollectible after repeated efforts to collect from her. Nov. 10 Received $5,500 from Sanders, along with a letter stating her intention to pay her debt in full within 30 days. Reinstated her account in full. Dec. 5 Received the balance due from Sanders. 31 Made a compound entry to write off the following accounts as uncollectible: Curt Major, $2,200; Bernadette Lalonde, $962.50; Ellen Smart, $1,470.Estimated that bad debt expense for the year was 2 percent of credit sales of$490,000 and recorded the expense. blade the closing entry for bad debt expense. Matiere records all amounts to the nearest cent. Present all amounts to two decimal places. Required: 1. Open threecohrmn general ledger accounts for Allowance for Doubtful Accounts and Bad Debt Expense- Keep running balances. 2. Record the transactions in the general journal and post to the ledger accounts. 3. The December 31, 2020, balance of Accounts Receivable is $146,000. Show how Accounts Receivable would be reported at that: date- 4. Assume that Matiere Co. begins aging accounts receivable on December 31, 2020. The balance in Accounts Receivable is $146,000, the credit balance in Allowance for Doubtrl Accounts is $16,212.50 {use your calculations from Requirement 3}, and the company estimates that $19,900 of its accounts receivable will prove uncollectible a. Make the adjusting entry for uncollectibles. b. Show how Accounts Receivable will be reported on the December 31, goat}, balance sheet after this adjusting entry. Question 9: The Generation Employment Agencyr started business on January 1, 2020. The company produced monthly nancial statements and had total salon of $525,000 (of which $400,000 was on account} during the rst four months. On April 30, Accounts Receivable had a balance of $23,400 (no accounts have been written o' to date), which was made up of the following accounts aged according to the date of the sale: A B C D E Month of Sale 2 Customer January February March April 3 Golden Distributors $ 3,600 $ 1,000 $ 2,000 $ 1,800 4 PG Courier 1,000 1,200 3,400 2,400 5 Personnel Solutions 5,000 14,000 8,000 4,000 6 Natures Design 2,000 7,400 8,120 28,400 7 Other Accounts Receivable 23,760 16,360 53,480 49,480 8 $35,360 $39,960 $75,000 $86,080 The following accounts receivable transactions took place in May 2020: May 12 Decided the PG Courier account was uncollectible and wrote it off. 15 Collected $6,600 from Golden Distributors for sales made in the first three months. 21 Decided the Personnel Solutions account was uncollectible and wrote it off. 24 Collected $2,000 from Natures Design for sales made in the month of January. 26 Received a cheque from Personnel Solutions for $18,200 plus four cheques of $3,200 each. postdated to June 26, July 26, August 26, and September 26. 31 Total sales in the month were $380,000; 90 percent of these were on account, and 75 percent of the sales on account were collected in the month. Required:1. The Generation Employment Agency has heard that other companies in the industry use the allowance method of accounting for uncollectibles, with many of these estimating the uncollectibles through an aging of accounts receivable. a. Journalize the adjustments that would have to be made on April 30 (for the months of January through April), assuming the following estimates of uncollectibles: Age of Accounts Receivable Percent Estimated Uncollectible From current month 3% From prior month 4 From two months prior 10 From three months prior 20 From four months prior 45 b. (Round your total estimate to the nearest whole dollar.) c. Journalize the transactions of May 2020. d. Journalize the month-end adjustment, using the information from the table that appears in Requirement la. 2. For the method of accounting for the uncollectibles used above, show: 1. The balance sheet presentation of the accounts receivable. b. The overall effect of the uncollectibles on the income statement for the months of April and May 2020.Question 10: n January 5, ZDZU, Paige Construction purchased a used crane at a total cost of $2,. Before placing the crane in service, Paige spent: $12,5 transporting it= $4,800 replacing parts, and $11,4 overhauling the engine. KarenPaige, the owner, estimates that the crane will remain in service for four years and have a residual value of $42,DDU. The crane= 5 annual usage is expected to be 2,40'0 hours in each of the rst three years and 2,290 hours in the fourth year. In trying to decide which amortization method to use, Mary Blunden, the accountant, requests an amortization schedule for each of the following generally accepted amortization methods: Straightline, Units of Production, and Double Declining. Required: 1. Assuming Paige Construction amortizes this crane individually, prepare an amortization schedule for each of the three amortization methods listed, showing asset cost= amortization expense, accumulated amortization, and asset boolr value. Assume a December 31 yearend. Round amortization per hour to four decimal places and the nal answer to the nearest dollar. 2. Paige Construction prepares nancial statements for its bankers using the amortization method that: maximizes reported income in the early years of asset use. Identify the amortization method that meets the company's objective