Assets

Cash $500,000

Accounts Receivable 700,000

Inventory 300,000

Property, Plant & Equipment 900,000

Accumulated Depreciation (100,000)

Total Assets $2,300,000

Liabilities & Equity

Accounts Payable $300,000

Notes Payable 1,000,000

Common Stock 500,000

Retained Earnings 500,000

Total Liabilities & Equity $2,300,000

Journal Entries for January 2013

Transaction 1: Sales Return

The buyer returns merchandise to the seller.

Journal Entry: Dr. Cr.

Sales Returns & Allowances 22,000

Accounts Receivable 22,000

Transaction 2: Sales Discounts

Description: Recorded collection within 2/10, n/30 period.

Journal Entry: Dr. Cr.

Cash 24,500

Sales Discounts 500

Accounts Receivable 25,000

Journal Entry: Dr. Cr.

Cash 155,000

Sales Revenue 155,000

Transaction 4: Cost Flow Assumption

Recorded cost of goods sold under one of the cost flow assumptions.

Journal Entry: Dr. Cr.

Cost of Goods Sold 45,000

Inventory 45,000

Transaction 5: Recording Estimated Uncollectible

Description: The credit manager estimates that $16,000 of sales will be uncollectible.

Journal Entry: Dr. Cr.

Bad Debts Expense 16,000

Allowance for Doubtful Accounts 16,000

Transaction 6: Write-off of an uncollectible account

Description: The credit manager authorizes a write-off of a $5,500 balance owed by a customer.

Journal Entry: Dr. Cr.

Allowance for Doubtful Accounts 5,500

Accounts Receivable 5,500

Transaction 7: Depreciation Expense

Recorded depreciation expense under one of the depreciation methods.

Journal Entry: Dr. Cr.

Depreciation Expense 12,000

Accumulated Depreciation 12,000

Transaction 8: Investment by Stockholders Description: Invested $55,000 cash in the business in exchange for common stock. Journal Entry: Dr. Cr.

Cash 55,000

Common Stock 55,000

Transaction 9: Dividends

Description: The corporation pays a dividend of $4,700 in cash to the stockholders.

Journal Entry: Dr. Cr.

Dividends 4,700

Cash 4,700

Transaction 10: Purchase of Equipment

Description: Purchases computer equipment for $7,800 cash.

Journal Entry: Dr. Cr.

Equipment 7,800

Cash 7,800

Transaction 11: Purchase of Supplies on Credit

Description: Purchases $4,800 of inventory on credit.

Journal Entry: Dr. Cr.

Inventory 4,800

Accounts Payable 4,800

1. What is the ending cash balance?

A. $750,000

B. $767,000

C. $722,000

D. $725,000

2. What is the ending accounts receivable balance net of allowance for doubtful accounts?

$637,000

B. $638,000

C. $652,000

D. $675,000

3. What is the ending inventory balance?

A. $241,900

B. $259,800

C. $249,600

D. $245,300

4. What is the ending equipment balance net of accumulated depreciation?

A. $773,000

B. $776,800

C. $786,000

D. $795,800

5. What is the ending accounts payable balance?

A. $304,800

B. $314,000

C. $316,800

D. $320,000

6. What is the ending retained earnings balance?

A. $500,000

B. $545,000

C. $554,800

D. $567,800

7. What is the net income?

A. $48,500

B. $59,500

C. $65,000

D. $68,200

8. What is the amount of total expenses?

A. $63,000

B. $75,000

C. $73,000

D. $81,000

9. What is the net increase in cash for the period?

A. $222,000

B. $225,000

C. $300,000

D. $325,000

10. What is the net cash provided by operating activities?

A. $179,500

B. $186,500

C. $183,400

D. $178,300

11. What is the net cash used by investing activities?

A. $(7,200)

B. $(9,200)

C. $(8,900)

D. $(7,800)

12. What is the net cash provided by financing activities?

A. $40,300

B. $50,500

C. $50,300

D. $40,200

Questions 13 to 15 cover the inventory methods:

13. January 1, 2013: Purchased 10 units at $6

January 15, 2013: Purchased 10 units at $9

Sold 14 units: What is the cost of goods sold under LIFO?

A. $114

B. $120

C. $126

D. $132

14. January 1, 2013: Purchased 10 units at $6

January 15, 2013: Purchased 10 units at $9

Sold 13 units: What is the cost of goods sold under FIFO?

A. $81

B. $87

C. $93

D. $99

15. January 1, 2013: Purchased 10 units at $6

January15, 2013: Purchased 10 units at $9

Sold 8 units: What is the cost of goods sold under average-cost?

A. $50

B. $55

C. $60

D. $65

Use the following information for questions 16 to 20:

Cost: $10,000

Salvage $1,000

Useful life: 5 years

Units over life: 36,000

16. What is the depreciation expense under straight-line?

A. $1,700

B. $1,800

C. $1,900

D. $2,000

17. What is the second year depreciation expense under declining-balance = 200%?

A. $4,000

B. $1,440

C. $864

D. $2,400

18. What is the fourth year depreciation expense under sum-of-years digits?

A. $2,400

B. $1,000

C. $1,100

D. $1,200

19. Assume the asset produced 13,000 units. What is the depreciation expense under the units of production method?

A. $1,300

B. $2,500

C. $3,250

D. $4,250

20. Assume the declining-balance = 200% method is used. What is the residual book value at the end of year 2?

A. $6,000

B. $3,600

C. $2,160

D. $1,296