Acct 220 midterm review questions
1. JOURNAL ENTRIES
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.
1. Received $50,000 from stockholders.
2. Purchased equipment for $75,000, paying $15,000 in cash and giving a note payable for the remainder.
3. Paid $3,000 rent for the month.
4. Recorded $12,500 of services provided on account.
5. Paid wages of $9,500.
6. Received $7,000 in cash for services provided.
7. Collected $2,000 from customers on account.
2. ADJUSTING ENTRIES
A review of the ledger of Wilde Co. at December 31, 2014, produces the following data pertaining to the preparation of annual adjusting entries:
(a) Salaries and Wages Payable $0: Salaries are paid every Friday for the current week. Five employees receive a weekly salary of $800, and three employees earn a weekly salary of $700. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.
(b) Unearned Rent Revenue $58,000: The company had several lease contracts during the year as shown below:
Rent
Term per Number of
Date (in months) lease leases
Oct. 1 12 $ 8,000 3
Dec. 1 12 18,000 2
(c) Notes Receivable $90,000: This is a 6-month note, dated November 1, 2014, with a 6% interest rate.
Instructions:
Prepare the adjusting entries at December 31, 2014. Show all computations.
3. INVENTORY COMPUTATIONS
Lan Enterprises uses a periodic inventory system for buckets it sells. It had a beginning inventory on April 1 of 80 units at a cost of $6 per unit. During April, the following purchases and sales were made.
Purchases Sales
April 7 60 units at $7.00 April 5 120 units at $20
13 120 units at $7.50 11 90 units at $20
23 90 units at $8.00 20 80 units at $20
29 50 units at $8.80 30 40 units at $20 320 330
Instructions: Compute the April 30 ending inventory and April cost of goods sold under (a) average cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations.
(1) Average – Ending Inventory = $_________; Cost of Goods Sold = $_________.
(2) FIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.
(3) LIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.
4. RATIOS
Sanders Enterprises reported the following information for 2014:
Beginning inventory $ 32,000
Cost of goods sold 404,000
Ending inventory 45,000
Net income 28,000
Net sales 750,000
Operating expenses 220,000
Sales revenue 765,000
Instructions: Compute each of the following ratios:
(1) Gross profit rate
(2) Inventory turnover
(3) Days in inventory
(4) Profit margin
5. Multiple-Step Income Statement
Below is a partial listing of the adjusted account balances of Barnett Cabinets at year-end on December 31, 2014:
Accounts receivable $ 24,000
Cost of goods sold 256,000
Selling expenses (includes depreciation) 48,000
Interest expense 3,000
Accumulated depreciation—Building 15,000
Sales discounts 5,000
Inventory 52,000
Administrative expenses (includes depreciation) 65,000
Sales revenue 418,000
Accounts payable 34,000
Interest revenue 500
Instructions: Using whatever data you believe appropriate, prepare a multiple-step income statement for the Barnett Cabinets for the year ended December 31, 2014.
