Fluent Essays

We have three hours to do the exam.Save your file as a Word, or PDF to send to me acct_1a_da_indv_midterm__s2020a.pdf Unformatted Attachment Preview FINANCIAL ACCOUNTING 1A MIDTERM Professor R.S. Claire USE THE GENERAL JOURNALS TO RECORD YOUR ANSWERS 1. It is the end of Kellco’s fiscal year. You have been given the following adjusted ledger balances. The ledger account balances are the normal balances for each account. Cash Accounts Rec. Inventory Pre-paid expense Land Equipment Accum. Depreciation S.T. Notes Payable Accounts Payable Kelly Capital Kelly Drawing Income Summary Sales Wage Expense Fuel Expense Insurance Expense Utilities Expense Depreciation Expense $1 25,000 300,000 75,000 38,000 100,000 350,000 80,000 150,000 125,000 175,000 80,000 0 958,000 250,000 35,000 35,000 85,000 15,000 Required: Make all the required closing entries. You do not have to prepare a Trial Balance to complete the problem just the closing journal entries. Use the journal paper on the next page to make your journal entries. © Copyrighted by Richard S. Claire 6/5/2019. All rights reserved. Page 2 of 13 DATE 2. ACCOUNT DR CR Dominic Bueno started a delivery business as a sole proprietorship on 7/1/XX. During the month of July the company had the following transactions: 7/1 The owner invested $100,000 in cash into the business checking account. 7/1 Rented a garage with office space for $5,000 per month and paid the first month’s rent by check. 7/2 A new 2 ton delivery truck was purchased by the company. The total purchase price including taxes, license and fees was $115,000. The company paid $15,000 by check as a down payment and signed a long-term note for five years at an interest rate of 9\% per year for the balance that was owed. 7/6 The company purchased a desktop computer and a printer for a total price of $1,150 and paid by check for the computer equipment. 7/8 Picked up and delivered machinery for a client. Billed $350 for the delivery service with terms “due on receipt”. 7/10 Received a bill for legal services in the amount of $1,200. © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 3 of 13 7/12 Entered into a $125,000 one year contract with a client to provide delivery services. 7/14 Received the amount owed from the 7/8 transaction. 7/15 Picked up and delivered furniture for a client and billed the client $565 with terms of “due on receipt”. 7/15 Wrote a check to Mr. Bueno for personal use in the amount of $2,000. 7/18 Purchased diesel fuel from a bulk fuel distributor on credit. The total amount owed for the fuel was $579 which the company will receive a bill for at the end of the month. 7/21 Delivered machinery under the terms of the contract signed on 7/12. The contract terms required that any amounts owed for delivery services will be billed for at the end of each month with terms of net 30 days. 7/31 Received the bill for the purchase of diesel fuel on 7/18 with terms of net 30 days. 7/31 Received a utility Bill in the amount of $475 and paid the bill immediately by check. 7/31 Billed the client for the delivery service provided on 7/21 in the amount of $2,100. Required: Make the necessary journal entries from the information given. Some dates do not require a journal entry. On dates that do not require an entry say “no entry required”. Omit the journal descriptions. Use the journal paper on the next page to make your journal entries. Date. Account Dr © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Cr Page 4 of 13 © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 5 of 13 3. You have been given an unadjusted Trial Balance at the end of Alico Inc. FY (12/31/XX): In reviewing the unadjusted Trial Balance, the following information has come to your attention: a. Alico Inc. entered into a six-month contract on 11/1/XX to provide maintenance service for six apartment houses owned by a Real Estate Investment Trust. The total value the contract was $185,000 and required a $20,000 prepayment. On 11/1/XX the bookkeeper debited cash and credited Maintenance Revenue for the $20,000 prepayment. On 12/31/XX 20\% of the contracted services had been completed. b. On 8/1/XX a one year fire insurance policy was purchased for $36,000. The bookkeeper debited Prepaid Insurance Expense and credited Cash to record the transaction. No other journal entries had been made for this transaction. c. Wages in the amount of $95,000 had been earned by Alico Inc. employees but will not be paid until next year. No entry had been made to record this fact. d. On 11/1/XX Alico Inc. lent $50,000 to one of its clients and the client signed a 90 day note receivable on this date with interest and principal due and payable on January 31 of the next year. The interest rate was at 14\% per year. At the end of the current year Alico Inc.had earned $1,167 in interest on the note. This amount had not yet been recorded. e. Depreciation in the amount of $15,000 had not yet been recorded. . Required: Make the required adjusting entries on 12/31/XX from the information given above. As a journal description, indicate what accounting principle that would have been violated if the adjusting entry had not been made. Use the journal paper on the next page to make your journal entries. © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 6 of 13 Date Account Dr Cr ANSWER THE FOLLOWING QUESTIONS ON THE TEST PAPER: 4. Give the assumption or principle that would have been violated if the following entries or information had not been given: a. An Adjustment is made for payroll expense at the EFY eventhough it had not been paid: b. A company was required to revalue all of its assets liabilities and owners equities at the end of the accounting year because it was going to file for bankruptcy and go out of business within a year. c. Changing the method of recognizing depreciation is not allowed from one accounting period to another. © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 7 of 13 d. An international corporation must record all of its foreign transactions in dollars for United States financial reporting purposes. e. A company records a fixed asset for not only the invoice price but all of the costs that it takes to put that asset into use. HIGHLIGHT THE CORRECT ANSWER IN YELLOW OR CIRCLE IT. (Chose the most correct answer) 5. GAAP requires the use of the accrual accounting system when: a. The IRS requires it if a business is dealing in inventory. b. When a company is publicly owned. c. When a company borrows money for a financial institution. d. none of the abouve 6. A Deferred Revenue is: a. A revenue that has been received and earned. b. An revenue that will be collected in the future. c. An revenue that has been received, but is a liability until earned. d. A future revenue that is listed as an asset. 7. What kinds of accounts are closed at the end of a fiscal year? a. Assets, Liabilities, Owner Equity, Revenue and Expenses. b. Revenue and Expense accounts and temporary Balance Sheet accounts c. All accounts. d. Temporay and perminate Balance Sheet accounts. 8. There are four basic financial statements required by GAAP. They are: a. Balance Sheet, Income Statement, Cash Flow Statement and a Trial Balance. b. Balance Sheet, Income Statement, Cash Flow Statement and a Work Sheet. c. Balance Sheet, Income Statement, Cash Flow Statement and a Statement of Change to Retained Earnings. d. Balance Sheet, Income Statement, Cash Flow Statement and a Post Close Trial Balance. © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 8 of 13 9. The Historical Cost Principle states that: a. All financial information must be stated at what the company can realize in value if it sold all of the asset the company owned. b. A revenue is recorded for the amount you paid for it. c. Assets must be recorded at the cost they are acquired for and must be kept at that cost in the accounting system until they are disposed off. d. All of the above. 10 The normal balance of an account for an Owners Equity account would be: a. A debit. b. The same as an Asset Account. c. The amount that was invested by the companies owner. d. A credit. 11. The Industrial Practices Principle states that: a. A company must follow the same rules as other companies. b. If all the companies in an industry violate the same principle then a company in that industry can violate the same principle. c. Require a company to ahear to the priciples even if other companies within the industry are not. d. Allows a company to change the way they are recording a transaction. 12. What is a Current Asset? a. An asset that is about to be sold. b. A fixed asset that has a long life. c. Any asset that has an economic life of over a year. d. An asset the will be consumed within a 12 month period. 13. In Finacial Accounting, cost is divided into 3 major catigories: a. Depreciable assets, Liabilities and Owners Equity. b. Period Costs, Long Term Cost and Short Term Cost. c. Cost of Goods Sold, Cost of Items Purchased and Cost of Inventory. d. Inventoriable Cost, Capital Cost and Period Cost. 14 The Cash basis of accounting can be used: a. in an accrual accounting system. b. by a company that sells merchandise. c. to conform to GAAP d. none of the above. © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 9 of 13 15. Define the Cost principle: 16. What is an Accured Revenue? 17. Define the Expense Recognition (Matching) principle: 18. What two accounting principles are most responsible for making adjusting entries 19. List the external users of Financial Statements: 20. Why is accounting important to the business world? © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 10 of 13 FINANCIAL ACCOUNTING CHART OF ACCOUNTS Prof. R.S. Claire BALANCE SHEET ACCOUNTS ASSETS Current Assets Cash/Checking S.T. Investments Avaliable for sale Investments Fair Market Value Adjustment S.T. Notes Rec. Interest Rec. Accounts Receivable Less: Allowance for Bad Debts Inventory Pre-paid expense (Insr., Rent,) Assets Under Consructions Deposits (Security, Equipment, Rent etc.) Operating Assets (Plant & Equip.-Fixed Assets) Land Buildings Less: Accumulated Depreciation-Build. Plant & Equipment Less: Accumulated Depreciation-Plant & Equipment Funiture & Fixtures Less: Accumulated Depreciation-F&F Office Equipment Less: Accumulated Depreciation-Office Equipment Communicaition Systems (Phone, Fax, etc. Less: Accumulated Depreciation-Communication Systems Computer Systems Less: Accumulated Depreciation-Computer Systems Transportation Equip. Less: Accumulated Depreciation-Transp. Equip. Leasehold improvements NORMAL BALANCE Debit Debit Debit Debit/Credit Debit Debit Debit Credit Debit Debit Debit Debit Debit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Other Assets (Intangiable Assets) Goodwill Patends Copyrights Trademarks Water Rights Debit Debit Debit Debit Debit Natural Resourses Mineral Rights Timber Rights Debit Debit © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 11 of 13 Oil Rights Debit LIABILITIES Current Liabilities S.T. Notes Payable Accounts Payable Credit Card Payable Accured Payables Payroll Payable Interest Payable Un-earned Revenue Cash Dividend Payable Common Stock Dividends to be Distributed Current Por. Of L.T. Debt Credit Credit Credit Credit Credit Credit Credit Credit Credit Credit Long Term Liabilities L.T. Notes Payable Bond Payable Less:Bond Discount Add: Bond Premium Credit Credit Debit Credit OWNERS EQUITY Sole Proprietorship Capital Less: Drawing Credit Debit Partnership/LLP/LLC Capital (for each partner) Less: Drawing (for each partner) Credit Debit Corporation (C Corp. & S Corp.) Stockholders Equity Preferred Stock Paid in excess of Par-Pref. Stock Common Stock Paid in exess of Par-Common Stock Retained Earnings Cash Dividend Stock Dividend Treasury Stock Paid in capital from T. S. Transaction Accumulated Other Comprehensive Income Unrealized Holding gain/loss on S.T. Investments Foreign currency translation gains or losses Pension plan gains or losses Non-controlling Interest Credit Credit Credit Credit Credit Debit Debit Debit Credit Debit/Credit Debit/Credit Debit/Credit Debit © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. Page 12 of 13 INCOME STATEMENT STATEMENT, (P&L STATEMENT) NORMAL SERVICE INDUSTRY BALANCE MERCHANDISING INDUSTRY REVENUE REVENUE Maint. Service Rev. Credit Sales Contracting Serv. Rev. Credit Less: Sales Returns & Allow. Software Devel. Rev Credit Cash (Sales) Discounts Consulting Rev. Credit Quantity Discounts Interest Revenue Credit Repair Reveneue Credit EXPENSES Advertising Auto expense Bad Debt Expense Bank charges Counsulting Depreciation exp. Dues & Subscriptions Frieght in Fuel exp. Insr. exp. Interest exp. Bond Interest exp. IT-Computer Exp. Licenses and Fees Maint. exp Marketing exp. Meals exp. Misc. exp. Office supplies exp. Phone exp. Payroll exp. Gross Payroll Exp. Payroll Tax exp. Professional Services Rent exp. Repair parts Shipping exp Software exp Tax exp. Travel exp Uniforms Utilities Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit COST OF GOODS SOLD PERIODIC INVENTORY SYSTEM Purchases Less: Purchase Returns ans Allow. Purchase Discounts PERPETUAL INVENTORY SYSTEM Cost of Goods Sold EXPENSES Advertising Bad Debt Expense Bank charges Counsulting Depreciation exp. Dues & Subscriptions Frieght in Fuel exp. Insr. exp. Interest exp. Bond Interest exp. IT-Computer exp. Licenses and Fees Maint. exp Marketing exp. Meals exp. Misc. exp. Office supplies exp. Payroll exp. Gross Payroll exp. Payroll Tax exp. Phone exp. Professional Services Rent exp. Repair parts Shipping exp © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. NORMAL BALANCE Credit Debit Debit Debit Debit Credit Credit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Page 13 of 13 Tax exp. Travel exp Uniforms Utilities Debit Debit Debit Debit OTHER REVENUE/GAINS Realized Gains from sale of Investments Unrealized Holding Gains on S.T. Investments Interest Income. Invetstment Income Gain on the Disposal of Assets Credit Credit Credit Credit Credit OTHER EXPENSES/LOSSES Unrealized Holding Loss from sale of investments Loss on Disposal of Assets Debit Debit FINANCIAL ACCOUNTING CHART OF ACCOUNTS Prof. R.S. Claire ACCOUNTING EQUATION AND DEBIT/CREDIT RULES CLOSED TO OWNERS EQUITY AT EFY ASSETS DR CR + - = LIABILITIES DR CR - + + OWNERS EQUITY DR CR - + + REVENUES DR CR - + - EXPENSES DR CR + © Copyrighted by Richard S. Claire 6/5/2019. All rights reseved. - ... Purchase answer to see full attachment