Question

Exam 2 Softbyte Inc. Balance Sheet December 31, 2012 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

Instructions: Open the balances in the T-accounts (general ledger). Post the journal entries to the T-accounts (general ledger). Prepare an income statement, statement of retained earnings, balance sheet, and statement of cash flows-indirect method. Journal Entries for January 2013

Transaction 1: Sales Return Description: 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

Transaction 3: Services Provided for Cash Description: Receives cash from customers for programming services it has provided. Journal Entry: Dr. Cr. Cash 155,000 Sales Revenue 155,000

Transaction 4: Cost Flow Assumption Description: 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 Description: 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:

13What 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. $1,300B. $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

Answer 1

1. CLOSING CASH BALANCE

particulars	amount
opening	500000
sales	+24500
service	+155000
common stock issued	+55000
dividend paid	-4700
equipment purchase	-7800
closing value	722000

2. ending accounts receivable

particulars	amount
opening balance	700000
sales return	-22000
claimed	-25000
allowance for bad debts	-16000
closing	637000

3. ending inventory

particulars	aount
opening	300000
cost flow	-45000
purchase	+4800
closing	259800

4. ending equipment

particulars	amount
opening	900000
accumulated depreciation	-100000
depreciation	-12000
purchase	+7800
closing	795800