Accounting for business operations acc 20364 – final examination
Accounting for Business Operations
ACC 20364 – Final Examination
1. Bella’s Beauty Salon’s unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments and $200 of accrued revenue was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
Required:
Based on the additional information, prepare the adjusting journal entries for Bella’s Beauty Salon.
2. The following is the adjusted trial balance for Rapid Car Services for the most recent year:
|
Rapid Car Services, Inc. |
|
|
|
Cash |
$33,000 |
|
|
Accounts receivable |
14,200 |
|
|
Office supplies |
1,700 |
|
|
Vehicles |
100,000 |
|
|
Accumulated depreciation—Vehicles |
|
45,000 |
|
Accounts payable |
|
11,500 |
|
Common stock |
|
1,000 |
|
Retained earnings |
|
70,900 |
|
Dividends |
40,000 |
|
|
Fees earned |
|
155,000 |
|
Rent expense |
13,000 |
|
|
Office supplies expense |
2,000 |
|
|
Utilities expense |
2,500 |
|
|
Depreciation Expense—Vehicles |
15,000 |
|
|
Salary expense |
50,000 |
|
|
Fuel expense |
12,000 |
|
|
Totals |
$283,400 |
$283,400 |
Required:
Prepare the following financial statements for Rapid Car Services, Inc. from the adjusted trial balance. Assume the stockholders did not make any additional investments in the company during the year.
Income Statement
Statement of Retained Earnings
Balance Sheet
3. END Company reported the current month purchase and sales data for its only product as follows:
|
Date |
Activities |
Units Acquired at Cost |
Units Sold at Retail |
|
April 1 |
Beginning Inventory |
175 units @ $15.00 |
|
|
4 |
Purchase |
150 units @ $16.00 |
|
|
7 |
Sales |
|
160 units @ $30.00 |
|
10 |
Purchase |
200 units @ $17.00 |
|
|
16 |
Sales |
|
250 units @ $30.00 |
|
25 |
Purchase |
160 units @ $18.00 |
|
|
28 |
Sales |
|
150 units @ $32.00 |
Required:
Determine the cost assigned to ending inventory and cost of goods sold using LIFO with the perpetual inventory system.
4. The following information is available for the Edwards Company for its March 31 bank reconciliation:
From the March 31 bank statement:
NSF: A check from a customer, Cook Co. in payment of their account.
IN: Interest earned on the account.
From the Edwards Company’s accounting records:
Required:
Based on the above information, prepare the2-column bank reconciliation for the Edwards Company for March.
5. Information for JasonMetalworks as of December 31 follows.
|
Administrative salaries expense |
$135,000 |
|
Depreciation expense—Factory equipment |
52,400 |
|
Depreciation expense—Delivery vehicles |
36,200 |
|
Depreciation expense—Office equipment |
24,800 |
|
Advertising expense |
22,350 |
|
Direct labor |
268,000 |
|
Factory supplies used |
12,000 |
|
Income taxes expense |
91,500 |
|
Indirect labor |
35,000 |
|
Indirect material |
24,000 |
|
Factory insurance |
15,500 |
|
Factory utilities |
14,000 |
|
Factory maintenance |
7,500 |
|
Inventories |
|
|
Raw materials inventory, January 1 |
32,000 |
|
Raw materials inventory, December 31 |
28,000 |
|
Work in Process inventory, January 1 |
33,780 |
|
Work in Process inventory, December 31 |
37,460 |
|
Finished goods inventory, January 1 |
56,970 |
|
Finished goods inventory, December 31 |
62,000 |
|
Raw materials purchases |
325,000 |
|
Rent expense—Factory |
50,000 |
|
Rent expense—Office space |
24,000 |
|
Rent expense—Selling Space |
24,000 |
|
Sales salaries expense |
97,500 |
|
Sales |
1,452,000 |
|
Sales discounts |
29,000 |
Required:
(a) Prepare the company’s schedule of cost of goods manufactured for the year ended December 31
(b) Prepare the company’s income statement that reports separate categories for selling and general and administrative expenses.
6. Wagner Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed.
|
|
Alternative 1 |
Alternative 2 |
|
Variable costs per unit |
$20 |
? |
|
Fixed costs |
$200,000 |
$274,400 |
|
Selling price per unit |
$40 |
$40 |
|
Income tax rate |
25% |
25% |
Required:
(a) Compute the break-even point in units and dollars for both alternatives.
(b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income.
(c) Compute the degree of operating leverage for each alternative. Which alternative would you recommend and why?