Accounting Principles I (ACC 111) Introduction to Accounting (Chapter 1)
Homework Problems
Problem 1 - A Recording Transactions Using the Accounting Equation
On February 1, of the current year, Kent created Dandelion Company to provide services as an architect. He completed the following transactions during February.
a. Kent deposited $20,000 into a business bank account in exchange for common stock.
b. Paid $1,500 to advertise the new business. c. Purchased $2,000 of supplies on account.
d. Paid rent for office space during February, $3,500. e. Received cash for services provided, $6,000.
f. Paid $1,500, on account, for supplies purchased in (c). g. Provided $10,000 of services on account.
h. Paid $4,700 for employee salaries.
i. Determined that $100 of supplies was on hand. The cost of supplies used was $1,900.
j. Paid $800 for blueprint expense. k. Paid dividends of $3,000.
Requirement:
Record each of the above transactions using a table with the following headings: Assets = Liabilities + Stockholders’ Equity
Accounts Accounts Common Retained
Letter Cash Receivable Supplies = Payable Stock Earnings Description The revenue account he will use is Fees Earned.
Problem 1 - B Financial Statements from the Accounting Equation
Strawberry Company was organized on October 1, of the current year, to sell insurance.
ASSETS = LIABILITIES + STOCKHOLDERS' EQUITY
Accounts Accounts Common Retained
Cash Receivable Supplies = Payable Stock Earnings Description
a. 18,000 18,000 b. 3,000 3,000 c. (2,000) (2,000) Rent Expense d. (1,000) (1,000) Auto Expense e. 7,000 7,000 Fees Earned f. 13,000 13,000 Fees Earned g. (4,000) (4,000) Salaries Expense h. (2,000) (2,000) i. (1,500) (1,500) Supplies Expense j. (500) (500) Miscellaneous Exp k. (6,000) (6,000) Dividends 9,500 13,000 1,500 = 1,000 18,000 5,000 Requirements:
1) Prepare an income statement for the month ended October 31 of the current year. 2) Prepare a retained earnings statement for the month ended October 31 of the current year.
Problem 1 - C Recording Transactions and Financial Statements
Marcus organized Bright & Clean Company on October 1, of the current year, to launder and dry clean clothes. The laundry is done on the premises with the dry cleaning done by a separate business. Transactions completed during their first month of business are below.
a. Marcus deposited $15,000 into a business bank account in exchange for common stock.
b. Purchased $30,000 of laundry equipment on account.
c. Paid $500 for truck expense, for the month, to transport clothes for dry cleaning. d. Paid rent for business space during October, $4,000.
e. Paid $5,000 cash for supplies.
f. Received cash from customers for cleaning services provided, $32,000. g. Paid $20,000, on account, for equipment purchased in (b).
h. Provided $15,000 of cleaning services on account.
i. Received the October bill, of $12,000, for dry cleaning services provided by another company. Bill will be paid during November.
j. Determined that $2,000 of supplies was on hand. The cost of supplies used was $3,000.
k. Received $5,000 cash from customers on account in (h). l. Paid $7,500 for employee wages.
m. Paid dividends of $5,000.
Requirements:
1) Record each of the above transactions using a table with the following headings:
ASSETS = LIABILITIES + STOCKHOLDERS' EQUITY
Accounts Accounts Common Retained
Cash Receivable Supplies Equipment = Payable Stock Earnings Description
The revenue account he will use is Cleaning Revenues.
2) Total each column, in the table, and make sure that A = L + SE.
3) Prepare an income statement for October, a retained earnings statement for October, and a balance sheet at October 31 of the current year.
Recording Transactions (Chapter 2) Homework Problems
Problem 2 - A T-Accounts and Trial Balance
Tyler Orange, a lawyer, created Burnt Orange Company on January 1 of the current year and completed the following transactions during the month of January.
a) Tyler invested $25,000 cash in exchange for Common Stock of the same amount. b) Paid $1,400 rent for the month of January.
c) Purchased $25,000 of office equipment paying $5,000 cash and signing a note payable for the balance.
d) Purchased $1,200 of supplies on account. e) Provided $6,000 of legal services for cash. f) Paid $2,400 cash for annual insurance policies. g) Provided $8,000 of legal services on account.
h) Paid $700, on account, for supplies purchased in (d) above. i) Received $5,000, on account, for services provided in (g) above.
j) Paid $1,000 on note payable for office equipment purchased in (c) above. k) Paid $4,000 salary to office assistant.
l) Received $400 utility bill for the month. Payment to be made in February. m) Paid $3,000 of dividends.
Requirements:
1) Record the above transactions directly into the T-Accounts provided. 2) Determine the balance of each T-Account.
3) Prepare an unadjusted trial balance for Burnt Orange Company as of January 31 of the current year.
Problem 2 - B Journal Entries, T-Accounts and Trial Balance
Bruno Gray, an architect, created Gray Company on March 1 of the current year and completed the following transactions during the month of March.
a) Bruno invested $18,000 cash in exchange for Common Stock of the same amount. b) Purchased $1,200 of supplies on account.
c) Paid $600 of automobile expenses for the month. d) Paid $1,100 rent for the month of March.
e) Received $5,000 cash for services provided.
f) Provided $10,000 of services on account. g) Paid $3,000 salary to office assistant.
h) Paid $900, on account, for supplies purchased in (b) above. i) The cost of supplies used for the month was $800.
j) Paid $4,000 of dividends.
Requirements:
1) Prepare journal entries for each of the above transactions using the following accounts: Cash, Accounts Receivable, Supplies, Accounts Payable, Common Stock, Dividends, Fees Earned, Salaries Expense, Rent Expense, Supplies Expense and Auto Expense.
2) Post the above journal entries into the T-Accounts provided. 3) Determine the balance of each T-Account.
4) Prepare an unadjusted trial balance for Gray Company as of March 31 of the current year.
Adjusting Entries (Chapter 3) Homework Problems
Problem 3 - A Adjusting Entries
Macaroni and Cheese Company
Unadjusted Trial Balance
October 31, 202X
Debits
Credits
Cash
$ 6,600
Accounts Receivable
10,000
Supplies
1,400
Equipment
30,000
Accumulated Depreciation - Equip
$ 6,000
Accounts Payable
800
Unearned Fees
6,000
Common Stock
25,000
Retained Earnings
9,000
Dividends
2,000
Fees Earned
42,200
Salaries Expense
29,000
Rent Expense
10,000
Totals
$ 89,000 $ 89,000
Prepare journal entries for the following adjustments on October 31 of the current year. a) Salaries earned by employees, but unpaid on Monday, October 31, total $1,000. b) Depreciation on the equipment, for the year, is estimated at $3,000.
c) Blue Violet billed its customers $1,500 for services provided during the month of October. At October 31, an entry is needed to record this.
d) On October 31, $300 of supplies are on hand.
e) The Unearned Fees account reflects cash received, on October 1, in advance of providing three month’s services. At October 31, one month of those services have been provided.
Problem 3 - B Adjusting Entries with T-Accounts & Trial Balance
Sepia Company
Unadjusted Trial Balance
December 31, 20XX
Debits
Credits
Cash
$ 3,000
Accounts Receivable
8,000
Prepaid Insurance
6,000
Prepaid Rent
12,000
Supplies
4,000
Automobile
25,000
Accumulated Depreciation - Auto
$ 10,000
Accounts Payable
2,500
Unearned Fees
7,500
Common Stock
12,000
Retained Earnings
8,000
Dividends
4,000
Fees Earned
110,000
Salaries Expense
58,000
Insurance Expense
8,000
Rent Expense
22,000
Totals
$ 150,000 $ 150,000
1) Post the following adjustments directly to the T-Accounts provided. a) Depreciation on the automobile, for the year, is estimated at $5,000. b) The balance in Prepaid Insurance represents six month’s insurance, paid in
advance, on September 1 of the current year.
c) The balance in Prepaid Rent represents six month’s rent, paid in advance, on December 1 of the current year.
d) Salaries earned, but unpaid on Monday, December 31, total $500.
e) Sepia billed its customers $4,000 for services provided during the month of December. At December 31, an entry is needed to record this.
f) On December 31, $1,200 of supplies are on hand.
g) The Unearned Fees account reflects cash received, on November 1, in advance of providing three month’s services. At December 31, two months of services have been provided.
Completing the Accounting Cycle (Chapter 4) Homework Problems
Problem 4 - A Classified Balance Sheet
Accounts Payable 6,000 Accounts Receivable 5,000 Accumulated Depreciation - Building 40,000
Building 120,000 Cash 12,000 Common Stock 60,000 Land ? Mortgage Payable 64,000 Prepaid Insurance 2,000 Retained Earnings 15,000 Salaries Payable 3,000 Supplies 1,000 Unearned Fees 2,000 Requirement:
Using the above amounts prepare a classified balance sheet, for the Plum Company at December 31 of the current year, that includes the correct balance for Land.
Problem 4 - B Closing Entries
Scarlet Company Adjusted Trial Balance
December 31, 202X Debit Credit Balances Balances Cash $ 8,000 Accounts Receivable 6,000 Equipment 40,000 Accounts Payable $ 3,000 Common Stock 25,000 Retained Earnings 19,000 Dividends 4,000 Fees Earned 33,000 Salaries Expense 14,000 Rent Expense 5,000 Utilities Expense 3,000 Totals $ 80,000 $ 80,000 Requirements:
1) Determine Scarlet Company’s net income. 2) Prepare the four closing entries.
The following T-Account may be of assistance.
Income Summary
Accounting for Merchandising Businesses (Chapter 5) Homework Problems
Problem 5 - A Calculating Merchandise Income Statement Amounts
The following data was taken from the accounting records of Cornflower Company for the month ended December 31 of the current year.
Merchandise inventory, December 1 $ 9,000 Merchandise inventory, December 31 5,000
Purchases 87,000 Purchases returns 3,000 Purchases discounts 1,000 Sales 200,000 Freight-in 2,000 Requirements:
5) Calculate Cornflower’s cost of merchandise purchased for December. 6) Calculate Cornflower’s cost of merchandise sold for December.
Problem 5 - B Merchandise Business Financial Statements
The following accounts and balances were found in the Sienna Company’s accounting records for the year ended December 31 of the current year.
Accounts payable $ 20
Accounts receivable 140 Accumulated depreciation – equipment 200 Advertising expense 200
Cash 300
Common stock 100
Cost of merchandise sold 6,000 Depreciation expense - equipment 80
Dividends 700
Equipment 800
Interest expense 20 Merchandise inventory 150 Miscellaneous selling expense 300
Notes payable 250
Office rent expense 100 Office salaries expense 700
Prepaid rent 10
Retained earnings, January 1 300
Salaries payable 130
Sales 10,000
Sales commissions expense 1,500
Requirements:
1) Prepare a multiple-step income statement. 2) Prepare a retained earnings statement.
3) Prepare a classified balance sheet, assuming that $25 of the note payable is due next year and the balance due during the next decade.
Inventories and Cost of Merchandise Sold (Chapter 6) Homework Problems
Problem 6 - A Periodic Inventory Methods and Cost of Merchandise Sold
Orchid Company's inventory records reflect the following data for the month of August.
Merchandise Available
Date Units Unit Cost Total Cost
Aug 1 Beginning Inventory 30 $10 $ 300 Aug 9 Purchase 70 12 840 Aug 17 Purchase 80 13 1,040 Aug 28 Purchase 20 15 300
Available 200 $ 2,480
Ending inventory, on August 31, was 50 units.
Requirement:
Prepare a chart comparing the cost of merchandise inventory, at August 31, and merchandise sold, during August, using the following costing methods:
Merchandise Merchandise Total Inventory Sold Available FIFO
LIFO
Problem 6 - B Gross Profit Method of Estimating Inventory On March 23, a clothing store had all of its inventory destroyed by fire. An estimate of the amount of inventory lost is needed for inventory purposes. The following information is available:
Inventory, January 1 $ 40,000 Purchases, January 1 - March 23 500,000 Sales, January 1 - March 23 700,000 Estimate gross profit rate 30% Requirements:
1) Using the gross profit method, estimate the amount of inventory lost in the fire. 2) What type of companies would most likely use the gross profit method of estimated inventory?
Problem 6 - C Retail Method of Estimating Inventory
Using the retail method and the following data, estimate the amount of Magenta Company’s ending inventory at May 31.
Cost Retail May 1 Merchandise inventory 42,000 50,000 May 1 - 31 Purchases 278,000 350,000
Bank Reconciliation (Chapter 7) Homework Problems
Problem 7 - A Bank Reconciliation
At September 30, of the current year, the Indigo Company’s balance of Cash is $850. The bank’s records, on the same date, show a balance of $1,000. The following information is available to reconcile these two balances:
a) Indigo made a deposit, on September 30, for $40 that does not appear on the bank statement.
b) The following checks, written by Indigo, have not been cashed by September 30: #30 $ 87
#33 10 #34 25
c) Bank service charges for the month were $13.
d) A check written and cashed for $63, to Mahogany Company, was incorrectly recorded by Indigo as $36. The check was payment for supplies on account.
e) The bank collected a $90 note receivable from one of Indigo’s customers. The principal amount of the note was $60 with an additional $30 included for interest.
f) A check written, and recorded, by Indigo for $75 was incorrectly charged by the bank as $57.
Requirements:
1) Prepare a bank reconciliation, at September 30 of the current year, in good form. 2) Prepare the necessary journal entries at September 30 of the current year.
Problem 7 - B Bank Reconciliation
At January 1, of the current year, the Bittersweet Company’s balance of Cash was $600. During the month of January, Bittersweet made deposits of $1,000 and wrote checks totaling $1,120. The bank’s records, on the same date, show a balance of $500. The following information is available to reconcile these two balances:
a) The bank collected a $35 note receivable from one of Bittersweet’s customers. The principal amount of the note was $30 with an additional $5 included for interest.
b) Bittersweet made a deposit, on January 31, for $40 that does not appear on the bank statement.
c) The following checks, written by Bittersweet, have not been cashed by January 31: #57 $ 90
#59 36
d) Bank service charges for the month were $10.
e) A check written and cashed for $87, to Melon Company, was incorrectly recorded by Bittersweet as $78. The check was payment for supplies on account.
f) A check written, and recorded, by Bittersweet for $15 was incorrectly charged by the bank as $51.
g) A check, in the amount of $46, from the Orchid Company was returned by the bank for insufficient funds.
Requirements:
1) Prepare a bank reconciliation, at January 31 of the current year, in good form. 2) Prepare the necessary journal entries at January 31 of the current year.
Receivables (Chapter 8) Homework Problems
Problem 8 - A Bad Debts Expense and Allowance for Doubtful Accounts
At December 31 of the current year, Spring Green Company’s accounts reflect the following balances.
Allowance for
Accts Receivable Doubtful Accounts Sales 120,000 2,000 700,000
Using the aging method, the balance of Allowance for Doubtful Accounts is estimated at $9,000.
Requirements:
1) Prepare the adjusting journal entry, on December 31, to record the estimated amount of uncollectible accounts.
2) Determine the adjusted balances of the following accounts: Accounts Receivable $ _____________ Allowance for Doubtful Accounts $ _____________ Bad Debts Expense $ _____________
Problem 8 - B Journalizing Receivable Transactions
Periwinkle Company, a major supplier to retail businesses, completed the following transactions.
Jan. 5 Sold $20,000 of merchandise, on account, to Salmon Company terms 1/10, n/30.
14 Received payment from Salmon Company, less discount.
Mar. 10 Loaned AJ Silver, a trusted employee, $10,000 for 60 days in exchange for a 9% note.
May 9 Received interest only from AJ Silver and accepted a new 12%, 30-day note for the principal (record the exchange of notes with a debit and credit to notes receivable).
Jun. 8 Received maturity value, of note, from AJ Silver.
10 Sold $30,000 of merchandise to Turquoise Company on account. Jul. 10 Accepted an 8%, 60-day note from Turquoise Company giving a time
extension on their account.
Sep. 8 Received maturity value, of note, from Turquoise Company. 10 Sold $60,000 of merchandise on account to Peach Company. Oct. 10 Accepted an 8%, 30-day note from Peach Company giving a time
extension on their account.
Nov. 9 Peach Company dishonored the note dated October 10.
Dec. 9 Received from Peach Company the maturity amount of the dishonored note, plus 12% interest for 30 days on the maturity value.
Requirement:
Property, Plant & Equipment (Chapter 9) Homework Problems
Problem 9 - A Disposal of Property, Plant & Equipment
On January 2, Year 1, Forest Green Company purchased equipment at a cost of $200,000. On that date, the equipment was estimated to have a useful life of 6 years and a residual value of $20,000. The company uses the straight-line method of depreciation.
Requirements:
1) The company decides to sell the equipment on the last day of year 4. Calculate the annual amount of depreciation, for each of those four years (assuming the original six year useful life) and the accumulated depreciation balance at December 31, Year 4.
2) What was the book value of the equipment on December 31, Year 4?
3) Assume the equipment was sold for $75,000 on December 31, Year 4. Prepare the journal entry to record the sale.
4) Assume the equipment was sold for $82,000 on December 31, Year 4. Prepare the journal entry to record the sale.
Problem 9 - B Depreciation of Property, Plant & Equipment Tumbleweed Company purchased equipment on January 2, Year 1 for $300,000. On that date, the equipment was estimated to have a useful life of 5 years, or 125,000 hours of use, and a residual value of $50,000. The equipment was used for 30,000 hours during Year 1, 20,000 in Year 2, 35,000 in Year 3, 15,000 in Year 4 and 25,000 in Year 5. Requirements:
1) Determine the annual amount of depreciation, for each of the five years, using the (a) straight-line method, (b) the units-of-production (output) method, and (c) the double-declining-balance method. Also, determine the total amount of depreciation for the five years for each method.
2) Which methods gives the largest depreciation expense in Year 1?
