survey of Accounting_Problems

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Description

Problem

1.
Define the following principles, concepts and terminology. Give an
example of each:

Matching

Cost

Conservatism

Entity

Going Concern

Depreciation

Breakeven

Variable cost

2. Under
the balance sheet classification of property, plant, and equipment, some
accounts need ad at the end of each month and others do not. Which do and why?
Which do NOT and why?

3.
Classify the following items as:

a.
accrued revenue (accrued asset)

b.
deferred revenue (unearned revenue)

c.
accrued expense (accrued liability)

d.
deferred expense (prepaid expense)

(1)
Three months’ rent paid in advance

(2)
Rental income for six months received in advance

(3)
Jobs completed but not yet billed at month-end

(4)
Interest payable accrued on a note, but not yet paid

(5)
Telephone bill owed but not yet paid

(6)
A three-year premium paid on auto fleet insurance policy

4.
Details of invoices for purchases of merchandise are as follows:

Merchandise Transportation Terms Returns and Allowances

a. $1,000 $25 FOB shipping point, 1/10, n/30 $200

b. 5,000 FOB
destination, n/30 400

c. 4,000 50 FOB shipping point, 2/10,
n/30 150

d. 5,000 FOB
destination, 1/10, n/30

Determine the amount to be paid in full
settlement of each of the invoices, assuming that credit for returns and
allowances was received prior to payment and that all invoices were paid within
the discount.

5. Determine the amount to be added to
Allowance for Doubtful Accounts in each of the following cases:

(a)
Balance of $500 in the allowance account just prior to adjustment.
Analysis of accounts receivable indicates doubtful accounts of $9,500.

(b)
Balance of $950 in the allowance account just prior to adjustment.
Uncollectible are estimated at 3.5% of sales, which totaled $1,000,000 for the
year.

6.
The following units are available for sale during the year:

January 1 Beginning
Inventory 10 Units @ 18

April 3 Purchases 30 Unis @ 20

August 31 Purchases 28 Units @ 25

September 29 Purchases 17
Units @ 30

December 31 Ending Inventory 21
Units

Determine ending inventory cost by (a)
FIFO, (b) LIFO, and (c) average cost.

7.On the basis of the following data related
to current assets for Mission Co. at December 2010, prepare a partial balance
sheet in good form.

Cash and cash equivalents $100,000

Notes receivable 50,000

Accounts receivable 290,000

Allowance for doubtful accounts 20,000

Interest receivable 750

Merchandise inventory-at lower of cost
(first-in, first-out method) or market 120,000

8. Indicate the section of the balance
sheet (current assets, fixed assets, investments, current liabilities, long- term
liabilities, and stockholders’ equity) in which each of the following is
reported:

(a)
Note receivable due in 3 years

(b)
Note receivable due in 90 days

(c)
Allowance for doubtful accounts

9.
You have been hired by a high-growth startup company to assist in the
determination of what depreciation method to employ for financial reporting.
The company’s fixed assets are equally divided among buildings and high-tech
equipment (heavily used in the initial years).

(a)
Can the company select different methods of depreciation for financial
reporting? Explain.

(b)
Explain to company management which method of depreciation would be
suitable for each type of fixed assets the company employs. Also, state why.

(c)
Which method of depreciation would the company choose for taxes? Explain
why.

10.
A machine with a useful life of 6 years and a residual value of $3,000
was purchased at the beginning of year 1 for $30,000. The machine was sold for
$15,000 on April 1 in year 4.

(a)
What was the book value of the equipment at the end of year 3 assuming
the straight-line method of depreciation is used?

(b)
Illustrate the effects on the accounts and financial statements of the
depreciation from January 1 to April 1 of year 4.

(c)
Illustrate the effects on the accounts and financial statements of the
sale of the machine on April 1.

11. A company acquired mineral rights for
$7,500,000. The mineral deposit is estimated at 600,000 tons and during the
year 100,000 tons were extracted and sold.

(a)
Calculate depletion expense for the year.

(b)
Show the effects on the accounts and financial statements of the
company.

(c)
What is the book value of the mineral rights at the end of the current
year?

12. During 2009, Lexie, Inc. acquired
Lena, Inc. for $10,000,000. The fair market value of the net assets of Lena,
Inc. was $8,500,000 on the date of purchase. During 2012, Lexie, Inc.
determined the goodwill resulting from the Lena acquisition was impaired and
had a value of $1,000,000.

(a)
Determine the amount of goodwill implied during 2009.

(b)
Illustrate the effects on the accounts and the financial statements of
the amortization for 2012.

13.
For each of the following items indicate whether the transactions listed
below increased (+), decreased (-)or had no effect (o)by
inserting the appropriate symbol.

Net Income

Assets

Liabilities

Owner’s Equity

Cash Flow

(a)

Sold
Equipment for cash at a gain

(b)

Recorded
amortization expense on patents

©

Paid
Cash for minor repairs to an asset

(d)

Recorded
a revenue expenditure incurred on account

€

Paid
Cash to remove old building from land being prepared for use

14. Indicate whether the following actions
would (+) increase, (-) decrease, or (0) not affect a company’s total assets,
liabilities, and stockholders’ equity.

Assets

Liabilities

Stockholder’s Equity

(1)

Declaring
a cash dividend

(2)

Paying
the cash dividend declared in (1)

(3)

Declaring
a stock dividend

(4)

Issuing
stock certificates for the stock dividends declared in (3)

15.
Tops Company sells Products D and E and has made the following estimates
for the coming year:

Product Unit
Selling Price
Unit
Variable Cost
Sales Mix

D $30 $24 60%

E 70 56 40

Fixed costs are estimated at $202,400.
Determine (a) the estimated sales in units of the overall product necessary to
reach the break-even point for the coming year, (b) the estimated number of
units of each product necessary to be sold to reach the break-even point for
the coming year, and (c) the estimated sales in units of the overall product
necessary to realize an operating income of $119,600 for the coming year.

(a)
If Henry Company’s budgeted sales are $800,000, fixed costs are
$350,000, and variable costs are $600,000, what is the budgeted contribution
margin ratio?

(b)
If the contribution margin ratio is 30% for Gray Company, sales are
$900,000, and fixed costs are $180,000, what is the operating profit?

16. A corporation, which had 20,000 shares
of common stock outstanding, declared a 3-for-l stock split.

(a)
What will be the number of shares outstanding after the split?

(b)
If the common stock had a market price of $240 per share before the
stock split, would be an approximate market price per share after the split?

17. Smith Co. is considering the following
alternative plans for financing the company:

Plan
I Plan II

Issue 10% Bonds (at face) $1,000,000

Issue $10 Common Stock $3,000,000 $2,000,000

Income tax is estimated at 40% of income.

Determine the earnings per share of common
stock under the two alternative financing plans, assuming income before bond
interest and income tax is $1,000,000.

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