problem 1 - Merchandising Company Income Statement
The Olympic Company provides the following alphabetic list of accounts and their respective balances. All accounts have normal balances, and income statement account balances are for the year ending December 31, 2011. A physical count of merchandise inventory on hand year end revealed a balance of $299,000. Use this information to prepare a comprehensive income statement.
Accounts payable $66,399
Accounts receivable 82,890
Accumulated depreciation 1,66,554
Beginning inventory, Jan. 1 1,85,000
Capital stock 1,44,000
Depreciation expense 25,000
Insurance expense 9,500
Land and Buildings 56,30,000
Marketing expense 86,230
Office Supplies Expense 3,620
Purchase discounts 26,850
Purchase returns & allowances 16,000
Rent expense 19,600
Retained earnings, Jan. 1 24,327
Salaries expense 1,58,500
Salaries payable 9,955
Sales discounts 65,200
Sales returns and allowances 24,000
Utilities expense 12,000
problem 2 - Bank Reconciliation Honolulu Cookie Company provides the following information in order for you to prepare the company's bank reconciliation:
Balance per company records at end of month $53,300
Bank service charge for the month 200
NSF check returned with bank statement 1,400
Outstanding checks at month end 18,800
Balance per bank at end of month 62,500
Deposit in transit at month end 8,000
problem 3 - Income Statement (Single-Step) The following are information for the Lotu Wo Company:
Net Sales 5,60,000
Interest Revenue 600
Cost of Goods Sold 3,66,000
Administrative Expenses 12,000
Selling Expenses 18,000
Interest Expense 2,000
Income Tax Expense 50,000
Based on the above, prepare a Single-Step Income Statement for the Lotu Wo Company.
problem 4 - Income Statement (Multiple-Step) Prepare a Multiple-Step Income Statement based on the information presented in problem 4 above.
problem 5 - Uncollectible Accounts
The Olympic Company has an accounts receivable balance at December 31, 2010 of $159,548.00. The existing balance in the Allowance for Uncollectible Accounts was a credit of $2,563.94. The company had net sales during 2010 of $789,933.00. Prepare the adjusting entry at December 31, 2010 to record the estimated uncollectible accounts under each of the following assumptions:
a) The company uses the percentage of receivables method and estimates that 3% of their accounts receivables will not be collectible.
b) The company uses the percentage of sales method and estimates that 1% of their net sales will be uncollectible.
problem 6 - Inventory Valuation
Kauai Surf Company sells high-end surfboards to tourists. The inventory is purchased from a manufacturer in Honolulu. At the beginning of 2010, the company had 20 surfboards on hand which they had purchased at a cost of $50 each. During 2010, they purchased an additional 40 surfboards at a cost of $60 each on June 12 and another 70 surfboards at a cost of $80 each. At the end of the year, there were 30 unsold surfboards in ending inventory. The company uses the periodic method of inventory. For each of the following inventory valuation methods, determine (a) the ending inventory value and (b) the cost of goods sold:
c) Weighted Average Cost
problem 7- Interest Calculations
find out the amount of interest for each of the following independent situations (assume 365 days per year):
a) $400,000 is borrowed at 6% interest for 1 year.
b) $50,000 is borrowed at an annual interest rate of 4% for 60 days.
c) $120,000 is borrowed at an annual interest rate of 7% for 275 days.
problem 8 - Perpetual and Periodic inventory
a) Describe the difference between the perpetual inventory method and the periodic inventory method.
b) Indicate for what types of inventory would each of the two inventory methods would be appropriate.
problem 9 - Closing Entries
a) Describe the nature of Closing Entries. I.e. what is the purpose of closing entries?
b) For each of the following accounts, indicate whether it is closed at the end of the year:
a) Salaries Expense
b) Accounts Receivable
c) Sales Revenues
d) Retained Earnings
f) Rent Expense
g) Interest income
h) Accounts Payable
i) Depreciation Expense
j) Notes Payable