Question 1

ABC Company purchased a new computer at the beginning of the year at a cost of $1,600.  The estimated salvage value is $100.  The estimated useful life is 3 years.  Complete the schedule below for the 3 years using Straight-Line Depreciation Method.

    Year  Depreciation Expense    Accumulated Depreciation          Net Book Value

    1                                         

    2                                         

    3

Question 2

ABC Company purchased a new computer at the beginning of the year at a cost of $1,600.  The estimated salvage value is $100.  The estimated useful life is 3 years.  Complete the schedule below for the 3 years using Double-Declining-Balance Depreciation Method.

    Year  Depreciation Expense    Accumulated Depreciation          Net Book Value

    1                                         

    2                                         

    3                                         

Question 3

The 2015 Financial Statements of Dell Company include the following footnote:

                                                                 2016                 2015

    Land                                                 $4,000,000       $4,000,000

    Building                                            $6,000,000       $5,400,000

    Equipment                                        $1,500,000       mce_markernbsp;   800,000

    Total Cost                                         $11,500,000      $10,200,000

less: accumulated depreciation         $4,500,000        $3,800,000

    Net Book Value                                   $7,000,000       $6,400,000

    In addition, Sales for 2016 were $30,000,000, and depreciation expense was $700,000. 

    a) Calculate Property, Plant, and Equipment Turnover for 2016.

    b) Estimate the Useful Life on average for the depreciable assets at the end of 2016.

    c) Estimate the Property and Equipment Percent Used Up at the end of 2016.

Question 4

XYZ Company sells $100,000 of bonds to private investors.  The bonds are due in 10 years, and have a 5% coupon rate, and interest is paid semi-annually.  The bonds were sold to yield 6%.

a) What proceeds does XYZ company receive from investors?

b) What periodic interest payment does XYZ make to investors?

Question 5

On October 1, 2016, ABC company took out a short-term loan of a $100,000 to be repaid in 9 months.  The annual interest rate is 6% with no interest payments due until the loan is repaid.  How much interest should ABC company accrue by year-end December 31, 2016?  How should it be recorded in the Financial Statements?

Please record the following items in Journal Entry format.  Clearly indicate the: (a) account name, (b) whether it is a (debit) or (credit), and (c) the amount.  See my example below:

Example: The firm purchased equipment for $1,000.   Clearly indicate the: (a) account name, (b) whether it is a (debit) or (credit), and (c) the amount.

Correct way to answer:

Equipment (debit) $1,000

Cash (Credit) $1,000

ABC Company purchased 150 computers from its suppliers on credit at a cost of $1,000 each.  The computers were purchased to be held for sale to customers by the end of the month.  ABC Company had sold all 150 computers for $1,500 each.  The store received payment for these computers, but waited until the end of the month to pay the supplier.  Please record:

a) the purchase of the computers on credit.

b) the sale of the computers on credit.

c) the receipt of cash for the sale of the computers in full from the customers.

d) the payment made to the suppliers for the computers originally purchased on credit.

Question 7

XYZ Company manufactures skateboards.  The company offers a 1-year warranty on all products.  During 2016, the company recorded Sales Revenue of $2,000,000.  Historically, about 1% of all Sales Revenue for the year are the cost of repairing and/or replacing goods under warranty.  Assume that at the start of the year, XYZ Company's Balance Sheet included an Accrued Warranty Liability of $5,000.  During the year, actual cost of repair and/or replacement of goods under warranty was $18,000.

a) Calculate XYZ company's estimated warranty expense for 2016.

b) What is the balance of the warranty liability at the end of the year?

Question 8

ABC Company reported the following figures on the Balance Sheet:

Retained Earnings Beginning of Year= $5,000,000.

Retained Earnings End of Year = $6,000,000.

If ABC Company reported Net Income for the Year of $1,200,000, how much dividends did they pay during the year?

Question 9

    DEF Company had the following transactions.  Record the following items in Journal Entry format.  Clearly indicate the (a) account name, (b) whether it is a (debit) or (credit), and (c) the amount.

    1.  Issued 7,000 shares of No-Par, Common Stock for $155,000.

    2.  Issued 3,000 shares of $100 Par, Preferred Stock at $117 per share.

    3.  Repurchased 4,000 of its Common Shares for $30 cash per share (Treasury Stock).

    4.  Reissued 1,500 of its Common Shares (Treasury Stock) for $35 cash per share.

Question 10

    Following is the Stockholders' Equity section of a recent Balance Sheet of XYZ Company.

    Stockholders' Equity:

 Common Stock, $10 par value, authorized shares, --- 1,000,000, issued shares --- 800,000 shares                                         $8,000,000

    Capital in Excess of Par                                                                                                                                                  $32,000,000

    Retained Earnings                                                                                                                                                            $1,000,000

    Common Stock in Treasury, at cost ---- 100,000 shares                                                                                                      ($5,000,000)

    Total Stockholders' Equity                                                                                                                                                $36,000.000

    a) What was the average issue price for the Common Shares issued?

    b) How many Common Shares are outstanding at the end of the year?

    c) What was the average cost at which the Treasury Stock was purchased?

    d)  Can you determine the current Market Value of the Common Stock from the above Balance Sheet?

Question 11

    GHI Company has the following stock outstanding:

    10,000 shares of $100 Par Value, 8%, Cumulative Preferred Stock

    10,000 shares of $1 Par Value, Common Stock

    Last year was the first year, GHI Company existed.  They did not have enough cash to pay any dividends.  This year, however, the company declares and pays $200,000 in dividends.

    a) How much of the $200,000 of dividends declared goes to the Preferred Shareholders?

    b) How much of the $200,000 of dividends declared goes to the Common Shareholders?

Question 12

    GHI Company has the following stock outstanding:

    10,000 shares of $100 Par Value, 8% Preferred Stock

    10,000 shares of $1 Par Value, Common Stock

    Last year was the first year, GHI Company existed.  They did not have enough cash to pay any dividends.  This year, however, the company declares and pays $200,000 in dividends.

    a) How much of the $200,000 of dividends declared goes to the Preferred Shareholders?

    b) How much of the $200,000 of dividends declared goes to the Common Shareholders?

Question 13

    JKL Company has 800,000 shares, $1 Par Value Common Stock outstanding.  JKL Company declares a 15% Common Stock Dividend when the market value of the Common Stock is $25 per share.  What is the effect on Retained Earnings of this small stock dividend?

Question 14

    JKL Company has 800,000 shares, $1 Par Value Common Stock outstanding.  JKL Company declares a 50% Common Stock Dividend when the market value of the Common Stock is $25 per share.  What is the effect on Retained Earnings of this large stock dividend?