Question
Show computations for each of the following, and clearly show your final answer using the answer sheet provided.
1. AP Company had a credit balance of $15,000 on 1/1/12 and $11,000 on 12/31/2012 in its Unearned Rent account. AP received $60,000 cash in 2012, all of which was credited to Unearned Rent account. Calculate the amount of Rent Revenue recognized in 2012.
2. PVP Company sublet a warehouse for 4 years at an annual rental of $60,000, beginning on November 1, 2012. The tenant paid one year's rent in advance on 11/1, which PVP recorded as a credit to Unearned Rent. Show computation and prepare the adjusting entry on December 31, 2012 for PVP.
3. The following information pertains to A&E Company's insurance account:
Premiums paid by A&E to purchase insurance in 2012 $ 12,800
Prepaid insurance account balance as of 12/31/2012 $3,000
Prepaid insurance account balance as of 12/31/2011 $1,200
Calculate the amount recorded by A&E as Insurance Expense in 2012.
4. A&E Company had the following transactions during 2012:
• A $10,000 write-down of receivables.
• A $60,000 gain from fluctuations in foreign currency exchange.
• A $60,000 write-off of obsolete inventory
In its 2012 income statement, assuming a 40% tax rate, what amount should A&E report as total infrequent net gains/losses that are considered extraordinary?
5. For the year ended December 31, 2012, A&E Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available:
Allowance for uncollectible accounts balance, 1/1/12 $5,000
Uncollectible accounts written off in 2012 10,000
Allowance for uncollectible accounts balance 12/31/12 60,000
Calculate the amount of bad debt expense recorded by A&E in 2012.
6. A&O Corp. financed the purchase of a machine on December 31, 2012 by making payments of $5,000 each year, for five years starting on December 31, 2012. The appropriate rate of interest is 10 %. Using the appropriate factors given below, calculate the cost of the machine to A&O on 12/31/2012.
• The future value of one for five periods at 10 % is 1.61051.
• The present value of one for five periods at 10 % is 0.62092.
• The future value of an ordinary annuity for five payments at 10 % is 6.10510.
• The present value of an ordinary annuity for five payments at 10 % is 3.79079.
• The present value of an annuity-due for five payments at 10 % is 4.16986.
7. During 2012 the A&E Company had a net income of $100,000. In addition, selected accounts showed the following:
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2012
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2011
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Cash
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$153,000
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$119,000
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Accounts Receivable
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238,000
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306,000
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|
Inventory
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391,000
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340,000
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|
Property, Plant and Equipment
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1,342,000
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1,122,000
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Accumulated depreciation
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(476,000)
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(442,000)
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Accounts payable
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187,000
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102,000
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Additional information: Assume that during 2012, A&E sold equipment at a gain of $10,000. Also, assume that depreciation expense for 2012 was $74,000.
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Show calculations for the amount of cash provided by operating activities in 2012.
8. A person wins a lottery on 12/31/2012. She will receive 20 annual payments of $50,000 each starting on 12/31/2012. Assuming a 12% interest rate, what is the present value of her winnings? Use the appropriate factors given below.
• Present value of an ordinary annuity at 12 % for 20 payments 7.46944
• Future value of an ordinary annuity at 12 % for 20 payments 72.05244
• Present value of an annuity due at 12 % for 20 payments 8.36578
9. To obtain additional cash, A&E Corporation factors $200,000 of its accounts receivable to PVP Corporation. PVP assesses a finance charge of 5 percent of the amount of accounts receivable and retains an amount equal to 3 percent of accounts receivable to cover sales discounts, returns, and allowances.
Assuming that this transaction is on a without recourse basis, prepare a journal entry on the books of PVP Corporation to record this transaction. Show computations and prepare your journal entry using the answer sheet provided.
10. Assume the same data given in #9 above except that this transaction is on a with recourse basis. Prepare a journal entry on the books of A&E Corporation to record this transaction. Assume that A&E has determined the recourse obligation to be $6,000. Show computations and prepare your journal entry using the answer sheet provided.