Exercises 3-1 Beverly Crusher and 3-8 Andy Roddick

Exercises 3-1,3-8

Exercise 3-1

Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.

April 2 Invested $32,000 cash and equipment valued at $14,000 in the business.

2 Hired a secretary-receptionist at a salary of $290 per week payable monthly.

3  Purchased supplies on account $700. (Debit an asset account.)

7 Paid office rent of $600 for the month.

11 Completed a tax assignment and billed client $1,100 for services rendered. (Use Service Revenue account.)

12 Received $3,200 advance on a management consulting engagement.

17 Received cash of $2,300 for services completed for Ferengi Co.

21 Paid insurance expense $110.

30 Paid secretary-receptionist $1,160 for the month.

30 A count of supplies indicated that $120 of supplies had been used.

30 Purchased a new computer for $6,100 with personal funds. (The computer will be used exclusively for business purposes.)

Journalize the transactions in the general journal. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Apr. 2
Apr. 2
Apr. 3
Apr. 7
Apr. 11
Apr. 12
Apr. 17
Apr. 21
Apr. 30
Apr. 30
Apr. 30

Exercise 3-8

Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August.

(a) At August 31, Roddick owed his employees $1,900 in salaries and wages that will be paid on September 1.

(b) At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the bill would be approximately $600.

(c) On August 1, Roddick borrowed $30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.

(d) A telephone bill in the amount of $117 covering August charges is unpaid at August 31.

Prepare the adjusting journal entries as of August 31, 2014, suggested by the information above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

TUTORIAL PREVIEW

Apr.     2          Cash................................................................................. 32,000

Equipment ..................................................................... 14,000

Beverly Crusher, Capital..................................                                                            46,000

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Blink Company - Prepare journal entries to record the following

Blink Company  - Prepare journal entries to record the following merchandising transactions of Blink Company, which applies the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for

example, record the purchase on July 1 in Accounts Payable—Boden.)

Jul. 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.

Jul. 2 Sold merchandise to Creek Co. for $900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $500.

Jul. 3 Paid $125 cash for freight charges on the purchase of July 1.

Jul. 8 Sold merchandise that had cost $1,300 for $1,700 cash.

Jul. 9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.

Jul. 11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.

Jul. 12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.

Jul. 16 Paid the balance due to Boden Company within the discount period.

Jul. 19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.

Jul. 21 Issued a $200 credit memorandum to Art Co. for an allowance on goods sold on July 19.

Jul. 24 Paid Leight Co. the balance due after deducting the discount.

Jul. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.

Jul. 31 Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

 TUTORIAL PREVIEW

July  1        Merchandise Inventory........................................................     6,000

                           Accounts Payable—Boden.........................................                             6,000

                     Purchased goods on credit.

         2       Accounts Receivable—Creek Co.........................................        900

File name Blink Company.docx    File type: .docx     PRICE:$10

Valley Companys adjusted trial balance on August 31, 2015

Valley Company’s adjusted trial balance on August 31, 2015, its fiscal year-end, follows.

Debit               Credit

  Merchandise inventory                                             $36,000

 Other (noninventory) assets                                       144,000

 Total liabilities                                                                                    $41,580

  Common stock                                                                                  48,460

  Retained earnings                                                                             71,141

  Dividends                                                                 8,000

 Sales                                                                                                   246,240

 Sales discounts                                                           3,767

 Sales returns and allowances                                     16,252

 Cost of goods sold                                                     95,489

 Sales salaries expense                                     33,735

 Rent expense—Selling space                                     11,573

 Store supplies expense                                               2,955

 Advertising expense                                                  20,930

 Office salaries expense                                              30,780

 Rent expense—Office space                                     2,955

 Office supplies expense                                             985

   Totals                                                                       $407,421         $407,421

Invoice cost of merchandise purchases $ 105,840  

Purchase discounts received 2,223  

Purchase returns and allowances 5,080  

Costs of transportation-in 3,900

Required:     

1. Compute the company’s net sales for the year.

2. Compute the company’s total cost of merchandise purchased for the year.

3.  Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.

4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

TUTORIAL PREVIEW

1... Net sales:

Sales	$246,240
Less:       Sales discounts	(3,767)
Sales returns and allowances	(16,252)
Net sales	$226,221

File name Valley Company.docx    File type: .docx     PRICE:$12

Heck manufacturing company is thinking of launching

Heck manufacturing company is thinking of launching a new product. The company expects to sell$950,000 of the new product in the first year and $1,500,000 the second and third year and $2,000,000 per year thereafter. Direct costs including labor and materials will be 40% of sales. Indirect incremental costs are estimated at $110,000 a year. The project requires a new plant that will cost a total of $2,000,000, which will be a depreciated straight line over the next 5 years.

The firm's marginal tax rate is 35%, and its cost of capital is 10%.

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values.

Assignment Guidelines

Using the information in the assignment description:

Prepare a statement showing the incremental cash flows for this project over an 8-year period.

Calculate the payback period (P/B) and the net present value (NPV) for the project.

Answer the following questions based on your P/B and NPV calculations:

Do you think the project should be accepted? Why?

Assume the company has a P/B (payback) policy of not accepting projects with life of over 4.5 years.

If the project required additional $1,000,000 investment in land and building, how would this affect your decision? Explain.

TUTORIAL PREVIEW

Calculation of payback period

Year	Cashflows	Cumulative cash flows
0	-2,000,000
1	503,350	503,350
2	717,850	1,221,200

File name Heck manufacturing.xlsx   File type: .xlsx     PRICE:$20

Accounting Week 2

Accounting Week 2

BE9-1

BE9-7

E9-12

P9-7A

BE9-1 The following expenditures were incurred by Obermeyer Company in purchasing land: cash price $70,000, accrued taxes $3,000, attorneys’ fees $2,500, real estate broker’s commission $2,000, and clearing and grading $3,500. What is the cost of the land?

BE9-7 On January 1, 2011, the Ramirez Company ledger shows Equipment $29,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of $2,000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation

E9-12 The following are selected 2011 transactions of Franco Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.

P9-7A The intangible assets section of Redeker Company at December 31, 2011, is presented below.

Problems: Set A 435

(b) Depreciation Expense— building $570,000; equipment $4,772,000

(c) Total plant assets $61,270,000

Patent ($70,000 cost less $7,000 amortization) $63,000

Franchise ($48,000 cost less $19,200 amortization) 28,800

Total $91,800

The patent was acquired in January 2011 and has a useful life of 10 years. The franchise was acquired in January 2008 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2012.

Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company.

Jan.–June Developed a new product, incurring $140,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.

Sept. 1 Paid $50,000 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October.

Oct. 1 Acquired a franchise for $100,000. The franchise has a useful life of 50 years.

Instructions

(a) Prepare journal entries to record the transactions above.

(b) Prepare journal entries to record the 2012 amortization expense.

(c) Prepare the intangible assets section of the balance sheet at December 31, 2012.

TUTORIAL PREVIEW

All of the expenditures should be included in the cost of the land. Therefore, the cost of the land is
Cash price	70,000
Accrued taxes	3,000

File name Accounting week 2.xlsx   File type: .xlsx     PRICE:$12