Accounting Exercises (Misc.)

Excerise 7.11 A and B only (page 206) : For each of the following situations, prepare theadjusting entry for the month ended May 31 and indicate the effect each adjustment would haveon net income:A. The May telephone bill for Scheele Company arrived in the accounting department onJune 8. The invoice totaled $210.B. Bailey, Inc. had an arrangement with a local newspaper to run a full-page advertisementevery Sunday. The cost of each ad was $350. The newspaper sends Bailey a bill on the15th of the next month. There were four Sundays in the month of May.ANSWER:Exercise 7.12 B and C only (page 206): For each of the following situations, prepare theadjusting entry for the month ended July 31 and indicate the effect each adjustment would haveon net income:B. On July 1, Rottman Company had a $390 balance in its supplies account. During July, $1,450of additional supplies was purchased. An inventory at July 31 showed $275 of supplies still onthe shelves.C. Last year, Apple Enterprises purchased some equipment at a total cost of $75,000. Theestimated useful life of the equipment is 5 years. Apple prepares semiannual financial statements.ANSWER:Exercise 7.18 (pages 207-208): The adjusted trial balance of Murphys Taxi Service, Inc.,follows. Determine the net income or loss for the month of May and the balance in the RetainedEarnings account that would appear on the balance sheet.Murphy’s Taxi Service, Inc.Adjusted Trial BalanceMay 31, 2010CashPrepaid InsuranceAutomobilesA/D AutomobilesCapital StockRetained EarningsPassenger fee revenueSalary expenseFuel expenseDepreciation expenseDebits$ 1,920$ 690$29,500Credits$12,800$15,000$ 3,720$ 4,250$ 2,400$ 485$ 615Repairs and maintenance expenseTotals$ 160$35,770$35,770ANSWER:Problem 7.1 1 and 7 only (pages 208-209): Biando Corporation began operations on May 1,2010 and completed the following transactions during its first month of operations.A. Sold capital stock for $30,000.B. Purchased land and building valued at $35,000 and $165,000, respectively, by paying $10,000cash and signing a 20-year mortgage for the balance.C. Purchased office equipment on account, $7,500.D. Billed a customer for services performed, $5,000.E. Received an $800 deposit from a customer for services to be performed next month.F. Made a partial payment on account for the office equipment purchased in transaction (C),$1,500.G. Performed a service and immediately collected $2,000.H. Received and immediately paid the telephone bill for the month, $380.I. Paid a dividend to owners, $3,000.J. Received, but did not pay, the monthly utility bill, $450.1. Prepare the general journal entries to record each of these events.7. Prepare the closing entries.ANSWER:Exercise 9.5 (page 265): Prepare journal entries for these transactions of Brayton Company usingthe gross price method and the perpetual inventory system.Apr 8 Purchased $15,800 in direct materials; terms 1/10, n/30, FOB shipping point.11 $3,080 direct materials were requisitioned from the direct materials warehouse.15 Filled indirect materials requisition $800. These materials are recorded as supplies.17 $380 in direct materials requisitioned on April 11 were not used in production and werereturned to the warehouse.17 Paid for direct materials purchased April 8.ANSWER:Exercise 9.7 (page 265): Carlson Company incurred the following manufacturing overhead costsduring the month of June 2010. Prepare the journal entry to record the costs.Depreciation, building $7,000Wages earned but not yet paid, janitor 600Electricity used and paid, factory 350Rent on equipment previously paid 900ANSWER:Exercise 9.8 (page 265): Erickson Company applies unit-related manufacturing overhead on thebasis of machine hours. The following unit-related overhead data were accumulated by theaccounting department:Estimated ActualMachine Hours 450,000 500,000Overhead costs 900,000 950,000What is the amount of over- or underapplied overhead?ANSWER:Exercise 9.11 (page 266): Anderson has identified the following operating activities for itscompany, the estimated overhead cost associated with each activity, an appropriate cost driver foreach activity, and the estimated usage of the cost driver for the coming period. Using thisinformation, determine the appropriate overhead rates.Activity Costs Cost Driver Est. UsageOccupying facilities $800,000 Square feet 100,000Testing quality $50,000 Production Runs 100Carrying inventory $125,000 Pounds of Material 1,500Setting up machines $60,000 Production Runs 100Packing containers $400,000 Units Made 200,000Using Machines $200,000 Machine hours 100,000ANSWER:Problem 9.3 A only (page 268): Rompola Corporation manufactures futons with the followingstandard costs per unit:Direct materials 80 yards @ $2.00 per yardDirect labor 20 hours @ $20.00 per hourThe actual results for the year were as follows:Direct materials 120,000 yards purchased at a cost of $264,000; 118,000 yards usedDirect labor 32,000 hours worked at a total cost of $604,800Production 1,500 unitsCompute the following variances:1. Direct materials price variance2. Direct materials usage variance3. Direct materials inventory variance4. Direct labor price variance5. Direct labor usage varianceANSWER:Exercise 10.1 (page 297): In each of the following situations, determine the month in which thebusiness should recognize the revenue:A. On June 5, Jacquie Monahan, an editor, received an advance from a publisher. She performedthe work during the period July 8 through July 22. On August 9, Jacquie sent the publisher anaccounting of her hours.B. On February 27, Pauls Plumbing placed an advertisement with the Kansas City Tribune. Thefull page ad ran during the week of March 15-22. The Tribune billed Pauls Plumbing for the adon March 7, with payment terms of n/30. Payment was received by the Tribune on April 4.C. On November 25, Bookworm, Inc., sold an encyclopedia to Childrens Learning Center onaccount. Payment was due on December 25 but was not received until January 15.ANSWER:Exercise 10.2 (page 297): In each of the following situations, determine the dollar amount of therevenue to be recognized:A. Metric Corporation received $10,000 from a customer as a deposit on a special order.B. Pearldine, Inc., shipped a machine to a customer and billed the customer for the remainingamount owed, $30,000. The customer had made a deposit of $8,000 two weeks prior to shipmentdateC. Catherine Dole, a doctor, received $200 in copayments from various patients during themonth. She also billed several insurance companies $3,500 for services rendered to thesepatients. The insurance companies usually pay within 60 days of receipt of the bills.ANSWER:Exercise 10.9 (page 298): A review of the financial statements of Micromania, Inc., revealed abeginning and ending Allowance for Uncollectible Accounts balance of $32,500 and $28,600respectively. If the uncollectible account expense for the period was $15,530, what was the totaldollar amount of accounts written off during the period?ANSWER:Exercise 10.12 (page 298): The following information is taken from the records of the PerryCompany. Perry uses a perpetual inventory system.DateTransactionNumber of UnitsUnit CostMay 1Beginning inventory28$5.004Sale1012Purchase18$4.0016Sale621Sale1425Purchase8$3.0031Sale17Determine the cost of goods sold for the month using FIFO and LIFO cost flow assumptions.How many units are in ending inventory and what is the cost of ending inventory under eachassumption?ANSWER:Exercise 10.17 (page 299): Manley Company planned to sell 140,000 units this year at $6.00 perunit. Actual results indicate that 142,000 units were sold at $6.25 per unit. What are the salesprice and sales quantity variances?ANSWER: