Intermediate Accounting I

Part A
20 Point Questions (3 questions x 20 points = 60 total points)
Show all work.
1. The following information is provided in the 2011 annual report to
shareholders of The Biz Store:
December 31, 2011 December 31, 2010
Accounts Receivable Y $ 6 million
Inventory $ 25 million $ 20 million
Total assets $ 250 million X
Total Stockholders’ Equity W $ 130 million
Net Sales $ 115 million
Cost of goods sold Z
Net Income U
Average Collection Period 22.2 days
Average days in inventory 104 Days
Equity multiplier 1.9
Return on stockholders’ Equity 16.0 %
Profit Margin on sales 17.4 %
ROA V
Required: Compute U-Z in the table
above.

2. Shown below is the activity for one of the products of Random Creations:
January 1 balance, 80 units @ $50 $4,000
Purchases:
January 18: 40 Units @ $51
January 28: 40 Units @ $52
Sales:
January 12: 30 Units
January 22: 30 Units
January 31:45 Units
2a. Compute the ending inventory and cost of goods sold assuming Random
Creations uses FIFO.
2b. Compute the ending inventory and cost of goods sold assuming Random
Creations uses LIFO and perpetual inventory system.
2c. Compute the ending inventory and cost of goods sold assuming Random
Creations uses LIFO and a periodic inventory system.
2d. Compute the ending inventory and cost of goods sold assuming Random Creations
uses average cost and a periodic inventory system.
2e. Compute the ending inventory and cost of goods sold assuming Random
Creations uses average cost and a perpetual inventory system.

3. On January 3, 2011, Michelson & Sons acquired a tract of land just
outside the city limits. The land and existing building were purchased for $2.4
million. Michelson paid $400,000 and signed a noninterest-bearing note
requiring the company to pay the remaining $2,000,000 on December 31, 2012. An
interest rate of 7% properly reflects the time value of money for this type of
loan agreement. Transfer taxes, title insurance and other costs totaling
$24,000 were paid at closing. During February, the old building was demolished
at a cost of $120,000, and an additional $100,000 was paid to clear and grade
the land. Construction of a new building began on March 1 and was completed on
October 30. Construction expenditures were as follows:
March 30 $ 800,000
June 30 1, 200,000
July 30 1,200,000
September 1 600,000
Michelson did not borrow specifically for the construction project, but did
have the following debt outstanding throughout 2011:
$6,000,000, 8% long-term note payable
$2,000,000, 5% long-term note payable
In December, the company purchased equipment and office furniture and fixtures
for a lump-sum price of $800,000. The fair values of the equipment and the
furniture and fixtures were $540,000 and $360,000, respectively. In December,
Michelson paid $340,000 for the construction of parking lots and landscaping.
Required:
3a. Determine the initial values of the various assets that Michelson acquired
or constructed during 2011.
3b. How much interest expense will Michelson report in its 2011 income
statement?

Part B
4 points Questions (10 questions x 4 points = 40 total points)
Show all Works
1. Tri Fecta, partnerships, had revenues of $360,000 in its first year of
operations. The partnership has not collected on $35,000 of its sales, and
still owes $40,000 on $150,000 of merchandise they purchased. There was no
inventory on hand at the end of the year. The partnership paid $25,000 in
salaries. The partners invested $40,000 in the business and $25,000 was
borrowed on a five-year note. The partnership paid $3,000 in interest that was
the amount owed for the year and paid $8,000 a two-year insurance policy on the
first day of business.
Required
1a. Compute net income for the first year for Tri Fecta.
2a. Compute the cash balance at the end of the first year for Tri Fecta.
2. Presented below is a partial trial balance for the Messenger Corporation at
December 31, 2011.
Account Title Debits Credits
Cash and Cash Equivalents 30,000
Account Receivable 195,000
Raw materials inventory 36,000
Note receivable 120,000
Interest receivable 4,000
Interest Payable 7,000
Marketable securities 48,000
Land 100,000
Buildings 1,500,000
Accumulated depreciation-buildings 740,000
Work in process inventory 38,000
Finish goods inventory 98,000
Equipment 400,000
Accumulated depreciation – equipment 230,000
Franchise (Net of amortization) 120,000
Prepaid insurance (for the next year) 60,000
Unearned revenue 48,000
Accounts payable 240,000
Note payable 500,000
Salaries Payable 6,000
Cash restricted for payment of Note Payable 100,000
Allowance for uncollectible Accounts 24,000
Sales revenues 900,000
Cost of goods sold 500,000PLEASE SEE ALL  QUESTIONS ATTACHED IN DOCUMENT BELOW: