202 Practice Final Exam Name_________________________

Note that this practice exam is substantially longer than the actual final exam will
be. The final exam will not contain any multiple choice questions. Such are
included here in order to provide additional practice on the material.

CHART OF ACCOUNTS -- not all are used for this exam

100 Cash
110 Accounts Receivable
115 Allowance for Uncollectible
Accounts
118 Interest Receivable
120 Inventory
130 Supplies
140 Prepaid Rent
150 Prepaid Insurance
155 Other Prepaid Expenses
160 Equipment
165 Accumulated Depreciation,
Equipment
170 Long Term Investments
172 Debt Investments
175 Stock Investments
176 Market Adjustment - Trading
177 Market Adjustment -
Available for Sale
180 Patents
182 Copyrights
184 Trademarks
188 Goodwill
189 Accumulated Amortization,
Intangibles
190 Notes Receivable
200 Accounts Payable
205 Salary & Wages Payable
210 Interest Payable
215 Rent Payable
400 Sales
410 Service Revenue
420 Sales Returns and Allowances
430 Sales Discounts
440 Interest Revenue
450 Dividend Revenue
460 Gain on Sale of Investments
470 Gain on Sale of Equipment
480 Gain on Bond Redemption
485 Unrealized Gain or Loss -
Income
500 Purchases
505 Purchase Returns & Allowances
510 Purchases Discounts
520 Freight-in
530 Cost of Goods Sold
540 Rent Expense
550 Supplies Expense
555 Insurance Expense
560 Salary & Wage Expense
565 Payroll Tax Expense
570 Freight Out Expense
575 Utility Expense
580 Bad Debts Expense
585 Depreciation Expense,
Equipment
587 Amortization Expense,
Intangibles
588 Organization Fees Expense
220 Insurance Payable 590 Interest Expense
225 Other Expenses Payable 595 Income Tax Expense
230 Unearned Revenue 596 Loss on Disposal of Equipment
232 Sales Tax Payable 597 Loss on Sale of Investments
234 FICA Tax Payable 598 Loss on Bond Redemption
236 Federal Taxes Payable
240 Dividends Payable
245 Bonds Payable
247 Discount on Bonds Payable
248 Premium on Bonds Payable
249 (Long Term) Notes Payable
250 Mortgage Payable
300 Preferred Stock
301 APIC, Preferred Stock
310 Common Stock
312 APIC, Common Stock
314 Common Stock Dividend
Distributable
320 Retained Earnings
325 Treasury Stock
326 APIC, Treasury Stock
329 Unrealized Gain or Loss -
Equity
330 Dividends
340 Income Summary
1. A company purchased land for $70,000 cash. Real estate brokers' commission
was $5,000 and $7,000 was spent for demolishing an old building on the land
before construction of a new building could start. Under the cost principle, the
cost of land would be recorded at

2. Presto Company purchased equipment and these costs were incurred:

Cash price $22,500

Sales taxes 1,800
Insurance during 320
transit
Installation and testing 430
Total costs $25,050

Presto will record the acquisition cost of the equipment as

3. Equipment was purchased for $90,000. Freight charges amounted to $4,200 and
there was a cost of $12,000 for building a foundation and installing the
equipment. It is estimated that the equipment will have a $18,000 salvage value
at the end of its 5-year useful life. Depreciation expense each year using the
straight-line method will be

4. Moreno Company purchased equipment for $450,000 on January 1, 2010, and

will use the double-declining-balance method of depreciation. It is estimated that
the equipment will have a 3-year life and a $20,000 salvage value at the end of
its useful life. The amount of depreciation expense recognized in the year 2012
will be

5. Equipment was purchased for $17,000 on January 1, 2010. Freight charges

amounted to $700 and there was a cost of $2,000 for building a foundation and
installing the equipment. It is estimated that the equipment will have a $3,000
salvage value at the end of its 5-year useful life. What is the amount of
accumulated depreciation at December 31, 2011, if the straight-line method of
depreciation is used?

6. An asset was purchased for $150,000. It had an estimated salvage value of

$30,000 and an estimated useful life of 10 years. After 5 years of use, the
estimated salvage value is revised to $24,000 but the estimated useful life is
unchanged. Assuming straight-line depreciation, depreciation expense in year 6
would be
7. On July 1, 2011, Hale Kennels sells equipment for $66,000. The equipment was
originally purchased on July 1, 2007 at a cost $180,000, had an estimated 5-year
life and an expected salvage value of $30,000. The company books depreciation
annually. What is the balance in Accumulated Depreciation as of December 31,
2010? What is the journal entry to update depreciation as of July 1, 2011?
What is the journal entry to record the sale of the equipment?

8. A coal company invests $16 million in a mine estimated to have 20 million tons
of coal and no salvage value. It is expected that the mine will be in operation for
5 years. In the first year, 1,000,000 tons of coal are extracted and sold. What is
the depletion expense for the first year?

9. Rooney Company incurred $280,000 of research and development cost in its

laboratory to develop a patent granted on January 1, 2011. On July 31, 2011,
Rooney paid $42,000 for legal fees in a successful defense of the patent. The
total amount debited to Patents through July 31, 2011, should be:

10. On October 1, Steve's Carpet Service borrows $400,000 from First National Bank
on a 3-month, $400,000, 8% note. The entry by Steve's Carpet Service to
record payment of the note and accrued interest on January 1 is

11. Four thousand bonds with a face value of $1,000 each, are sold at 103. The
entry to record the issuance is

12. Bryce Company has $1,500,000 of bonds outstanding. The unamortized

premium is $21,600. If the company redeemed the bonds at 101, what would be
the gain or loss on the redemption?

13. A $600,000 bond was retired at 103 when the carrying value of the bond was
$622,000. The entry to record the retirement would include a

14. In a recent year Cey Corporation had net income of $250,000, interest expense
of $50,000, and a times interest earned ratio of 9. What was Cey Corporation's
income before taxes for the year?
15. Presented here is a partial amortization schedule for Courtney Company who
sold $200,000, five year 10% bonds on January 1, 2011 for $216,222 and uses
semi-annual effective interest amortization. The effective rate was 8%.

BOND AMORTIZATION SCHEDULE

Interest Interest Interest Premium Unamortized Bond Carrying
Period Paid Expense Amortization Premium Value
Jan. 1, 2011 x x x $16,222 $216,222
July 1, 2011
Jan. 1, 2012 (i) (ii) (iii) (iv) (v)
What amount should be shown in cell (iii)?

16. Jared Company issued 6%, 5 year bonds, with par value of $800,000, paying
semiannual interest for $745,464. The annual market rate of interest on the
date of issue was 8%. Assuming effective interest method of amortization,
calculate the bond interest expense on the first interest payment date.

17. On January 1, 2013, Andrew Company issues $320,000, 15 year, 8% bonds

(paying semiannual interest) for $360,800, when the annual market rate of
interest is 6%. If the company uses the effective interest method of
amortization, the journal entry to record the semi-annual interest on June 30 will
include a:

18. Simon Company issued 4,000 shares of its $5 par value common stock in
payment of its attorney's bill of $35,000. The bill was for services performed in
helping the company incorporate. Simon should record this transaction by
debiting

19. Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value
common stock. This stock was sold later at a selling price of $6 per share. The
journal entry to record the sale is:

20. Ephram Company has 3,000 shares of 5%, $100 par non-cumulative preferred
stock outstanding at December 31, 2011. No dividends have been paid on this
stock for 2010 or 2011. Dividends in arrears at December 31, 2011 total
21. Norton, Inc. has 10,000 shares of 6%, $100 par value, noncumulative preferred
stock and 100,000 shares of $1 par value common stock outstanding at
December 31, 2010, and December 31, 2011. The board of directors declared
and paid a $50,000 dividend in 2010. In 2011, $110,000 of dividends are
declared and paid. What are the dividends received by the preferred and
common shareholders in 2011?

22. Joy Elle's Vegetable Market had the following transactions during 2011:
1. Issued $50,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of $22,000.
3. Acquired land by issuing common stock of par value $100,000.
4. Declared and paid a cash dividend of $2,000.
5. Sold a long-term investment (cost $63,000) for cash of $6,000.
6. Acquired an investment in IBM stock for cash of $12,000.
What is the net cash provided by financing activities?

23. Joy Elle's Vegetable Market had the following transactions during 2011:
1. Issued $50,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of $22,000.
3. Acquired land by issuing common stock of par value $100,000.
4. Declared and paid a cash dividend of $2,000.
5. Sold a long-term investment (cost $63,000) for cash of $6,000.
6. Acquired an investment in IBM stock for cash of $12,000.
What is the net cash provided by investing activities?

24. The net income reported on the income statement for the current year was
$225,000. Depreciation recorded on plant assets was $38,000. Accounts
receivable and inventories increased by $2,000 and $8,000, respectively.
Prepaid expenses and accounts payable decreased by $1,000 and $11,000
respectively. How much cash was provided by operating activities?

25. If $20,000 is deposited in a savings account paying interest of 4% compounded

annually, what amount will be in the account at the end of 5 years?

26. If $20,000 is deposited in a savings account at the end of each year and the
account pays interest of 5% compounded annually, what will be the balance of
the account at the end of 10 years?
27. If you are able to earn an 8% rate of return, what amount would you need to
invest today to have $20,000 one year from now?

28. Dexter Company is considering purchasing equipment. The equipment will

produce the following cash flows:

Year 1 $60,000
Year 2 $100,000

Dexter requires a minimum rate of return of 10%. What is the maximum price
Dexter should pay for this equipment?

29. Hazel Company has just purchased equipment that requires annual payments of
$30,000 to be paid at the end of each of the next 4 years. The appropriate
discount rate is 15%. What is the present value of the payments?

30. Miley Enterprises sold equipment on January 1, 2011 for $5,000. The equipment
had cost $24,000. The balance in Accumulated Depreciation at January 1 is
$20,000. What entry would Robot make to record the sale of the equipment?

31. Conroy Company purchased a machine at a cost of $90,000. The machine is

expected to have a $5,000 salvage value at the end of its 5-year useful life.
Instructions:
Compute annual depreciation for the first and second years using the
(a) straight-line method.
(b) double-declining-balance method.

32. Marlow Company purchased equipment on January 1, 2010 for $70,000. It is

estimated that the equipment will have a $5,000 salvage value at the end of its
5-year useful life. It is also estimated that the equipment will produce 100,000
units over its 5-year life.
Instructions
Answer the following independent questions.
1. Compute the amount of depreciation expense for the year ended December
31, 2010, using the straight-line method of depreciation.
2. If 16,000 units of product are produced in 2010 and 24,000 units are
produced in 2011, what is the book value of the equipment at December 31,
2011? The company uses the units-of-activity depreciation method.
3. If the company uses the double-declining-balance method of depreciation,
what is the balance of the Accumulated Depreciation—Equipment account at
December 31, 2012?
33. Delta Company issued bonds with a face amount of $1,500,000 in 2005. As of
January 1, 2011, the balance in Discount on Bonds Payable is $4,800. At that
time, Delta redeemed the bonds at 101.

Instructions
Assuming that no interest is payable, make the entry to record the redemption.

34. English Company billed its customers a total of $1,890,000 for the month of
November. The total includes a 5% state sales tax.
Instructions
(a) Determine the proper amount of revenue to report for the month.
(b) Prepare the general journal entry to record the revenue and related liabilities
for the month.

35. Based on the following information, compute the (1) current ratio and (2)
working capital.
Current assets $200,000
Total assets 900,000
Current liabilities 80,000
Total liabilities 500,000

36. Taylor Corporation issued $2 million, 10-year, 8% bonds on January 1, 2011.

Instructions
Prepare the entries to record the sale of these bonds and the first semi-annual
payment of interest, assuming they were issued at the following. Use the
effective interest method of amortization of the discount or premium.
(a) 98, with an effective rate of 9%.
(b) 103, with an effective rate of 7%.

37. Wood Company retired $500,000 face value, 9% bonds on June 30, 2011 at 98.
The carrying value of the bonds at the redemption date was $508,000.

Instructions
Prepare the journal entry to record the redemption of the bonds.
38. Presented below are three independent situations:
(a) Howell Corporation purchased $350,000 of its bonds on June 30, 2011, at
102 and immediately retired them. The carrying value of the bonds on the
retirement date was $339,500. The bonds pay semiannual interest and the
interest payment due on June 30, 2011, has been made and recorded.
(b) Justice, Inc. purchased $400,000 of its bonds at 97 on June 30, 2011, and
immediately retired them. The carrying value of the bonds on the retirement
date was $393,000. The bonds pay semiannual interest and the interest
payment due on June 30, 2011, has been made and recorded.

Instructions
For each of the independent situations, prepare the journal entry to record the
retirement or conversion of the bonds.

39. Mert Company borrowed $750,000 on January 1, 2011, by issuing $750,000,

8% mortgage note payable. The terms call for semiannual installment payments
of $50,000 on June 30 and December 31.
Instructions
(a) Prepare the journal entries to record the mortgage loan and the first two
installment payments.
(b) Indicate the amount of mortgage note payable to be reported as a current
liability and as a long-term liability at December 31, 2011.

40. The following selected transactions pertain to Nesley Corporation:

Jan. Issued 100,000 shares, $10 par value, common stock for $22 per share.
3
Feb. Issued 6,000 shares, $10 par value, common stock in exchange for
10 special purpose equipment. Nesley Corporation's common stock has
been actively traded on the stock exchange at $25 per share.

Instructions
Journalize the transactions.
41. Yunger Corporation has the following stockholders' equity accounts on January
1, 2011:
Common Stock, $10 par value $1,500,000
Paid-in Capital in Excess of Par 200,000
Retained Earnings 500,000
Total Stockholders' Equity $2,200,000

The company uses the cost method to account for treasury stock transactions.
During 2011, the following treasury stock transactions occurred:

April 1 Purchased 10,000 shares at $16 per share.

August 1 Sold 4,000 shares at $18 per share.
October1 Sold 4,000 shares at $15 per share.

Instructions
(a) Journalize the treasury stock transactions for 2011.
(b) Prepare the Stockholders' Equity section of the balance sheet for Yunger
Corporation at December 31, 2010. Assume net income was $110,000 for 2011.

42. Agler Corporation purchased 3,000 shares of its $5 par value common stock for
a cash price of $12 per share. Two months later, Agler sold the treasury stock
for a cash price of $10 per share.

Instructions
Prepare the journal entry to record the sale of the treasury stock assuming
(a) No balance in Paid-in Capital from Treasury Stock.
(b) A $4,000 balance in Paid-in Capital from Treasury Stock.

43. On January 1, 2011, Dolan Corporation had 60,000 shares of $1 par value
common stock issued and outstanding. During the year, the following
transactions occurred:
Mar. 1 Issued 25,000 shares of common stock for $400,000.
June 1 Declared a cash dividend of $2.00 per share to stockholders of record
on June 15.
June 30 Paid the $2.00 cash dividend.
Dec. 1 Purchased 5,000 shares of common stock for the treasury for $22 per
share.
Dec. 15 Declared a cash dividend on outstanding shares of $2.25 per share to
stockholders of record on December 31.

Instructions
Prepare journal entries to record the above transactions.
44. A comparative balance sheet for Mann Company appears below:

MANN COMPANY
Comparative Balance Sheet
Dec. 31, Dec. 31,
2011 2010
Assets
Cash $ 27,000 $10,000
Accounts receivable 18,000 14,000
Inventory 25,000 18,000
Prepaid expenses 6,000 9,000
Long-term investments -0- 18,000
Equipment 60,000 32,000
Accumulated depreciation—equipment (20,000) (14,000)
Total assets $116,000 $87,000

Liabilities and Stockholders' Equity

Accounts payable $ 17,000 $ 7,000
Bonds payable 37,000 47,000
Common stock 40,000 23,000
Retained earnings 22,000 10,000
Total liabilities and stockholders' $116,000 $87,000
equity

Additional information:
1.Net income for the year ending December 31, 2011 was $27,000.
2.Cash dividends of $15,000 were declared and paid during the year.
3.Long-term investments that had a cost of $18,000 were sold for $14,000.
4.Sales for 2011 were $120,000.

Instructions
Prepare a statement of cash flows for the year ended December 31, 2011, using
the indirect method.
45. A comparative balance sheet for Hartman Corporation is presented below:
HARTMAN CORPORATION
Comparative Balance Sheet
2011 2010
Assets
Cash $ 46,000 $ 31,000
Accounts receivable (net) 70,000 60,000
Prepaid insurance 25,000 17,000
Land 18,000 40,000
Equipment 70,000 60,000
Accumulated depreciation (13,000)
(20,000)
Total Assets $209,000 $195,000

Liabilities and Stockholders' Equity

Accounts payable $ 11,000 $ 6,000
Bonds payable 27,000 19,000
Common stock 140,000 115,000
Retained earnings 55,000
31,000
Total liabilities and stockholders' $209,000 $195,000
equity
Additional information:
1. Net loss for 2011 is $10,000.
2. Cash dividends of $14,000 were declared and paid in 2011.
3. Land was sold for cash at a loss of $4,000. This was the only land
transaction during the year.
4. Equipment with a cost of $15,000 and accumulated depreciation of
$10,000 was sold for $5,000 cash.
5. $22,000 of bonds were retired during the year at carrying (book) value.
6. Equipment was acquired for common stock. The fair market value of the
stock at the time of the exchange was $25,000.

Instructions
Prepare a statement of cash flows for the year ended 2011, using the indirect
method.

46. Rob Honda plans to buy a home and can deposit $10,000 for the purchase
today. If the annual interest rate is 8%, how much can Rob expect to have for a
down payment in 5 years?

47. Bill and Ellen Sweatt plan to invest $2,000 a year in an educational IRA for their
granddaughter, Sloane Martin. They will make these deposits on January 2nd of
each year. Bill and Ellen feel they can safely earn 8%. How much will be in this
account on December 31 of the 18th year?
48. Cecilia Jeffries purchased an investment for $19,636.30. From this investment,
she will receive $2,000 annually for the next 20 years starting one year from
now. What rate of interest will Cecilia be earning on her investment?

49. Hahn Company uses the percentage of sales method for recording bad
debts expense. For the year, cash sales are $300,000 and credit sales are
$1,200,000. Management estimates that 1% is the sales percentage to
use. What adjusting entry will Hahn Company make to record the bad
debts expense?

50. Using the percentage of receivables method for recording bad debts
expense, estimated uncollectible accounts are $25,000. If the balance of
the Allowance for Doubtful Accounts is $8,000 debit before adjustment,
what is the amount of bad debts expense for that period?

51. A company has net credit sales of $700,000 for the year and it estimates
that uncollectible accounts will be 2% of sales. If Allowance for Doubtful
Accounts has a credit balance of $1,000 prior to adjustment, its balance
after adjustment will be a credit of
52 Coffeldt Sign Company uses the allowance method in accounting for uncollectible
. accounts. Past experience indicates that 1% of net credit sales will eventually be
uncollectible. Selected account balances at December 31, 2010, and December 31,
2011, appear below:
12/31/10 12/31/11
Net Credit Sales $400,000 $500,000
Accounts Receivable 75,000 100,000
Allowance for 5,000 ?
Doubtful Accounts

Instructions
(a)Record the following events in 2011.
Aug. 10Determined that the account of Sue Lang for $1,000 is
uncollectible.
Sept.12Determined that the account of Tom Woods for $4,000 is
uncollectible.
Oct. 10Received a check for $550 as payment on account from Sue Lang,
whose account had previously been written off as uncollectible.
She indicated the remainder of her account would be paid in
November.
Nov. 15Received a check for $450 from Sue Lang as payment on her
account.

(b) Prepare the adjusting journal entry to record the bad debt provision for
the year ended December 31, 2011
(c) What is the balance of Allowance for Doubtful Accounts at December 31,
2011?

53. Nolte Products is undecided about which basis to use in estimating

uncollectible accounts. On December 31, 2011, the balance in Accounts
Receivable was $680,000 and net credit sales amounted to $3,500,000
during 2011. An aging analysis of the accounts receivable indicated that
$36,000 in accounts are expected to be uncollectible. Past experience has
shown that about 1% of net credit sales eventually are uncollectible.

Instructions
Prepare the adjusting entries to record estimated bad debts expense using
the (1) percentage of sales basis and (2) the percentage of receivables
basis under each of the following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,200 before
adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $730 before
adjustment.
Answer Key

1. 82,000
2. 25,050
3. 17,640
4. 30,000
5. 6,680
6. 13,200
7. 105,000

Depreciation Expense 15,000

Accumulated Depreciation 15,000

Cash 66,000
Accumulated Depreciation 120,000
Equipment 180,000
Gain on Disposal 6,000
8. 800,000
9. 42,000
10. Notes Payable 400,000
Interest Payable 8,000
Cash 408,000
11. Cash 4,120,000
Premium on Bonds Payable 120,000
Bonds Payable 4,000,000
12. 6,600 gain
13. gain on bond redemption of $4,000
14. 400,000
15. 1,405
16. 29,819
17. Debit to premium on bonds payable for $1,976
18. Organization Expense for $35,000.
19. Cash 54,000
Treasury Stock 45,000
Additional Paid in Capital-Treasury Stock 9,000
20. 0
21. Preferred Common
60,000 50,000
22. 26,000
23. (6,000)
24. 243,000
25. 24,333
26. 251,558
27. 18,519
28. 137,190
29. 85,649
30. Calculate gain or loss on sale:
Proceeds $5,000
Book value ($24,000 –
4,000 $20,000)
Gain on Sale $1,000

Entry to record sale:

Cash 5,000
Accumulated Depreciation—Equipment 20,000
Gain on Sale 1,000
Equipment 24,000

31. (a) Straight-line method:

Years 1 and 2 depreciation = $17,000/yr. ($90,000 – $5,000) ÷ 5

(b) Double-declining-balance method:

Year 1 depreciation = $36,000 ($90,000 – 0) × *40%
Year 2 depreciation = $21,600 ($90,000 – $36,000) × 40%*(1/5 × 2)
32.
1. Straight-line C–S = ($70,000 – $5,000) = $13,000 per year
method: =
Years 5

2. Units-of-activity C–S = ($70,000 – = $0.65 per unit

method: = $5,000)
Units 100,000 units

2010 16,000 units × = $10,400

$.65
2011 24,000 units × = 15,600
$.65
Accumulated = $26,000
depreciation
Cost of asset $70,000
Less: Accumulated 26,000
Depreciation
Book value $44,000

3. Double-declining-balance method:
Book Value
Beginning Declining Depreciation Accumulated
of × Balance Rate = Depreciation
Year Expense
2010 $70,000 40% $28,000 $28,000
2011 42,000 40% 16,800 44,800
2012 25,200 40% 10,080 54,880

33. Jan. 1 Bonds Payable 1,500,000

Loss on Bond Redemption 19,800
Discount on Bonds Payable 4,800
Cash 1,515,000

34. (a) $1,890,000 ÷ 1.05 = $1,800,000 is the total sales revenue.

(b) $1,800,000 × .05 = $90,000 is the state sales tax liability.
Journal Entry:
Accounts Receivable 1,890,000
Sales Revenue 1,800,000
State Sales Tax Payable 90,000
35. (1) Current ratio = 2.5:1 ($200,000 ÷
$80,000)
(2) Working capital = $120,000 ($200,000 –
$80,000)
36. (a) Cash ($2,000,000 × 98%) 1,960,000
Discount on Bonds Payable 40,000
Bonds Payable 2,000,000
Interest Expense 88,200
Discount on Bonds Payable 8,200
Cash 80,000
(b) Cash ($2,000,000 × 103%) 2,060,000
Bonds Payable 2,000,000
Premium on Bonds Payable 60,000
Interest Expense 72,100
Premium on Bonds Payable 7,900
Cash 80,000

37. Bonds Payable 500,000

Premium on Bonds Payable 8,000
Gain on Bond Redemption 18,000
Cash ($300,000 × 98%) 490,000

38. (a) June 30 Bonds Payable 350,000

Loss on Bond 17,500
Redemption
Discount on Bonds Payable 10,500
Cash 357,000
($350,000 – $339,500 = $10,500)
($350,000 × 102% = $357,000)
(b) June 30 Bonds Payable 400,000
Discount on Bonds Payable 7,000
Gain on Bond Redemption 5,000
Cash 388,000
($400,000 – $393,000 = $7,000)
($400,000 × 97% = $388,000)
39.
January 1, 2011
(a) Cash 750,000
Mortgage Notes Payable 750,000

June 30, 2011

Interest Expense ($750,000 × 8% × 30,000

6/12)
Mortgage Notes Payable 20,000
Cash 50,000

December 31, 2011

Interest Expense ($730,000 × 8% × 29,200

6/12)
Mortgage Notes Payable 20,800
Cash 50,000

(b) Current : $44,129

[$50,000 – ($709,200 × 8% × 6/12)] + [$50,000 –
($687,568 × 8% × 6/12)]
Long-term: $665,071 [($750,000 – $20,000 – $20,800) –
$44,129]

40. January 3
Cash 2,200,000
Common Stock 1,000,000
Paid-in Capital in Excess of Par Value 1,200,000
(To record issuance of common stock in excess of par)

February 10
Equipment 150,000
Common Stock 60,000
Paid-in Capital in Excess of Par Value 90,000
(To record issuance of stock for equipment)
41. (a) Apr. 1 Treasury Stock 160,000
Cash 160,000
(To record purchase of treasury stock)
Aug. 1 Cash 72,000
Treasury Stock (4,000 × $16) 64,000
Paid-in Capital from Treasury 8,000
Stock (4,000 × $2)
(To record sale of treasury stock)
Oct. 1 Cash 60,000
Paid-in Capital from Treasury Stock 4,000
(4,000 × $1)
Treasury Stock (4,000 × $16) 64,000
(To record sale of treasury stock)
(b) Stockholders' equity
Paid-in capital
Capital Stock
Common stock, $10 par $1,500,000
Additional paid-in capital
In excess of par value $200,000
From treasury stock
4,000 204,000
Total paid-in capital 1,704,000
Retained earnings ($500,000 + $110,000)
610,000
Total paid-in capital and retained 2,314,000
earnings
Less: Treasury stock (2,000 shares)
(32,000)
Total stockholders' equity $2,282,000

42. (a) Cash 30,000

Retained Earnings [($12 – $10) × 6,000
3,000]
Treasury Stock 36,000
(b) Cash 30,000
Paid-in Capital from Treasury Stock 4,000
Retained Earnings 2,000
Treasury Stock 36,000
43.

44. MANN COMPANY

Statement of Cash Flows
For the Year Ended December 31, 2011
Cash flows from operating activities
Net income $27,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense $ 6,000
Loss on sale of long-term 4,000
investments
Increase in accounts receivable (4,000)
Decrease in prepaid expenses 3,000
Increase in inventories (7,000)
Increase in accounts payable 10,000 12,000
Net cash provided by operating 39,000
activities
Cash flows from investing activities
Sale of long-term investments 14,000
Purchase of equipment (28,000)
Net cash used by investing (14,000)
activities
Cash flows from financing activities
Issuance of common stock 17,000
Retirement of bonds payable (10,000)
Payment of cash dividends (15,000)
Net cash used by financing activities (8,000)
Net increase in cash 17,000
Cash at beginning of period 10,000
Cash at end of period $27,000
45.

(a) Accumulated Depreciation 12/31/10 $13,000

Accumulated Depreciation 12/31/11 20,000
Difference 7,000
Add: Accumulated depreciation on 10,000
equipment sold
Depreciation expense $17,000
(b) Cost of land sold $22,000
Less: Loss on sale of land (4,000)
Proceeds from sale of land $18,000

46. Use Table 1

$10,000 × 1.46933 = $14,693.30.
47. Use Table 2
$2,000 × 37.45024 = $74,900.48.
48. 8% ($19,636.30 ÷ $2,000) = 9.81815 Read across the 20-period row in
Table 4 to find 9.81815 in the 8% column.
49. Bad Debts Expense 12,000
Allowance for Doubtful 12,000
Accounts
50. 33,000
51. 15,000
52. (a) Aug. 10 Allowance for Doubtful Accounts 1,000
Accounts Receivable—Sue Lang 1,000
(To write off Sue Lang account)
Sept.12 Allowance for Doubtful Accounts 4,000
Accounts Receivable—Tom Woods 4,000
(To write off Tom Woods account)
Oct. 10 Accounts Receivable— Sue Lang 1,000
Allowance for Doubtful Accounts 1,000
(To reinstate Sue Lang account
previously
written off)
Cash 550
Accounts Receivable— Sue Lang 550
(To record collection on account)
Nov. 15 Cash 450
Accounts Receivable— Sue Lang 450
(To record collection on account)
(b) Dec. 31 Bad Debts Expense ($500,000 × 1%) 5,000
Allowance for Doubtful Accounts 5,000
(To record estimate of uncollectible
accounts)
(c) Balance of Allowance for Doubtful Accounts at December
31, 2010, is $6,000 ($5,000 – $1,000 – $4,000 + $1,000
+ $5,000).

53. Judith Company issues a $220,000, 3-year bond paying 6% interest

rate, with interest payable semiannually. The market rate for similar
such securities is 8%. How much can Judith Company expect to receive
from the sale of these bonds?

a. How much is the semi annual interest rate?

$220,000 6.0% div by 2 3.0% $ 6,600

b. Calculate the present value of the interest payments.

Use Effective Interest rate divided by 2:
Use # of periods times 2:
$ 6,600 PVA(4%,12) 9.385 $ 61,941

c. Calcualte the present value of the principal

$ 220,000 PV(4%,12) 0.625 $ 137,500

d. Add b and c together. $ 199,441

54.
(1) Percentage of sales basis:
The following adjusting entry would be the same regardless
of the balance in the Allowance for Doubtful Accounts.
Bad Debts Expense ($3,500,000 × 35,000
.01)
Allowance for Doubtful Accounts 35,000
Percentage of receivables basis:
(2)
(a)Bad Debts Expense ($36,000 – 32,800
$3,200)
Allowance for Doubtful Accounts 32,800
(b)Bad Debts Expense ($36,000 + 36,730
$730)
Allowance for Doubtful Accounts 36,730