ACCOUNTING

February 4, 2021

Exercise 1
Log Cabin Homes, Inc., uses a job cost system to account for its jobs, which are prefabricated houses.
As of January 1, its records showed inventories as follows:

Materials 100,000
Work in process (Jobs 22 and 23) 180,000
Finished goods (Job 21) 140,000

The work in process inventory consisted of two jobs:

Job 22 Job 23
Direct Materials 36,000 40,000
Direct Labor 40,000 28,000
Manufacturing overhead 20,000 16,000
Total 96,000 84,000

In January the company had the following transactions:

a.
Materials purchased on account, $400,000.
b.
Direct materials used: Job No. 22, $60,000; Job No. 23, $120,000; Job No. 24, $180,000.
c.
Indirect materials used, $10,000.
d.
Direct labor costs: Job No. 22, $100,000; Job No. 23, $200,000; and Job No. 24, $80,000.
9
e.
Indirect labor costs, $80,000.
f.
Overhead is assigned to jobs at $100 per machine-hour. Job No. 22 used 530 machine-
hours, Job No. 23 used 980 machine-hours, and Job No. 24 used 350 machine-hours in
January.
g. Job No. 22 and 23 were completed and transferred to Finished Goods Inventory.
h. Job No. 21 and 22 were sold on account for $1,200,000, total.
i. Manufacturing overhead costs incurred, other than indirect materials and indirect labor,
were depreciation, $60,000, and heat, light, power, miscellaneous, $30,000 (to be paid
next month).
j. Selling and administrative expenses were $100,000.
Required:
1. Calculate the Job Cost for each job.
2. Journalize the transactions described above, including the adjustment related to
manufacturing overhead at the end of the year
3. Calculate the ending balance in Raw Materials Inventory, Work in Process Inventory,
Finished Goods Inventory, and Cost of Goods Sold.
4. Prepare an income statement (cost of goods sold format).

Exercise 2
Using the appropriate data among those presented below:
 Change in FGI 54,400
Change in inv. of direct materials 19,200
Change in WIP -46,400
Current assets 362,000
Current liabilities 332,000
Depreciation 50,000
Direct labor 147,000
Income tax expense 19,200
Interest expenses 27,200
Inventories 121,700
Manufacturing overhead 229,000
Own work capitalized 12,200
Selling, general, and administrative costs 252,200
Prepaid insurance 28,000
Purchases of direct materials 224,100
Sales revenue 920,800
Unearned revenue 18,000

Determine the following values, clearly showing the calculations performed, and prepare the
income statement of the firm (total output format):
1. Cost of goods sold
2. Gross profit from sales
3. Operating profit,
4. EBITDA
5. Net profit after tax
6. Total output (value of production)
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receiuobleinterestmctchingpnnciplett
7. Acid test ratio, .

Exercise 3 Loong
Turian Co. incurred the following transactions:
a. On October 1, 2020, the company borrowed 500,000 from Citadel Bank, to be repaid
one year later, on September 30, 2021, plus 7% interest. The bank agrees not to charge
any early repayment penalties in case the firm decides to settle its debt before maturity.
On July 1, 2021, Turian decided to repay it debt in full. Journalize all the entries related
to the loan, from the date in which it is incurred to its repayment, including all the
adjusting and closing entries at the end of 2020. The entries should be presented first by
applying present value accounting, and then using future value accounting. Determine
the present value of the loan at December 31, 2020, and the interest expense related to
the loan for 2020 and 2021, under both present and future value accounting.
b. On February 15, 2021, Turian sold 80,000 worth of products to Solar Electronics Co.
(carried in the inventory for ,500), receiving a 1-year note bearing interest at 8%.
c. On September 15, 2021 the firm discounted its note receivable to Citadel Bank that
applied an 11% discount rate to the transaction.
d. On November 15, 2021, Turian purchased materials 45,000, issuing a 7%, one-year
note payable.

2
 Required: Journalize the above described transactions, assuming perpetual inventory, and
including the adjusting and the closing entries at the end of 2021.

Exercise 4
For each of the following accounts:
Allowance for uncollectible accounts CA 1st permanent cr
Accumulated depreciation CA 1st permanent CR Finished goods inventory A 1st permanent DR

Allowance for bad debts CA 1st permanent OR Goodwill A 1st permanent DR

Income tax payable L 1st permanent CR

Bonds payable L 1st permanent CR Notes payable L 1st permanent or

Cost of goods sold E 2nd temporary

DR Preferred stock Q 2nd permanent or
Sales returns and allowances CR 2nd temporary DR
Depletion expense E 2nd temporary
DR
Inventory of merchandise A 1st permanent DR

Direct labor Premium on bonds payable L 1st permanent CR

Discount on bond payable CL 1st permanent DR

Equipment A 1st permanent DR
Estimated returns inventory A 1st permanent DR
Interest expenses E 2nd temporary DR
Land improvements A 1st permanent DR
Manufacturing overhead summary account 2nd temporary DR
Paid-in capital in excess of par Q 2nd permanent CR
Prepaid expenses A 1st permanent DR
Purchase returns and allowances CE 2nd temporary or
Retained earnings Q 2nd permanent CR
Treasury shares CQ 2nd permanent DR
Unearned revenue L 1st permanent or
Work in process A 1st permanent DR
Provide the following information:
1. Nature of the account (asset, liability, equity, revenue, expense, contra asset, etc ;
2. Class of the account (1st, 2nd);
3. Type of account (permanent or temporary);
4. Typical balance (debit or credit);
5. Typical entry in which the account is used for the first time in the year;
6. Closing entry at the end of the period (if applicable).

Question 1
Describe the eff -in

those generated on the same items by a distribution of stock dividend. Explain the effects of cash
and stock dividends on the book value per share of common stock.

Question 2
If the expected level of activity in a production center is 50,000 machine-hours and the estimated
overhead costs are $750,000, what is the predetermined overhead rate? Show the calculation.
don't we the actual
know
What are the major reasons for using predetermined manufacturing overhead rates? until the end of the
rate
year
What is underallocated and overallocated overhead? What is the purpose of the related adjusting
entry at the end of the year?
estimated MOH 750,000
=
= 15
estimated 50,000
allocation base

3
Exercise 4 :
Exercise 1 :

DR Depreciation Expense CRACC .

Depreciation DR Inventory of materials CR Accounts payable 400,000 400,000

DR Bad Debt Expense CR Allowance for BD DR WIP 22 OR

Inventory of materials 60,000 360,000

DR cash CR Bonds Payable DR WIP 23 120.000

of merchandise
DR COGS OR
Inventory DR WIP 24 180,000

DR Depreciation Expense CRACC Depreciation DR MOH

Cklnventoryof materials 10,000 10,000

DR cash CR Bond Payable DR MOH CR Accumulated Depreciation 60,000 60,000

DR Discount on Bond Payable DR MOH CR Accounts payable 30,000 30,000

DR Equipment CR cash overhead allocation :

530×100

Dec 31,2021 DR WIP 22 CR MOH 53,000 186,000

"
"

DR sales Returns CR Refunds Payable DR WIP 23 98,000

#
Estimated 35.000
DR
Inventory Returns OR COGS DR WIP 24

Feb 7,2022 Direct Labor :

A-

DR Refunds Payable CR Accounts receivable DR WIP 22 or

salary payable
100,000389000
"
IRA
-

DR
Inventory of merchandise CR Estimated DR Wip 23 200,000

80.000
DR Interest expense CR Interest payable or WIP 24

DR Income CR Interest expense

summary 96,000 84,000 -
wipe

303,000 50200
'

DR MOH CR
SQIQRY Payable DM 60.000
DL 100,000
120,000
200,000
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80,000
MOH 53.000 98.000 35,000
DR cash OR COMMON Stock

OR Paid in Capitol in excess of por completion of jobs 22 and 23 :

DR Prepaid expense CR cash DR FGI OR WIP 22 805000303,000

"
"
DR Purchase
expense OR Accounts Payable CR WIP 23 502,000
"

DR Accounts Payable CR Purchase R&A⇐+ sole of jobs 21 and 22 :

DR Purchase R&A OR COGS DR Accounts receivable or sales revenue 1,200,000 1,200,000

140,000
DR Income CR Retained Earnings DR COGS CRFGI +303.000=443.000
summary
shares cash
Treasury CR MOH
DR
" °°°°°

DR cash OR Unearned revenue 60.000 over allocation

30,000

DR WIP OR
Salary Payable 80,000

Adjustment of overambition :

DR MOH OR COGS 86,000 86,000

was sales Revenue 1,200,000

443,000 86,000
-

COGS 1357,000)

357,000 Gross
margin 843,000
-

SIA ( 100,000)

operating profit 743,000

Materials FGI

100,000 300,000 140,000 443,000

400,000 10,000 805,000

130,000 502,000
Exercise 3 :

Oct 1 2020 500,000 7% Jul 1,

,

present value accounting :

Oct 1,2020

DR cash CR Loon payable 500 500

Dec 31,2020

500,000 ✗
7% ✗ 3/12 =
8,750

DR Interest expense CR Interest payable 8.750 8,750

Jul 1,2021

500,000 ✗ 7% ✗
6112 =
17,500

DR Loon Payable CR Cosh 500,000526250

DR Interest payable 8.750

DR Interest Expense 17,500

Future value Accounting :

Oct 1,2020

FV = PV + I =
500,000+500,000×71×12112=535,000

DR cash CR Loon payable 500,000535000

DR Prepaid Interest 35.000

Dec 31,2020

DR Interest expense CR Prepaid interest 8.750 8,750

Jolt ,
2021

500,000 (1+7%+9112)=526,250
535,000 -

526,250=8,750

DR Loon Payable CR Prepaid Interest 8,750 8,750

DR Interest expense CR Prepaid interest 17,500 17,500

DR LOOM Payable CR Cosh 526,250 526,250

Feb 115,2021

DR Note Receivable CR sales Revenue 80,000 80,000

DR COGS CR FGI 52,500 52,500

1 note 8.1
year .

Sept 15,2021
80,000 × 8-1 .
✗
7112--3,733

80,000 + 8.1 .
=
86,400

PV - FV ( 1- dt ) PV= 86,40011-111×51121--82,440

DR Note receivable CR Interest revenue 3733 3733

DR cash CR Note receivable 82.440 83,733

DR Discount expense 1,293

Dec 31,2021
Discount Expense
✗ 1293=38790
DR Prepaid expense CR Discount expense 1293 387.90

Feb 15,2022 905.10

DR Discount expense CR Prepaid expense 387.90 387.90

 Exercise 2 :

sales revenue 920,800

Change in FGI 54,400

Change in WIP 146,4007

Own work capitalized 12,200

Total output 941,000

Direct labor 147,000

Direct materials 224,100-19,200=204,900 cost of materials used

MOH 229,000

selling & 0dm costs 252,200

Operating income 107,900 measure of performance independent from financial structure of the firm

-
interest expenses -27,200
Net income before tox 80,700
-
income tox -19,200

Net income 61,500

COGS

Direct materials 204,900

Direct labor 147,000

MOH 229,000

Total
manufacturing costs 580,900

change in WIP +46,400

cost of finished goods 627,300

own work capitalized -12,200

COGM ( finished and available) 615,100

COGS = WGM -

change in FGI =
615,100-54,400=560,700

Gross profit from sales sales revenue COGS 920,800 560,700 360,100
•
= - =
-
=

( Gross margin )

EBITDA =
EBIT before D and A =
EBIT +
Depreciation =

107,900+50,000 =
157,900
✓

bait 's on
expense
 ACCOUNTING EXERCISES

i.
Exercise 1
Journalize the following transactions:

1. On April 27 Allied Industries pays its employees their monthly salaries. The gross salary

employer payroll tax rate is 32%.

2. Zeta Carpentry Ltd. decides to produce a piece of specialized manufacturing equipment

pleted on October 1 the useful life

depreciation).
3. On April 1, Tuck Co. purc At the end of April, they took a
count of the remaining supplies and found that the
rovide the adjusting entry needed at the end of April.
4. On April 30, 2017, Weiss Industries 41,800. The
customer signed a 12-month note at 8% yearly interest. On June 30, 2017, Weiss
discounted the note to a bank at 11%. Provide all the entries related to the transactions,
including the adjusting entries, if necessary, at the end of 2017.
5. On December 1, Gamma Company signs a 6-month contract with Good Maintenance Ltd,

on December 1, and the balance at the end of the contract. Gamma decides to journalize
the entire payable in full on December 1. Provide all the entries from December 1 to the
end of the contract, including year-end adjustments.
6. On April 1, 2017, Amos Inc.
unwanted

purchase of the plant assets and identify those that are subject to depreciation.

a depreciation schedule for the first three years using the double-declining balance
method.
7. Greasy Monkey Inc. manufactures motor oil. The inventory of cans of oil at the beginning
of April is 350 cans 32 each. During the month, the company manufactures 1,850
cans 59,200, sells 2,000 cans 51 each, and uses
10 cans for the lubrication of its own equipment.
8. On October 1, Prime Security Inc. signs a nine-month contract with a new customer,
consisting in offering private security services for their properties. The agreed price is
her
half at the end of the contract.
9. Burgdorf Stahl AG 950,000.
attorneys advise that it is probable Burgdorf Stahl will lose this lawsuit. A
few months later, the court orders the 800,000 for damage
compensation.

1
1.
Payroll expenses
Liquidation of the salaries
Lt 12%01-254,000

DR
salary Expense CR Social
Security Tax Payable 25400030.480
26%01-254,000-30,480
My )
TOXPAYODÉ
( GNSS Sol @

CR Employee Income 58,115

"
CR
salary Payable 165,405 ( Net
salary Take-home
pay )
-

Lt 32%01-254,000

81.280
DR Employer payroll tox expense CR Social
Security TP 81,280

Payments
cash
DR Social
security TQX Payable CR 111,760 335,280

DR Employee Income Tax Payable 58,115

DR
salary Payable 165,405

2. Self
production (job costing plontosset )
:

DR WIP Equipment CR
Salary Payable 12,250 5,200

CR Materials 4,950

CR MOH 2,100

Octt

DR Equipment CRWIP Equipment 12,250 12,250

Dec 31 Depreciation
Depreciation charge =
12,250-1,000=750

772-0×3=187.50
15
DR Depreciation expense Crisco .
Depreciation
3. Shrinkage

purchase of assets

DR Office supplies CR Accounts Payable 18001800 Noexpensebccoehovoitusedtheossetyet

Usage of the asset ( with shrinkage)

Apr 30

DR supplies expense or Office supplies 1100 1100 1800-(650+50)=1100

DR shrinkage expense CR Office supplies 50 50

4. Discounting a note receivable

Apr 30 Sole

DR Notes Receivable CR soles Revenue 41,800 41,800

Jun 30 Discount the note

PV of Note =
41,800 ✗
(1+8-1×2112)=42,357 1--42,357-41,800=557

DR Notes receivable or Interest revenue 557 557

Discounted vote = 45,144 (1-11-1×10112)=41,005

Value at maturity =
41,800 (1+8-1×12112)=45,144

DR cosh CR Notes Receivable 41,005 42,357

DR Discount expense 1,352

Dec 31 differ tothefotore ✗ matching principle

✗ 1.3152=540
DR Prepaid expense CR Discount expense
5. Prepayment accrual

Deal

DR service expense CR cosh 6000 2000

CR Accounts payable 4000

Dec 31 ✗
matching principle
DR Prepaid expense CR service Expense 5,000 5,000

May 31 contract expires

DR service
expense or prepaid Expense 5,000 5,000

DR Accounts payable CR cosh 4,000 4,000

6. Plontossets Depreciationon improvements

Purchase of land

DR Lord CR cosh 200,000 115,000

CR Notes Payable 85.000

CR cosh 8,900 8.900 to make the asset oeooikble ✗ use

DR Lond improvement or cash 17,500 17,500

DR Building CR cosh 450,000 450,000

Useful life : 50
yrs Residual valve :
25.000 Depreciation using ☐☐ balance 3
years
1. 4150,000 × 1150×2 =
18,000

2. (450,000-18,000) ×
1/50 ✗
2 =
17,280

3. (950,000-18,000-17,280) ✗ V50 ✗ 2 = 16,580

We depreciate land improvement and building .

7. self -

use of production
cost manufacturing = 32 cost of one unit ✗ 10=320
nunits manufactured

DR supplies Expense CRFGI 320 320

8. We provide service recognize revenue

correctly
octl

DR cosh CR Unearned revenue 2,250 2,250

monthly revenue =

4%-0--500
Dect recognize 3 months of revenue

DR Unearned revenue or service revenue 1.soo i.soo

June 31 maturity
DR Unearned revenue or service revenue 750 750

DR cosh CR service revenue 2,250 2,250

9. Provision for risk

DR Provision expense CR Provision for risk 950,000 980,000

DR Provision for risk CR Cash 800,000 800,000

DR Provision for risk CR Reversal of 180,000 180.00

provisions
GAIN
Exercise *
2
Invest Trading Inc. had the following inventory purchases and sales during the month of April.

Purchases Sales
Date Units Unit Cost Total Units Unit Price Total
215
1-Apr (beginning
balance)
8 380 63 23,940
12 450
15 230 64 14,720
21 180 66
30 18 (return) 66

Provide the
necessary journal entries, including those needed to determine the balances of the final inventory
and of cost of goods sold, using LIFO and the periodic method.

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Exercise 3
Given the following data at the end of 2016:

Common stock 500,000

Preferred stock, 4% 120,000
Paid-in capital in excess of par 240,000
Retained earnings (opening balance, credit) 650,000
Cash dividends distributed in 2016 2,800
4.70) 23,500
Net profit for the year 2016 88,000
Par value per share of common stock 1
Par value per share of preferred stock 1

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Required:
1.
2. Determine the total paid-in capital;
3. Calculate the book value per share of common stock and preferred stock, considering that

4. Journalize the following transactions in 2017: a) distribution of a 6% stock dividend to the

common shareholders; b) distribution of 18,000, attributing the
maximum amount possible to common shareholders after satisfying the claims of the
preferred shareholders (

5. calculate the book value per share of common stock

and preferred stock after all the above mentioned transactions.

Exercise 4
Stack Overflow Software, Inc. issues a bond with the following characteristics:
4,000,000
2
ÑB•
Exercise 1
ACCOUNTING
June 23rd, 2016

Heisenberg Gmbh. is a merchandising company that operates in the wholesale distribution of

chemical products for research laboratories. Transactions are the following:
a. Beginning inventory: 2,300 units at
b. Purchase of 3,800 units at . A few days later, Heisenberg realized that 500 units have
different characteristics from those expected. The company accepts the sup
2% allowance on the entire purchase, to avoid a return.
c. Purchase of 700 units at
d. Credit sale of 22 each to W. White Laboratories.
e. The customer returns 150 units lamenting quality issues. Heisenberg offers a 3% allowance
on the remaining units.
f. At the end of the year, a physical count of the inventory reveals that 20 units are missing
from the warehouse.
g. The market value of the inventory at the end of the period
Journalize the above described transactions using LIFO and periodic inventory, and then using FIFO
and perpetual inventory, including the closing entries.

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Exercise 2
Given the following data for 2015:

Common stock 1,250,000

Preferred stock, 5% 350,000
Paid-in capital in excess of par 2,345,000
Retained earnings (opening balance, credit) 647,000
Cash dividends distributed in 2015 6,500
Treasury shares 139,200
Net profit for the year 2015 165,000
Par value per share of common stock
Par value per share of preferred stock

Required:
1.
2. Determine the total paid-in capital;
3. Calculate the book value per share of common stock and preferred stock, considering that
preferred dividends in ar
4. Journalize the following transactions in 2016: a) distribution of a 5% stock dividend to the
common shareholders; b) distribution of 82,000, attributing the
maximum amount possible to common shareholders after satisfying the claims of the
preferred shareholders (d 11,000 are in arrears); sale of 50% of the treasury

5. calculate the book value per share of common stock

and preferred stock after the above mentioned transactions.
-