T.A.

Ho Huu Tin

EXERCISES FOR FINAL

Part 1 – Chapter 7: Inventory
Question 1: Oscorp Co. uses a perpetual inventory system. It entered into the following
calendar-year 2016 purchase and sales transactions:
Date Activities Units purchased at Cost Units sold at
Jan 1 Beginning inventory 770 units – $50/unit
Feb 19 Purchases 420 units - $41/unit
Mar 17 Purchases 260 units - $25/unit
Mar 20 Sales 770 units - $75/unit
Aug 22 Purchases 180 units - $49/unit
Aug 31 Purchases 585 units - $42/unit
Sep 3 Sales 650 units - $75/unit
Instructions: Compute Cost of Merchandise Sold, Ending Inventory and Gross Profit
Using:
1. FIFO
2. LIFO
3. Average (Only use in periodic method)
Question 2: Timo Co. uses a perpetual inventory system and had the following purchases
and sales during April
Date Activities Units purchased at Cost Units sold at
1 Beginning inventory 100 units - $40/unit
3 Purchases 60 units - $50/unit
4 Sales 70 units - $80/unit
10 Purchases 200 units - $55/unit
31 Sales 80 units - $90/unit
Instructions: Using the inventory and sales data above, calculate the value assigned
to cost of goods sold in April, Gross profits and to the ending inventory at April 30 using:
1. FIFO

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2. LIFO
Part 2 – Chapter 9: Receivables
Question 3: The following selected transactions were taken from the records of Marvel
Co. for the year ending December 31, 2016:
Mar 13 Wrote off account of B. Hall, $4,000
Apr 19 Received $3,500 as partial payment on the $8,500 account of M. Rainey. Wrote
off the remaining balance as uncollectible
Jul 9 Reinstated the account of B. Hall, which had been written off on Mar 13 and
received $4,000 in full payment
Nov 23 Wrote off the following accounts as uncollectible (record as one journal entry):
Batman $1,400
Wonder Woman 850
Thor 3,900
Loki 2,300
Captain American 680
Dec 31 Marvel has credit sales of $2.2 million for year 2016. Marvel prepares a
schedule of its Dec 31, 2016, account receivable by age. It estimates the percent of
receivables in each age category that will become uncollectible. This information is
summarized here.
December 31, 2016 Age of Accounts Expected Percent
Accounts Receivable Receivable Uncollectible
$616,000 Not Yet due 0.9%
$298,000 1 to 30 days past due 1.65%
$64,000 31 to 60 days past due 6.15%
$41,000 61 to 90 days past due 31.00%
$9,200 Over 90 days past due 64.00%
Instructions:
a. Journalize the transactions for 2016 under the direct write-off method.
b. Journalize the transaction for 2016 under the allowance method, assuming that the
allowance account had a beginning balance of $12,000 on January 1, 2016, and the

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company uses the analysis of receivables method. Prepare the adjusting entry to record bad
debts expense at December 31, 2016.
Question 4: ABC, Co. uses the allowance method of accounting for uncollectible accounts
receivables. Selected transactions completed by XYZ are as follows:
Feb 1 Sold merchandise on account to XYZ Co., $20,000. The cost of the merchandise
sold was $11,000.
Mar 24 Received 60% of the $22,000 balance owed by OP Co., a bankrupt business,
and wrote off the remainder as uncollectible.
May 14 Accepted a 60-day, 12% note for $20,000 from XYZ Co. on account.
Jun 3 Reinstated the account of Bibi, which had been written of in the preceding year
as uncollectible. Journalized the receipt of $12,000 cash in full payment of Bibi’s account.
Aug 12 Received from XYZ Co. the amount due on its note of May 14.
Dec 31 Wrote off the following accounts as uncollectible (compound entry): Stan Co.,
$2,000; Jenny Co., $1,400; Bailey Co., $3,000; Fluke Co., $2,500.
Based on analysis of the $350,500 of account receivable, it was estimated that
8,500 will be uncollectible. Journalized the adjusting entry, provided that January 1 credit
balance of T account for Allowance for Doubtful Accounts was $10,000
Instructions:
a. Journalize the transactions
b. Post each entry that effects the following selected T accounts and determine the
new balances: Allowance for Doubtful Accounts, Bad Debt Expense
Question 5: ASUS Company uses the allowance method of accounting for uncollectible
accounts receivable. Selected transactions completed by ASUS Company are as follows:
Feb.1: Sold merchandise on account to Ames Co 10,000 $. The cost of the merchandise
sold was 5,500 $
Mar 15: Accepted a 60-day, 12% note for $10,000 from Ames on account
April 9: Wrote off a $3500 account from Dorset Co as uncollectible
April 21: Loaned $7000 cash to Jill Klein, receiving a 90-days, 14% note

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May 14: Received the interest due from Ames Co. and a new 90-day, 14% note as
renewal of loan.
June 13: Reinstate the account of Dorset Co., write off on April 9, and received 3,500$
in full payment
July 20: Jill Klen dishonored her note
Aug 12: Received from Ames Co. the amount due on its note of May 14
Aug 19: Received from Jill Klein the amount owed on the dishonored note, plus interest
for 30 days at 15% computed on the maturity value of the note
Dec 16: Accepted a 60-day, 12% note for 15,000 from International Company on
account
Dec 31: It is estimated that 3% of credit sale of 2,500,000 for the year ended December
31, will be uncollectible
Instructions:
1. Journalize the transaction.
2. At the end of the current year, Accounts Receivable has a balance of $1,200,000;
Allowance for Doubtful Accounts has a debit balance of $2,500; and credit sales for
the year total $2,500,000. It is estimated that 2% of the credit sales of $2,500,000
for the year ended December 31 will be uncollectible. Determine the following
values:
(1) The amount of the adjusting entry for Allowance for Doubtful Account
(2) The adjusted balances of Allowance for Doubtful Accounts,
(3) Bad Debt Expense
(4) The net realizable value of Accounts receivable.
Part 3: Chapter 10: Fixed assets & intangible assets
Question 6: Angel Co. purchased a package of computerized manufacturing machine at
the beginning year at cost of $67,000. The machine’s useful life is estimated at 10 years or
420,000 units of product and residual (salvage) value of $4,000.
Instructions:

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a. Calculate the depreciation expense using the straight-line method.

b. Calculate the depreciation expense for the first year using the units of production
method with 29,900 units of product made during first year.
Part 4: Chapter 13: Corporations
Question 7: Rocklin Corporation reports the following components of stockholders’ equity
on December 31, 2016.
Common stock-$25 par value, 100,000 shares authorized, 45,000 $1,125,000
shares issued and outstanding
Paid-in capital in excess of par value, common stock $60,000
Retained earnings $460,000
Total shareholders’ equity $1,645,000
In year 2017, the following transactions affected its stockholders’ equity accounts.
Jan 1: Purchased 4,500 shares of its own stock at $25 cash per share
Jan 5: Declared $3 per share cash dividend payable
Feb 28: Paid the dividend declared on Jan 5
July 6: Sold 1,688 of its treasury shares at $29 cash per share
Aug 22: Sold 2,812 of its treasury shares at $22 cash per share
Sept 5: Declared $3 per share cash dividend payable
Oct 28: Paid dividend declared on Sept 5
Dec 31: Closed the $388,000 credit balance (from net income) in the Income Summary
account to Retained Earnings.
Instructions:
a. Prepare journal entries to record each of these transactions for 2017
b. Prepare a statement of retained earnings for the year end December 31, 2017
Question 8: The stockholders’ equity accounts of Balloon Co., with balances on January
1, 2017, are as follows:
 Preferred 2% Stock, $30 par $300,000
(50,000 shares authorized, 10,000 shares issued)
 Paid-In Capital in Excess of Par – Preferred Stock 30,000
 Common stock, $20 par value 2,100,000

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(200,000 share authorized, 105,000 shares issued)

 Paid-In Capital in Excess of Par – Common Stock 315,000
Treasury Stock (20,000 shares, at cost) 520,000
 Retained Earnings 13,500,000
The following selected transactions occurred during the year:
Jan 6 Sold 20,000 shares of the treasury stock for $580,000.
Feb 9 Issued 50,000 shares of common stock for $1,450,000.
May 1 Declared a $0.6 cash dividend per share to preferred stockholders and $0.3 to
common stockholders of record on May 15.
Jun 1 Paid the cash dividends.
Jul 1 Declared a 2% common stock dividend to stockholders of record on July 15, to
be capitalized at the fair market value of the common stock, which is estimated at $30.
Jul 31 Issued the shares for the stock dividend.
Aug 7 Purchased 15,000 shares of treasury stock for $405,000.
Instructions:
a. Journalize the entries to record the transactions for Balloon Co (14 marks)
b. How does preferred stock differ from common stock? (6 marks)
Part 5 - Chapter 16: Statement of cash flows
Question 9: The income statement of JVC, Inc., as below:
JVC, Inc.
Income Statement
For the year ended December 31, 2016
Revenues:
Services Revenue $235,000
Expenses:
Cost of goods sold $97,000
Salary expense 57,000
Depreciation expense 26,000

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Income tax expense 4,000 184,000

Net income $51,000

JVC, Inc.
Dec 31, 2016 Dec 31, 2015
Current Assets
Cash 30,000 8,000
Accounts Receivable 41,000 59,000
Inventory 97,000 93,000
Current Liabilities
Accounts Payable 30,000 17,000
Accrued Liabilities 11,000 24,000
Additional data follow:
a. Acquisition of plant assets is $118,000. Of this amount, $100,000 is paid in cash and
$18,000 by signing a note payable.
b. Cash receipt from sale of land totals $28,000. There was no gain or loss.
c. Cash receipts from issuance of common stock total $29,000.
d. Payment of note payable is $18,000.
e. Payment of dividends is $8,000.
Instructions: Prepare JVC, Inc.’s statement of cash flows for the year ended
December 31, 2016, using the indirect method. Include a separate section for noncash
investing and financing activities.

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Question 10: The comparative financial statement for Yale Company is as follows:
Yale Company
Comparative Balance Sheet
December 31, 2016
2016 2015
Assets
Cash 97,600 25,000
Account Receivables (net) 58,800 66,000
Merchandise Inventory 83,200 75,000
Land 400,000 0
Long-term Investments 0 88,000
Equipment 480,000 425,000
Accumulated Depreciation - Equipment (210,000) (212,000)
Total assets 909,600 467,000
Liabilities & Stockholders’ Equity
Account Payable 57,700 49,000
Interest Payable 2,900 4,500
Dividends Payable 12,000 10,000
Bonds Payable 95,000 110,000
Mortgage Payable 400,000 0
Common Stock 120,000 100,000
Paid-In Capital in Excess of Par-Common
Stock 30,000 20,000
Retained Earnings 192,000 173,500
Total Liabilities & Stockholders’ Equity 909,600 909,600

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Yale Company
Income Statement
For the year ended December 31, 2016
Sales 772,000
Cost of goods sold 656,700
Gross profit 115,300
Operating expenses:
Depreciation Expenses 39,000
Other Operating Expense 23,975
Total operating expenses 62,975
Income from operations 52,325
Other income
Gain on sales of equipment 15,000
Other expenses and losses
Loss on sales of investments 7,900
Interest expense 8,800 (1,700)
Income before income taxes 50,625
Income tax expense 10,125
Net Income 40,500
Additional Information:
a. Cash dividends declared were $22,000.
b. The company purchased the land on Sep 1. The company paid for the land by giving the
seller a mortgage for the full amount.
c. Sold the long-term investment on Jun 1 for $80,100.
d. Sold equipment on Feb 15 for $54,000 that had originally cost $80,000 and had $41,000
of accumulated amortization.
e. Issued $60,000 of bonds payable at face value on April 30.
f. Purchased equipment for $135,000 cash on Oct 31.

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Instructions: Prepare a statement of cash flows for Yale Co. for the year ended Dec
31, 2016, using indirect method.
Part 7: Chapter 17: Financial analysis
Question 11: Anna and Carlo are two companies competing in the same industry.
Summary information from the financial statements of the two companies are given as
bellows:
Comparative Income Statement
For Years Ended December 31, 2016
Anna Carlo
Sales 659,230 779,430
Cost of goods sold 484,330 531,730
Interest expense 6,130 10,230
Income tax expense 12,030 18,530
Net income 67,000 104,230

Beginning of year data

Anna Carlo
Accounts receivable, net 28,030 52,430
Notes receivable (trade) - -
Merchandise inventory 53,830 105,630

Balance Sheet
As of December 31, 2016
Anna Carlo
Assets
Cash 17,730 32,230
Accounts receivable, net 44,500 62,600
Merchandise inventory 82,670 130,730

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Prepaid expenses 3,230 5,180

Plant and equipment, net 283,230 302,630
Total assets 431,360 533,370
Liabilities and Stockholders’ equity
Current liabilities 59,570 91,530
Long-term notes payable 79,030 99,230
Common stock, $5 par value 174,230 204,230
Retained earnings 118,530 138,380
Total liabilities and equity 431,360 533,370
Instructions:
a. Compute the current ratio, acid-test ratio, accounts receivable turnover, inventory
turnover, days’ sales in inventory, and days’ sales in receivables for both company.
b. Anna and Carlo are being evaluated by a bank that can lend money to only one of
them. Identify the company that you consider to be the better short-term credit risk and
explain why.

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