Accounting for business operations acc 20364 – final examination

Accounting for Business Operations

ACC 20364 – Final Examination

 

1. Bella’s Beauty Salon’s unadjusted trial balance for the current year follows:

  

Additional information:

a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments and $200 of accrued revenue was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded. 

Required:

Based on the additional information, prepare the adjusting journal entries for Bella’s Beauty Salon. 


 


 

 

2.  The following is the adjusted trial balance for Rapid Car Services for the most recent year:

 

Rapid Car Services, Inc.
Adjusted Trial Balance
For the year ended December 31

 

Cash

$33,000

 

Accounts receivable

14,200

 

Office supplies

1,700

 

Vehicles

100,000

 

Accumulated depreciation—Vehicles

 

45,000

Accounts payable

 

11,500

Common stock

 

1,000

Retained earnings

 

70,900

Dividends

40,000

 

Fees earned

 

155,000

Rent expense

13,000

 

Office supplies expense

2,000

 

Utilities expense

2,500

 

Depreciation Expense—Vehicles

15,000

 

Salary expense

50,000

 

Fuel expense

      12,000

                

Totals

   $283,400

  $283,400

 

 

Required:

Prepare the following financial statements for Rapid Car Services, Inc. from the adjusted trial balance.  Assume the stockholders did not make any additional investments in the company during the year.

Income Statement

Statement of Retained Earnings

Balance Sheet

 


 


 

 


 


 

 

3. END Company reported the current month purchase and sales data for its only product as follows:

Date

Activities

Units Acquired at Cost

Units Sold at Retail

April 1

Beginning Inventory

175 units @ $15.00

 

4

Purchase

150 units @ $16.00

 

7

Sales

 

160 units @ $30.00

10

Purchase

200 units @ $17.00

 

16

Sales

 

250 units @ $30.00

25

Purchase

160 units @ $18.00

 

28

Sales

 

150 units @ $32.00

 

 

Required:

Determine the cost assigned to ending inventory and cost of goods sold using LIFO with the perpetual inventory system.

 

 


 


 

 


4. The following information is available for the Edwards Company for its March 31 bank reconciliation:

From the March 31 bank statement:

  

NSF: A check from a customer, Cook Co. in payment of their account.
IN: Interest earned on the account.

From the Edwards Company’s accounting records:

  

  

Required:

Based on the above information, prepare the2-column bank reconciliation for the Edwards Company for March.


 


5.  Information for JasonMetalworks as of December 31 follows.

Administrative salaries expense

$135,000

Depreciation expense—Factory equipment

52,400

Depreciation expense—Delivery vehicles

36,200

Depreciation expense—Office equipment

24,800

Advertising expense

22,350

Direct labor

268,000

Factory supplies used

12,000

Income taxes expense

91,500

Indirect labor

35,000

Indirect material

24,000

Factory insurance

15,500

Factory utilities

14,000

Factory maintenance

7,500

Inventories

 

   Raw materials inventory, January 1

32,000

   Raw materials inventory, December 31

28,000

   Work in Process inventory, January 1

33,780

   Work in Process inventory, December 31

37,460

   Finished goods inventory, January 1

56,970

   Finished goods inventory, December 31

62,000

Raw materials purchases

325,000

Rent expense—Factory

50,000

Rent expense—Office space

24,000

Rent expense—Selling Space

24,000

Sales salaries expense

97,500

Sales

1,452,000

Sales discounts

29,000

 

Required:

 

(a)  Prepare the company’s schedule of cost of goods manufactured for the year ended December 31

 

(b)  Prepare the company’s income statement that reports separate categories for selling and general and administrative expenses.


6.  Wagner Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed.

 

Alternative 1

Alternative 2

Variable costs per unit

$20

?

Fixed costs

$200,000

$274,400

Selling price per unit

$40

$40

Income tax rate

25%

25%

 

Required: 

(a) Compute the break-even point in units and dollars for both alternatives.

(b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income.

(c) Compute the degree of operating leverage for each alternative. Which alternative would you recommend and why?

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