WORKSHOP 2

To be solved prior to Workshop 2

1. United Airlines is an example of a

a. producer
b. supplier
c. retailer
d. service provider X
e. None of them
2. Which one of the following is not an external user of financial information?
a. Company management X
b. Internal Revenue Service
c. Creditors
d. Stockholders
e. All of them are

3. Which of the following statements is true?

a. Profits distributed to the creditors are called dividends
b. The balance sheet shows the assets, liabilities, and profits of a company
c. Dividends are an expense, and are reported on the income statement as a deduction from net income
d. The income statement reports the revenues and expenses of a company X
e. None of them is true

4. Harbor City Corporations endofyear balance sheet consisted of the following amounts:

Cash
Property, plant, and equipment
Capital stock
Retained earnings

$ 15,000
70,000
100,000
?

Accounts receivable
Long-term debt
Accounts payable
Inventory

What is Harbor Citys retained earnings balance at the end of the current year?
a. $10,000 X
b. $110,000
c. $160,000

$ 50,000
40,000
20,000
35,000

d. $170,000
e. None of the above
5. Macon Enterprises purchased land for $2,000,000 in 2001. In 2015, an independent appraiser
assessed the value at $3,400,000. What amount should appear on the financial statements in 2015
with respect to the land?
a.
b.
c.
d.

$2,000,000 X
$1,400,000
$3,400,000
Whatever amount the company believes is the best indicator of the true value of the land

6. Which of the following is a five-member body that has the authority from Congress to set standards
for conducting audits?
a. FASB
b. SEC
c. PCAOBX
d. AICPA
e. None of the above

7. Which one of the following items is not included in cash?

a. A bank certificate of deposit for one year X
b. A savings account at the bank
c. A checking account at the bank
d. All of the above are included in cash
e. All of them are

8. On November 2, 2014, Quaint General Store concluded that a customers $400 account
receivable was uncollectible and that the account should be written off. What effect will this
writeoff have on Quaints 2014 net income and balance sheet totals assuming the allowance
method is used to account for bad debts?
a. Decrease in net income; decrease in total assets
b. Increase in net income; no effect on total assets
c. No effect on net income; decrease in total assets
d. No effect on net income; no effect on total assets X
e. None of the above

9. What is the distinguishing characteristic between accounts receivable and notes receivable?
a. Accounts receivable are usually current assets while notes receivable are usually long-term assets.
b. Accounts receivable require payment of interest if not paid within the usual credit terms.
c. Notes receivable result from credit sale transactions for merchandising companies, while accounts
receivable result from credit sale transactions for service companies.
d. Notes receivable result from a written promise to pay within a specified amount of time. X
e. All of the above

Benton Corporation
The data below is for Benton Corporation for 2015.
Accounts ReceivableJanuary 1, 2015
Credit sales during 2015
Collections from credit customers during 2015
Customer accounts written off as uncollectible during 2015
Allowance for Doubtful Accounts [Credit Balance]
(After write-off of uncollectible accounts)
Estimated uncollectible accounts based on an aging analysis

$334,000
850,000
725,000
12,000
1,700
13,200

Refer to the data for Benton Corporation (questions 10-12).

10. What is the balance of Accounts Receivable at December 31, 2015?
a. $209,000
b. $225,000
c. $447,000 X
d. $459,000
e. None of the above

11. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense
for 2015?
a. $ 2,900
b. $11,500 X
c. $23,500
d. $26,900
e. None of the above

12. If the aging approach is used to estimate bad debts, what should the balance in the Allowance
for Doubtful Accounts be after the bad debts adjustment?
a. $26,900
b. $14,900
c. $13,200 X
d. $11,500
e. None of the above

PROBLEM

After several months of planning, Sylvia Workman started a haircutting business called
Expressions. The following events occurred during its first month:

June 1
June 2
June 3
June 4
June 5
June 15
June 17
June 17
June 31

Workman invested $3,000 cash and $15,000 of equipment in Expressions in

exchange for its common stock
Expression paid $600 cash for furniture for the shop
Expression paid $500 cash for rent
It purchased $1,200 of equipment on credit for the shop (using a long-term note
payable)
Expression opened for business. Cash received from services provided in the first
week and a half of business (ended June 15) is $825
It provided $100 of haircutting services on account
I received a $100 check for services previously rendered account
It paid $125 cash to an assistant for working during the grand opening
Cash received from services provided during the second half of August is $930

June 31
June 31

It paid a $400 installment toward principal on the note payable entered into on June 4
It paid $900 cash dividends to Workman

Required
1.
2.
3.
4.

Prepare necessary journal entries for June.

Prepare an income statement for June
Prepare a statement of retained earnings for June
Prepare a balance sheet as of June 31