Correcting entries:

Date

Account

Debit

31-1215

Cash

1,500

Credit

Accounts receivable

1,500

b. Adjusting Entries:
Date

Account

Debit

31-1215

Interest receivable

Credit
300

Interest income ($30,000 0.06 2/12)

31-1215

Interest expense

300
1,875

Interest payable ($75,000 0.05 6/12)

31-1215

Depreciation: Building (150,000 0.03)

1,875
4,500

Accumulated depreciation: Building

31-1215

Depreciation: Equipment (50,000 0.15)

4,500
7,500

Accumulated depreciation: Equipment

31-1215

Cost of sales

7,500
3,500

Inventory (55,000 51,500)

31-1215

Salaries and wages expense

3,500
5,500

Salaries and wages payable

31-1215

Bad debts expense [(53,500 1,500) 0.05]

+ 1,500
Allowance for bad debts

5,500
4,100
4,100

c. Adjusted Trial Balance:

XYZ Company
Adjusted Trial Balance
December 31, 2015
Account
Cash
Accounts Receivable

Debit
45,00
0
52,00
0

2,6
00

Allowance for Doubtful Accounts

Notes Receivable
Interest receivable
Merchandise Inventory
Land
Building

30,00
0
3
00
51,50
0
20,00
0
150,00
0
19,50
0

Accumulated Depreciation, Building

Equipment

50,00
0
28,50
0

Accumulated Depreciation, Equipment

Goodwill

26,00
0
25,00
0
5,5
00
1,8
75
75,00
0
20,00
0
147,00
0
700,00
0
3
00

Accounts Payable
Salaries payable
Interest payable
Long-Term Notes Payable
Common Stock, $10 par, 2,000 shares authorized
and outstanding
Retained Earnings
Sales Revenue
Interest income
Salaries Expense

Credit

155,50

0
3,5
00
353,50
0
55,00
0
4,5
00
7,5
00
4,1
00
1,8
75
15,00
0
1,025,275

Utilities Expense
Cost of Goods Sold
Administrative Expenses
Depreciation: Building
Depreciation: Equipment
Bad debts expense
Interest expense
Sales Expenses
Totals

1,025,275

d. Classified Balance Sheet:

ABC Company
Balance Sheet as at 31-12-2015
Non-Current Assets:
Goodwill
Land
Buildings
Equipment
Accumulated depreciation
Current Assets:
Cash
Merchandise Inventory
Accounts Receivable
Allowance for Doubtful Accounts
Notes Receivable
Interest receivable
Total assets
Equity:
Common Stock
Retained earnings

$
26000
20,000
150,000
50,000
(48,000)
45,000
51,500
52,000
(2,600)
30,000
300

20,000
246,825

198,000

176,200
374,200

266,825

Non-Current liabilities:
Long-term loan notes payable
Current liabilities:
Accounts Payable
Salaries payable
Interest payable
Total equity and liabilities

75,000
25,000
5,500
1,875

75,000

32,375
374,200

e. Closing Entries:
Date

Account

31-1215

Sales

Debit

Credit

700,000

Interest income

300
Cost of sales

353,500

Salaries expense

155,500

Utilities expense

3,500

Administrative expenses

55,000

Depreciation: Building

4,500

Depreciation: Equipment

7,500

Bad Debts expense

4,100

Interest expense

1,875

31-1215

Sales expense

15,000

Income summary

99,825
99,825

Income summary
Retained earnings

99,825

Question 2
Required:
a. Calculate the cost of goods available for sale.
Opening inventory (150 $7.00)
Add: Purchases
Cost of goods available for sale

1,050
6,945__
$7,995 (Answer)

b. Calculate the dollar value of sales.

(100 $10) + (125 $10) + (75 $12) + (200 $12.50) + (150 $15) =
$7,900
c. Calculate the value of Ending Inventory and Cost of Goods Sold
under the following independent assumptions:
a. Cost of Goods Available for Sale

$7,995

b. Sales

$7,900

c. Value of:

Ending
Inventory

COGS

(1)LIFO method

$3,103

$4,893

(2)FIFO method

$3,206

$4,789

(3)Average-cost method

$3,178

$4,817

Please see workings below for calculations.

(2) FIFO
METHOD
Date
Units

Total In
Per
Unit

Total

Total Out
Per
Units
Unit
Total

Jan-01

150 7.00

Jan-02
Jan-05

100 7.00
225 7.20

100 7.50

Jan-24

350

75 7.20

540

75 7.20

150 7.80

200 7.95

540

1,170

Jan-17

Jan-20

50 7.00

750

Jan-12

Jan-15

700

1,620

Jan-07

Jan-10

Balance
Per
Units
Unit

75 7.20

540

100 7.50

750

25 7.80

195

1,590

125 7.80

975

Total
1,050

50 7.00

350

50 7.00

350

225 7.20

1,620

150 7.20

1,080

150 7.20

1,080

100 7.50

750

75 7.20

540

100 7.50

750

75 7.20

540

100 7.50

750

150 7.80

1,170

125 7.80

975

125 7.80

975

200 7.95

1,590

175 7.95

1,391

25 7.95
Jan-25

Jan-30

150 8.00

75 8.20

199

1,200

615

175 7.95

1,391

150 8.00

1,200

175 7.95

1,391

150 8.00

1,200

75 8.20
Total

6,945

AVERAGE COST
METHOD
Total In
Date Uni
ts
Per Unit Total
Jan01
Jan02
Jan05
225 7.20
1,620
Jan07
Jan10
100 7.50
750
Jan12
Jan15
150 7.80
1,170

4,789

Total Out
Per
Units
Unit
Total

3,206

Balance
Per
Units
Unit
Total
150 7.00

100 7.00

125 7.16

75 7.30

700

895

547

615

50 7.00

1,050
350

275 7.16

1,970

150 7.16

1,075

250 7.30

1,825

175 7.30

1,277

325 7.53

2,447

Jan17
Jan20
Jan24
Jan25
Jan30

200 7.53
200 7.95

125 7.53

941

325 7.79

2,531

175 7.79

1,363

1,200

325 7.89

2,563

615

400 7.94

3,178

1,590
150 7.79

150 8.00
75 8.20

Total

1,506

6,945

1,168

4,817

3,178

Question 3
Required: Prepare Acme Supply Company's general journal entries for the following
transactions:

Date
Jan 1

Account
10% Note receivable

Debit
$15,000

Accounts receivable
Jan 15

Equipment

$15,000
$10,000

12% Notes payable

Jan 15

10% notes receivable

$10,000
$30,000

Cash
Jan 31

Credit

Interest receivable ($15,000 0.10 1/12)

Interest income

$30,000
$125
$125

Apr 15

Cash

$30,000
10% notes receivable

Apr 15

Cash ($30,000 0.10 3/12)

$30,000
$750

Interest income
May 15

Cash

$750
$15,000

10% Notes receivable

May 15

Oct 15

Cash ($15,000 0.10 4/12)

$15,000
$500

Interest receivable

$125

Interest income

$375

12% Notes payable

$10,000
Cash

Oct 15

Interest expense ($10,000 0.12 9/12)

Cash

$10,000
$900
$900

Question 4:
XYZ Company purchased a refrigerated delivery truck for $65,000 on January 1,
2015. The plan is to use the truck for 5 years and then replace it. At the end of its
useful life, the truck is expected to have a salvage value of $10,000. The fiscal year
ends December 31.
a. Prepare the depreciation table for XYZ's truck, assuming that the company
uses the straight-line method for depreciation.
b. Prepare the depreciation table for XYZ's truck, assuming that the company
uses the double-declining-balance depreciation method.
c. Compute the depreciation expense for 2015 for XYZ's truck, assuming the
truck has an expected life of 200,000 miles and during 2015 the truck was
driven 24,540 miles. Round your depreciation expense per mile to three
decimal places.

a.Answer:

Year

Total

Depreciation

Accumulated

Expense

Depreciation

End-of-Year
Book Value

2015

11,000

11,000

$54,000

2016

11,000

22,000

43,000

2017

11,000

33,000

32,000

2018

11,000

44,000

21,000

2019

11,000

55,000

10,000

b. Answer:
Depreciation

Year

Expense

Total

End-of-Year

Accumulated

Book Value

Depreciation

2015

26,000

26,000

$39,000

2016

15,600

41,600

23,400

2017

9,360

50,960

14,040

2018

4,040

55,000

10,000

c.
Answer

$6,748.500

[($65,000 cost - $10,000 salvage) / 200,000 miles] 24,540 miles = 6,748.500

Question 5
Required:
Prepare the general journal entry to record the employer's payroll liability.
Prepare the general journal entry to record the employer's payroll-tax liability.
Prepare the general journal entry to liquidate the liabilities accrued in parts (a) and
(b) on January 22.
Date
(a)

Account
Salaries and wages expense
FICA social security
FICA Medicare
State income tax

Debit

Credit

25,000
1,550
363
1,250

Income tax withheld

3,750

Net wages payable

(b)

Employer Payroll tax expense

18,087
5,300

FICA tax withheld (Employer match)

3,750

FUTA

200

SUTA

1,350

Net wages payable

18,087

Cash/bank
FICA social security
FICA Medicare

18,087
1,550
363

State income tax

1,250

FUTA

200

SUTA

1,350
Cash

$4,713

Question 6
Required:
a. Prepare the general journal entry to record the end-of-the-year adjusting
entry if Acme uses 0.5% of Net Credit Sales as the basis for determining
Bad-Debt Expense.
b. Prepare the general journal entry to record the end-of-the-year adjusting
entry if Acme uses 5% of Accounts Receivable as the basis for determining
Bad-Debt Expense.

Date
(a)

Account
Bad Debts expense

Debit
13,875

Allowance for doubtful accounts

(b)

Bad debts expense

Allowance for doubtful accounts

Credit

13,875

11,500
11,500

(a) [(Credit sales $2,500,000 25,000 sales return) 0.5%] + $1,500 debit
balance of allowance = 13,875
(b) (Accounts receivable $200,000 5%) + $1,500 debit balance of allowance =
11,500