Post the adjusting entries to the ledger accounts enter the


QUESTION 1:

Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example.(If an amount reduces the account balance then enter with negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).)



Cash


Net Income

(a) Purchased $110 of supplies for cash.


$-110


$0

(b) Recorded an adjusting entry to record use of $44 of the above supplies.


     

(c) Made sales of $1,299, all on account.


     

(d) Received $879 from customers in payment of their accounts.


     

(e) Purchased equipment for cash, $2,732.


     

(f) Recorded depreciation of building for period used, $768.


     

QUESTION 2:

The financial statements of Tootsie Roll are presented below.

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)




For the year ended December 31,




2011


2010


2009



Net product sales


$528,369



$517,149



$495,592




Rental and royalty revenue


4,136



4,299



3,739




Total revenue


532,505



521,448



499,331




Product cost of goods sold


365,225



349,334



319,775




Rental and royalty cost


1,038



1,088



852




Total costs


366,263



350,422



320,627




Product gross margin


163,144



167,815



175,817




Rental and royalty gross margin


3,098



3,211



2,887




Total gross margin


166,242



171,026



178,704




Selling, marketing and administrative expenses


108,276



106,316



103,755




Impairment charges


-



-



14,000




Earnings from operations


57,966



64,710



60,949




Other income (expense), net


2,946



8,358



2,100




Earnings before income taxes


60,912



73,068



63,049




Provision for income taxes


16,974



20,005



9,892




Net earnings


$43,938



$53,063



$53,157
















Net earnings


$43,938



$53,063



$53,157




Other comprehensive earnings (loss)


(8,740

)


1,183



2,845




Comprehensive earnings


$35,198



$54,246



$56,002
















Retained earnings at beginning of year


$135,866



$147,687



$144,949




Net earnings


43,938



53,063



53,157




Cash dividends


(18,360

)


(18,078

)


(17,790

)



Stock dividends


(47,175

)


(46,806

)


(32,629

)



Retained earnings at end of year


$114,269



$135,866



$147,687
















Earnings per share


$0.76



$0.90



$0.89
















Average Common and Class B Common shares outstanding


57,892



58,685



59,425



(The accompanying notes are an integral part of these statements.)



CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)


Assets


December 31,






2011


2010



CURRENT ASSETS:










Cash and cash equivalents


$78,612



$115,976





Investments


10,895



7,996





Accounts receivable trade, less allowances of $1,731 and $1,531


41,895



37,394





Other receivables


3,391



9,961





Inventories:










Finished goods and work-in-process


42,676



35,416





Raw materials and supplies


29,084



21,236





Prepaid expenses


5,070



6,499





Deferred income taxes


578



689





Total current assets


212,201



235,167




PROPERTY, PLANT AND EQUIPMENT, at cost:










Land


21,939



21,696





Buildings


107,567



102,934





Machinery and equipment


322,993



307,178





Construction in progress


2,598



9,243







455,097



440,974





Less-Accumulated depreciation


242,935



225,482





Net property, plant and equipment


212,162



215,492




OTHER ASSETS:










Goodwill


73,237



73,237





Trademarks


175,024



175,024





Investments


96,161



64,461





Split dollar officer life insurance


74,209



74,441





Prepaid expenses


3,212



6,680





Equity method investment


3,935



4,254





Deferred income taxes


7,715



9,203





Total other assets


433,493



407,300





Total assets


$857,856



$857,959




Liabilities and Shareholders' Equity


December 31,






2011


2010



CURRENT LIABILITIES:










Accounts payable


$10,683



$9,791





Dividends payable


4,603



4,529





Accrued liabilities


43,069



44,185





Total current liabilities


58,355



58,505




NONCURRENT LIABILITES:










Deferred income taxes


43,521



47,865





Postretirement health care and life insurance benefits


26,108



20,689





Industrial development bonds


7,500



7,500





Liability for uncertain tax positions


8,345



9,835





Deferred compensation and other liabilities


48,092



46,157





Total noncurrent liabilities


133,566



132,046




SHAREHOLDERS' EQUITY:










Common stock, $.69-4/9 par value-120,000 shares authorized-36,479 and 36,057 respectively, issued


25,333



25,040





Class B common stock, $.69-4/9 par value-40,000 shares authorized-21,025 and 20,466 respectively, issued


14,601



14,212





Capital in excess of par value


533,677



505,495





Retained earnings, per accompanying statement


114,269



135,866





Accumulated other comprehensive loss


(19,953

)


(11,213

)




Treasury stock (at cost)-71 shares and 69 shares, respectively


(1,992

)


(1,992

)




Total shareholders' equity


665,935



667,408





Total liabilities and shareholders' equity


$857,856



$857,959



TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)






For the year ended December 31,








2011


2010


2009




CASH FLOWS FROM OPERATING ACTIVITIES:














  Net earnings


$43,938



$53,063



$53,157






  Adjustments to reconcile net earnings to net cash provided by operating activities:















    Depreciation


19,229



18,279



17,862







    Impairment charges


-



-



14,000







    Impairment of equity method investment


-



-



4,400







    Loss from equity method investment


194



342



233







    Amortization of marketable security premiums


1,267



522



320







    Changes in operating assets and liabilities:















    Accounts receivable


(5,448

)


717



(5,899

)






    Other receivables


3,963



(2,373

)


(2,088

)






    Inventories


(15,631

)


(1,447

)


455







    Prepaid expenses and other assets


5,106



4,936



5,203







    Accounts payable and accrued liabilities


84



2,180



(2,755

)






    Income taxes payable and deferred


(5,772

)


2,322



(12,543

)






    Postretirement health care and life insurance benefits


2,022



1,429



1,384







    Deferred compensation and other liabilities


2,146



2,525



2,960







    Others


(708

)


310



305






  Net cash provided by operating activities


50,390



82,805



76,994





CASH FLOWS FROM INVESTING ACTIVITIES:















  Capital expenditures


(16,351

)


(12,813

)


(20,831

)






  Net purchase of trading securities


(3,234

)


(2,902

)


(1,713

)






  Purchase of available for sale securities


(39,252

)


(9,301

)


(11,331

)






  Sale and maturity of available for sale securities


7,680



8,208



17,511







  Net cash used in investing activities


(51,157

)


(16,808

)


(16,364

)




  CASH FLOWS FROM FINANCING ACTIVITIES:















    Shares repurchased and retired


(18,190

)


(22,881

)


(20,723

)






    Dividends paid in cash


(18,407

)


(18,130

)


(17,825

)






    Net cash used in financing activities


(36,597

)


(41,011

)


(38,548

)




Increase (decrease) in cash and cash equivalents


(37,364

)


24,986



22,082





Cash and cash equivalents at beginning of year


115,976



90,990



68,908





Cash and cash equivalents at end of year


$78,612



$115,976



$90,990





Supplemental cash flow information















  Income taxes paid


$16,906



$20,586



$22,364







  Interest paid


$38



$49



$182







  Stock dividend issued


$47,053



$46,683



$32,538




(The accompanying notes are an integral part of these statements.)


What was the amount of depreciation expense for 2011 and 2010? (You will need to examine the notes to the financial statements or the statement of cash flows.)

What was the cash paid for income taxes during 2011, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2011?

QUESTION 3:

The Solo Hotel opened for business on May 1, 2014. Here is its trial balance before adjustment on May 31.

SOLO HOTEL
Trial Balance
May 31, 2014



Debit


Credit

Cash


$ 2,779



Supplies


2,600



Prepaid Insurance


1,800



Land


15,279



Buildings


71,200



Equipment


16,800



Accounts Payable




$ 4,979

Unearned Rent Revenue




3,300

Mortgage Payable




37,200

Common Stock




60,279

Rent Revenue




9,000

Salaries and Wages Expense


3,000



Utilities Expense


800



Advertising Expense


500





$114,758


$114,758

Other data:

1. Insurance expires at the rate of $300 per month.
2. A count of supplies shows $1,174 of unused supplies on May 31.
3. (a) Annual depreciation is $3,720 on the building.
(b) Annual depreciation is $3,600 on equipment.
4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,690 has been earned.
6. Salaries of $650 are accrued and unpaid at May 31.

Journalize the adjusting entries on May 31.

Prepare a ledger using T-accounts. Enter the trial balance amounts and post the adjusting entries.

Prepare an adjusted trial balance on May 31.

Prepare an income statement for the month of May.

Prepare a retained earnings statement for the month of May.

Prepare a classified balance sheet at May 31.

QUESTION 4:

Ken Lumas started his own consulting firm, Lumas Consulting, on June 1, 2014. The trial balance at June 30 is as follows.

LUMAS CONSULTING
Trial Balance
June 30, 2014



Debit


Credit

Cash


$ 6,850



Accounts Receivable


7,000



Supplies


2,059



Prepaid Insurance


3,480



Equipment


15,000



Accounts Payable




$ 4,280

Unearned Service Revenue




5,200

Common Stock




22,149

Service Revenue




8,000

Salaries and Wages Expense


4,000



Rent Expense


1,240


 



$39,629


$39,629

In addition to those accounts listed on the trial balance, the chart of accounts for Lumas also contains the following accounts: Accumulated Depreciation-Equipment, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.

Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $235 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. Services were performed for $4,114 of unearned service revenue by the end of the month.
5. Salaries of $1,439 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $4,252 of services performed during the month have not been recorded as of June 30.

Prepare the adjusting entries for the month of June.

Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. (Use T-Accounts.)

Prepare an adjusted trial balance at June 30, 2014.

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Financial Accounting: Post the adjusting entries to the ledger accounts enter the
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