Question - Transactions, Essay, & Statements
Q1: Central Air Inc, has the following transactions in August 2012. Prepare journal entries for each of the transactions:
1. Issued 3,000 shares common stock to investors for cash at $10 per share.
2. Purchased $750,000 inventory on account.
3. Borrowed $60,000 from bank.
4. Sold $1,200,000 of products to customers on account; cost of the products sold was $480,000.
5. Purchased for cash $25,000 machinery.
6. Incurred $120,000 salaries, paid 75% in cash and owing the rest on account.
7. Earned $1,500 interest on investments, received 90 % in cash.
8. Paid $52,000 cash on accounts payable.
9. Declared and paid $5,000 dividends.
10. Incurred $1,800 utilities usage during the month; paid $1,500 in cash and owed the rest on account.
Q2: Several transactions are given below that were completed during 2011 by Story Company. Prepare the adjusting entries as of December 31, 2011, assuming no adjusting entries have been made during the year.
a. On September 1, 2011, Zimmerman collected six months' rent of $8,940 on storage space. At that date, Zimmerman debited Cash and credited Unearned Rent Revenue for $8,940.
b. On October 1, 2011, the company borrowed $21,600 from a local bank and signed a 11 percent note for that amount. The principal and interest are payable on the maturity date, September 30, 2012.
c. Depreciation of $1,600 must be recognized on a service truck purchased on July 1, 2011, at a cost of $16,000.
d. Cash of $3,300 was collected on November 1, 2011, for services to be rendered evenly over the next year beginning on November 1. Unearned Service Revenue was credited when the cash was received.
e. On November 1, 2011, Zimmerman paid a one-year premium for property insurance, $8,280, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.
f. The company earned service revenue of $4,200 on a special job that was completed December 29, 2011. Collection will be made during January 2012. No entry has been recorded.
g. At December 31, 2011, wages earned by employees totaled $13,800. The employees will be paid on the next payroll date, January 15, 2012.
h. On December 31, 2011, the company estimated it owed $490 for 2011 property taxes on land. The tax will be paid when the bill is received in January 2012.
Q3: Frostburg Retail shop has the following adjusted trial balance at December 31, 2012.
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Debit
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Credit
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Cash
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$8,500
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Account Receivable
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4,400
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Interest Receivable
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6600
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Prepaid Insurance
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3,200
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Inventory
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8,000
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Long-Term Investment
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10,000
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Buildings
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30,000
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Equipment
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20,000
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Accumulated Depreciation
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$7,000
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Notes Payable
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$11,000
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Accounts Payable
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4,800
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Income Taxes Payable
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8,000
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Unearned Rent Revenue
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1,000
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Contributed Capital
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7,400
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Retained Earnings
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10,000
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Sales Revenue
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120,000
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Interest Revenue
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200
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Rent Revenue
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1,500
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Cost of Goods Sold
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42,000
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Wages Expense
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24,000
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Depreciation Expense
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3,600
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Utilities Expense
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1200
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Insurance Expense
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1,400
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Income Tax Expense
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8,000
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Total
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$170,900
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$170,900
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Required: Prepare good forms of Income Statement, Statement Of Stockholders' Equity, and Balance Sheet for December 2011 for Frostburg Marketing Company.
Q4: Allegany Company produces clothing. During 2011, the company reported the following items that affected cash. Indicate whether each of these items is a cash flow from operating activities (O), investing activities (I), or financing activities (F).
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Activities:
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1. Sold shares of stock to new stockholders
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2. Sold equipment by receiving cash
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3. Paid wages to employees
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4. Borrowed money from bank on a long-term note
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5. Collected cash on account from customers
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6. Paid cash for supplies
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7. Paid dividends to stockholders
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8. Lent cash to XYZ company
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9. Paid interest to bank on the note
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10.Purchased Office building
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