Fargo Homework Assignment
This assignment focuses on account analysis. You have Fargo's adjusted trial balance and are asked to analyze the activity in selected accounts to determine information about beginning balances, ending balances and activity during the period. We will discuss how to get started with this exercise in class on Monday, January 30. Bring your copy of the case to class. This is a hand-in assignment - you are to work independently. I will check your work on Monday, February 6 and Monday, March 20 (these will count as two separate homework checks). The completed assignment is due April 10 (hard copy).
The July 31, 2014 adjusted trial balance of Fargo Company is presented below. Notice that the total debits and credits for each account are listed (including the beginning balances) rather than the usual account ending balance. Fargo's fiscal year end is June 30. All adjusting entries have been made for the month of July 2014, except the adjustment for inventory.
|
Account
|
Debit
|
Credit
|
|
Cash
|
$68,500
|
$54,600
|
|
Accounts Receivable
|
58,000
|
54,400
|
|
Allowance for Credit Losses
|
700
|
1,100
|
|
Inventory
|
60,000
|
|
|
Prepaid Advertising
|
1,200
|
400
|
|
Office Supplies
|
2,200
|
1,300
|
|
Office Equipment
|
22,000
|
1,500
|
|
Accumulated Depreciation
|
400
|
7,600
|
|
Accounts Payable
|
31,900
|
40,000
|
|
Salaries Payable
|
|
800
|
|
Interest Payable
|
|
100
|
|
Dividends Payable
|
3,500
|
8,200
|
|
Notes Payable
|
3,000
|
30,000
|
|
Common Stock
|
|
14,200
|
|
APIC - C/S
|
|
20,000
|
|
Retained Earnings
|
7,200
|
19,900
|
|
Sales Revenue
|
|
61,000
|
|
Sales Returns
|
2,200
|
|
|
Sales Discounts
|
500
|
|
|
Purchases
|
42,000
|
|
|
Purchase Returns and Allowances
|
|
900
|
|
Purchase Discounts
|
|
400
|
|
Salaries Expense
|
9,200
|
|
|
Office Supplies Expense
|
1,300
|
|
|
Insurance Expense
|
700
|
|
|
Advertising Expense
|
600
|
|
|
Bad Debt Expense
|
500
|
|
|
Miscellaneous Expense
|
400
|
|
|
Depreciation Expense
|
300
|
|
|
Interest Expense
|
300
|
|
|
Gain/Loss on Sale of Equipment
|
|
200
|
|
Totals
|
$316,600
|
$316,600
|
Using the trial balance of gross balances for Fargo and the additional information given below, answer the following questions about the operations of Fargo. Put answers in box when given. Show all work for credit. Complete the general ledger T-Accounts on the Excel schedule to support your answers.
1. Compute the amount of interest paid in July. At June 30, 2014, none was payable.
2. What was the amount of cash received on the sale of office equipment?
3. Assuming that the office equipment has a five year estimated life, no estimated salvage value, and no depreciation is taken during the month of purchase or sale, how much office equipment was acquired during the month?
4. How old is the office equipment that was neither sold nor acquired during the month?
5. How much cash was paid on accounts payable during the month? Assume the beginning balance in Accounts Payable for July was zero.
6. What is the amount of Accounts Receivable written off during the month?
7. What is Fargo's net realizable value of Accounts Receivable at July 31, 2014?
8. If the beginning balance in Notes Payable was $20,000, how much new debt did Fargo incur in July?
9. How much debt did Fargo pay off in July?
10. If all vendors sell to Fargo on terms of 2/10, n/30, what was the total amount of purchase discounts that were lost in July? Assume that no purchases were made in the last 10 days of July?
11. If there was no prepaid advertising at the beginning of the period, what was the total cash outlay for advertising in July?
12. How much cash was used to pay salaries during the month? Assume the balance in Salaries Payable on July 1 was zero.
13. What was the balance of Retained Earnings at the beginning of the fiscal year?
14. If office supplies valued at $300 were on hand at the beginning of the month, what were the total purchases of office supplies during the month?
15. What journal entry does Fargo make to record the purchase of office supplies?
16. The beginning balance in Dividends Payable on July 1 was $1,000. What amount of cash dividends were paid during the month?
17. Of the cash dividends paid, how much related to dividends declared in the current period?
18. What are net sales for July?
19. If 90% of sales are made on credit and all returns relate to credit sales, what was the beginning balance in Accounts Receivable on July 1?
20. How much cash was received on accounts receivable in July?
21. Does Fargo record purchases of inventory using the gross method or net method? How is this determined?
22. What was the beginning balance in Inventory at July 1?
23. What are net purchases for July?
24. Fargo performed a physical count of inventory at July 31 and valued it at $70,000. What is the cost of goods sold for the month of July?
25. Provide the journal entry to adjust inventory at July 31.
26. Provide the closing journal entry (ies) to close the books at July 31.
27. After recording these final journal entries, what is the ending balance in Retained Earnings on July 31?