ACC 20364 Final Examination Accounting for Business Operations

ACC 20364 Final Examination Accounting for Business Operations.

ACC 20364 Final Examination Accounting for Business Operations

ACC20364

ACC 20364 Final Examination Accounting for Business Operations

Accounting for Business Operations

Final Examination

1. Bella’s Beauty Salon’s unadjusted trial balance for the current year follows:

Additional information:

a. An insurance policy examination showed $1,240 of expired insurance.

b. An inventory count showed $210 of unused shop supplies still available.

c. Depreciation expense on shop equipment, $350.

d. Depreciation expense on the building, $2,220.

e. A beautician is behind on space rental payments and $200 of accrued revenue was unrecorded at the time the trial balance was prepared.

f. $800 of the Unearned Rent account balance was earned by year-end.

g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.

h. Three months’ property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.

i. One month’s interest on the note payable, $600, has accrued but is unrecorded.

Required:

Based on the additional information, prepare the adjusting journal entries for Bella’s Beauty Salon.

2. The following is the adjusted trial balance for Rapid Car Services for the most recent year:

Rapid Car Services, Inc.

Adjusted Trial Balance

For the year ended December 31

Cash	$33,000
Accounts receivable	14,200
Office supplies	1,700
Vehicles	100,000
Accumulated depreciation—Vehicles		45,000
Accounts payable		11,500
Common stock		1,000
Retained earnings		70,900
Dividends	40,000
Fees earned		155,000
Rent expense	13,000
Office supplies expense	2,000
Utilities expense	2,500
Depreciation Expense—Vehicles	15,000
Salary expense	50,000
Fuel expense	12,000
Totals	$283,400	$283,400

Required:

Prepare the following financial statements for Rapid Car Services, Inc. from the adjusted trial balance.  Assume the stockholders did not make any additional investments in the company during the year.

Income Statement

Statement of Retained Earnings

Balance Sheet

3. END Company reported the current month purchase and sales data for its only product as follows:

Date	Activities	Units Acquired at Cost	Units Sold at Retail
April 1	Beginning Inventory	175 units @ $15.00
4	Purchase	150 units @ $16.00
7	Sales		160 units @ $30.00
10	Purchase	200 units @ $17.00
16	Sales		250 units @ $30.00
25	Purchase	160 units @ $18.00
28	Sales		150 units @ $32.00

Required:

Determine the cost assigned to ending inventory and cost of goods sold using LIFO with the perpetual inventory system.

4. The following information is available for the Edwards Company for its March 31 bank reconciliation:

From the March 31 bank statement:

NSF: A check from a customer, Cook Co. in payment of their account.

IN: Interest earned on the account.

From the Edwards Company’s accounting records:

Required:

Based on the above information, prepare the2-column bank reconciliation for the Edwards Company for March.

5. Information for JasonMetalworks as of December 31 follows.

Administrative salaries expense	$135,000
Depreciation expense—Factory equipment	52,400
Depreciation expense—Delivery vehicles	36,200
Depreciation expense—Office equipment	24,800
Advertising expense	22,350
Direct labor	268,000
Factory supplies used	12,000
Income taxes expense	91,500
Indirect labor	35,000
Indirect material	24,000
Factory insurance	15,500
Factory utilities	14,000
Factory maintenance	7,500
Inventories
Raw materials inventory, January 1	32,000
Raw materials inventory, December 31	28,000
Work in Process inventory, January 1	33,780
Work in Process inventory, December 31	37,460
Finished goods inventory, January 1	56,970
Finished goods inventory, December 31	62,000
Raw materials purchases	325,000
Rent expense—Factory	50,000
Rent expense—Office space	24,000
Rent expense—Selling Space	24,000
Sales salaries expense	97,500
Sales	1,452,000
Sales discounts	29,000

Required:

Prepare the company’s schedule of cost of goods manufactured for the year ended December 31

Prepare the company’s income statement that reports separate categories for selling and general and administrative expenses.

6. Wagner Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed.

 

	Alternative 1	Alternative 2
Variable costs per unit	$20	?
Fixed costs	$200,000	$274,400
Selling price per unit	$40	$40
Income tax rate	25%	25%

Required:

(a) Compute the break-even point in units and dollars for both alternatives.

(b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income.

(c) Compute the degree of operating leverage for each alternative. Which alternative would you recommend and why?