Chapter 1 Extra-credit Assignment Name________________________________

Net income and owners equity for four businesses

Four different companies, A, B, C, and D show the same balance sheet data at the beginning and end of
a year. These data, exclusive of the amount of owners equity, are summarized as follows:

Total Assets Total Liabilities

Beginning of the year $220,000 $140,000
End of the year 290,000 180,000

On the basis of the above data and the following information for the year, determine the net income (or
loss) of each company for the year.

A The company made no investments and had no withdrawals during the year.
B The company made an additional investment of $50,000 but had no withdrawals during the year.
C The company made no investments but had $20,000 of withdrawals during the year.
D The company made an additional investment of $40,000 and had $10,000 of withdrawals during the
year.
Name___________________________________

BA 201 - Chapter 10 Homework Assignment (40 points)

True/False
Indicate whether the statement is true or false. (5 points)

____ 1. When land is purchased to construct a new building, the cost of removing any structures on the land should be
charged to the building account.

____ 2. An intangible asset is one that has a physical existence.

____ 3. An estimate of the amount which an asset can be sold at the end of its useful life is called residual value.

____ 4. Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be
the same.

____ 5. Patents are exclusive rights to manufacture, use, or sell a particular product or process.

Matching

Classify each of the following costs associated with long-lived assets as one of the following: (10 points)
a. Buildings
b. Machinery and Equipment
c. Land
d. Land Improvements
____ 6. Fees paid to architect to design new office building
____ 7. Cost of insurance during the construction of new office building
____ 8. Interest on money borrowed to finance construction of new office building
____ 9. Sales Taxes paid on new factory equipment
____ 10. Freight costs paid on purchase of new equipment
____ 11. Repairs made to used office equipment
____ 12. Costs to survey a new piece of land for a new business location
____ 13. Costs of government permits required to develop land for a new business location
____ 14. Purchase price of land purchased for new business site
____ 15. Landscaping at new business location
 Match the intangible assets with their proper classification
a. Patent
b. Copyright
c. Trademark
d. Goodwill
____ 16. Rights to sell a book and make a profit
____ 17. Nike Swoosh
____ 18. A new kitchen gadget that can be produced by only one company
____ 19. Reputation of a company
____ 20. Mickey Mouse

Multiple Choice
Identify the choice that best completes the statement or answers the question. (10 points)

____ 21. A characteristic of a fixed asset is that it is

a. intangible
b. used in the operations of a business
c. held for sale in the ordinary course of the business
d. a long term investment
____ 22. Accumulated Depreciation
a. is used to show the amount of cost expiration of intangibles
b. is the same as Depreciation Expense
c. is a contra asset account
d. is used to show the amount of cost expiration of natural resources
____ 23. A building with an appraisal value of $147,000 is made available at an offer price of $152,000. The
purchaser acquires the property for $35,000 in cash, a 90-day note payable for $45,000, and a mortgage
amounting to $65,000. The cost basis recorded in the buyer's accounting records to recognize this purchase
is
a. $147,000
b. $152,000
c. $145,000
d. $110,000
____ 24. Expenditures that add to the utility of fixed assets for more than one accounting period are
a. committed expenditures
b. revenue expenditures
c. current expenditures
d. capital expenditures
____ 25. Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two
categories
a. salvage and functional
b. physical and functional
c. residual and salvage
d. functional and residual
____ 26. The most widely used depreciation method is
a. straight-line
b. double-declining-balance
c. units-of-production
d. units-of-production or double-declining-balance
____ 27. The depreciation method that does not use residual value in calculating the first year's depreciation expense is
a. straight-line
b. units-of-production
c. double-declining-balance
d. none of the above
____ 28. A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the
amount of the gain or loss on disposal of the fixed asset?
a. $2,000 loss
b. $1,500 loss
c. $3,500 gain
d. $2,000 gain
____ 29. The process of transferring the cost of metal ores and other minerals removed from the earth to an expense
account is called
a. depletion
b. deferral
c. amortization
d. depreciation
____ 30. Expenditures for research and development are generally recorded as
a. current operating expenses
b. assets and amortized over their estimated useful life
c. assets and amortized over 40 years
d. current assets

Other

31. Equipment acquired on January 2, 2011 at a cost of $273,500 has an estimated useful life of eight years and
an estimated residual value of $35,500.

Required:

(1) What was the annual amount of depreciation for the years 2011, 2012, and 2013,
assuming the straight-line method of depreciation is used? (1 point)

(2) What was the book value of the equipment on January 1, 2014? (1 point)

(3) Assuming that the equipment was sold on January 2, 2014, for $170,500, journalize
the entry to record the sale. (1 point)

(4) Assuming that the equipment had been sold on January 2, 2014, for $189,000 instead
of $168,500, journalize the entry to record the sale. (1 point)
Problem

32. Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5
years, or 14,000 operating hours, and a residual value of $10,000. Compute the depreciation for the first and
second years of use by each of the following methods: (6 points)

(a) straight-line
(b) units-of-production (1,200 hours first year; 2,250 hours second year)
(c) declining-balance at twice the straight-line rate

(Round the answer to the nearest dollar.)

Name__________________________________

BA 201 - Chapter 7 Homework Assignment (40 points)

True/False
Indicate whether the statement is true or false. (5 points)

____ 1. The selection of an inventory costing method has no significant impact on the financial statements.

____ 2. Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of
inventory on hand.

____ 3. During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory
amount for the balance sheet that is higher than LIFO would produce.

____ 4. In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price
less any direct costs of disposal.

____ 5. The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item
by item, by major classification of inventory, or by the total inventory.

Matching

Indicate the impact of the following situations on current year net income. (8 points)
a. Net income for the current year will be overstated.
b. Net income for the current year will be understated.
c. Net income for the current year will not be affected.
____ 6. Merchandise was purchased FOB shipping point on the last day of the year. The cost of the merchandise
purchased was not included in ending inventory.
____ 7. Merchandise was purchased FOB destination on the last day of the year. The cost of the merchandise
purchased was not included in ending inventory.
____ 8. Merchandise held on consignment was included in the count of ending inventory.
____ 9. A consignor included merchandise in the hands of the consignee in ending inventory.
____ 10. Beginning inventory was understated due to an error in last years inventory count.
____ 11. Merchandise that was sold and shipped FOB destination on the last day of the year was not included in the
sellers ending inventory.
____ 12. Merchandise that was sold and shipped FOB shipping point on the last day of the year was not included in the
sellers ending inventory.
____ 13. Last years ending inventory was recorded as $10,000. The actual inventory on hand the end of last year
was $12,000.

Multiple Choice
Identify the choice that best completes the statement or answers the question. (10 points)
____ 14. The two most widely used methods for determining the cost of inventory are
a. FIFO and LIFO
b. FIFO and average
c. LIFO and average
d. gross profit and average
____ 15. The inventory method that assigns the most recent costs to cost of goods sold is
a. FIFO
b. LIFO
c. average
d. specific identification
____ 16. The inventory costing method that reports the most current prices in ending inventory is
a. FIFO
b. Specific identification
c. LIFO
d. Average cost
____ 17. When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is:
a. debit Cost of Merchandise Sold; credit Sales
b. debit Cost of Merchandise Sold; credit Merchandise Inventory
c. debit Merchandise Inventory; credit Cost of Merchandise Sold
d. No journal entry is made to record the cost of merchandise sold.
____ 18. Under the _________ inventory method, accounting records maintain a continuously updated inventory value.
a. retail
b. periodic
c. physical
d. perpetual
____ 19. If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included
in the inventory of the
a. consignee
b. retailer
c. manufacturer
d. shipper
____ 20. Merchandise inventory at the end of the year was inadvertently overstated. Which of the following
statements correctly states the effect of the error on net income, assets, and owner's equity?
a. net income is overstated, assets are overstated, owner's equity is understated
b. net income is overstated, assets are overstated, owner's equity is overstated
c. net income is understated, assets are understated, owner's equity is understated
d. net income is understated, assets are understated, owner's equity is overstated
____ 21. If the cost of an item of inventory is $50 and the current replacement cost is $57, the amount included in
inventory according to the lower of cost or market is
a. $7
b. $50
c. $57
d. $107
____ 22. Kristins Boutiques has identified the following items for possible inclusion in its December 31, 2010
inventory. Which of the following would not be included in the year end inventory?
a. Merchandise purchased FOB shipping point was picked up by the freight company but
had still not arrived at Kristins Boutique as of December 31, 2010.
b. Kristin has in its warehouse merchandise on consignment from Abby Co.
c. Kristin has sent merchandise to various retailers on a consignment basis.
d. Kristin has merchandise on hand which has been returned by customers because of wrong
size.
____ 23. The method of computing inventory that uses records of the selling prices of the merchandise is called
a. retail method
b. last-in, first-out
c. first-in, first-out
d. average cost

Problems

24. The following data regarding purchases and sales of a commodity were taken from the related perpetual
inventory account:

June 1 Balance 25 units at $60

6 Sale 20 units
8 Purchase 20 units at $61
16 Sale 10 units
20 Purchase 20 units at $62
23 Sale 25 units
30 Purchase 15 units at $63

Calculate the cost of the ending inventory at June 30, using (1) the first-in, first-out (FIFO)
method and (2) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and
total cost of each lot in the inventory. (6 points)

25. Basic inventory data for April 30 are presented below for a business that employs the lower of cost or market
basis of inventory valuation.

Unit Unit Total

Cost Market Lower of
Commodity Quantity Price Price Cost Market C or M
A 40 $ 52 $ 55 _______ _______ _______
B 10 155 150 _______ _______ _______
C 20 82 85 _______ _______ _______
D 35 58 55 _______ _______ _______

(a) Complete the table. (4 points)

(b) Determine the amount of reduction in the inventory at April 30 attributable to market
decline. (1 point)

26. During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available
for sale totaled $700,000. Estimate the cost of the merchandise inventory as of August 31, based on an
estimated gross profit rate of 45%. (3 points)
27. On the basis of the following data, estimate the cost of the merchandise inventory at March 31 by the retail
method: (3 points)

Cost Retail
March 1 Merchandise Inventory $250,000 $350,000
March 1-31 Purchases (net) 850,000 1,650,000
March 1-31 Sales (net) 845,000
Name___________________________________

BA 201 - Chapter 8 Homework Assignment (40 points)

True/False
Indicate whether the statement is true or false. (5 points)

____ 1. The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals
of the early 2000s.

____ 2. There are two internal control objectives and they are to ensure accurate financial reports, and ensure
compliance with applicable laws.

____ 3. If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have
exceeded cash overages for the period.

____ 4. A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.

____ 5. In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank
statement.

Multiple Choice
Identify the choice that best completes the statement or answers the question. (10 points)

____ 6. Internal control does not consist of policies and procedures that
a. protect assets from misuse
b. aid management in directing operations toward achieving business goals
c. guarantee the company will not go bankrupt
d. ensure that business information is accurate
____ 7. An element of internal control is
a. risk assessment
b. journals
c. subsidiary ledgers
d. controlling accounts
____ 8. An example of a preventive control is
a. the use of a bank account
b. separation of the Purchasing Department and Accounting Department personnel
c. bonding employees who handle cash
d. accepting payment in currency only
____ 9. On the bank's accounting records, customers' accounts are normally shown as
a. debit balances
b. expenses
c. an asset
d. a liability
____ 10. Credit memos from the bank
a. decrease a bank customer's account
b. are used to show a bank service charge
c. show that a company has deposited a customer's NSF check
d. show the bank has collected a note receivable for the customer
____ 11. A bank reconciliation should be prepared periodically because
a. the company's records and the bank's records are in agreement
b. the bank has not recorded all of its transactions
c. any differences between the company's records and the bank's records should be
determined, and any errors made by either party should be discovered and corrected
d. the bank must make sure that its records are correct
____ 12. Journal entries based on the bank reconciliation are required in the company's accounts for
a. outstanding checks
b. deposits in transit
c. bank errors
d. book errors
____ 13. Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item
would be included on the bank reconciliation as a(n)
a. deduction from the balance per company's records
b. addition to the balance per bank statement
c. deduction from the balance per bank statement
d. addition to the balance per company's records
____ 14. During a bank reconciliation process,
a. Outstanding checks and deposits in transit are added to the bank statement balance.
b. Outstanding checks are subtracted and deposits in transit are added to the bank statement
balance.
c. Outstanding checks and deposits in transit are subtracted from the bank statement balance.
d. Outstanding checks are added and deposits in transit are subtracted from the bank
statement balance.
____ 15. Entries are made to the Petty Cash account when
a. making payments out of the fund.
b. recording shortages in the fund.
c. replenishing the petty cash fund.
d. establishing the fund.

Other

16. The following selected transactions relate to cash collections for a firm that maintains a $100 change fund at
all times. Present entries to record the transactions for each of the two days of cash receipts from sales. (2
points)

(a) Actual cash in cash register, $4,512.36; cash receipts per cash register tally, $4,413.07.
(b) Actual cash in cash register, $3,812.95; cash receipts per cash register tally, $3,712.16.
 17. Using the following information, prepare a bank reconciliation for Young Co. for August 31, 2011: (7 points)

(a) The bank statement balance is $4,010

(b) The cash account balance is $4,207.
(c) Outstanding checks amounted to $517.
(d) Deposits in transit are $633.
(e) The bank service charge is $45.
(f) A check for $84 for supplies was recorded as $48 in the ledger.

18. Journalize the entries to record the following: (3 points)

Mar 1 Established a petty cash fund of $450.00
Mar 31 The amount of cash in the petty cash fund is now $173.00. The fund is
replenished based on the following receipts: office supplies, $145.00; selling
expenses, $135.00.
Record any discrepancy in the cash short and over account.

Matching

Match the following elements of internal control: (5 points)

a. provides reasonable assurance that business goals will be achieved
b. used by management for guiding operations and ensuring compliance with requirements
c. overall attitude of management and employees
d. used to locate weaknesses and improve controls
e. identify, analyze and assess likeliness of vulnerabilities
____ 19. Control Environment
____ 20. Risk Assessment
____ 21. Control Procedures
____ 22. Monitoring
____ 23. Information and Communication

Assign the letter to indicate whether the following items would be added or subtracted from the companys
books or the bank statement during the construction of a bank reconciliation. (8 points)
a. Added to the companys books
b. Subtracted from the companys books
c. Added to the bank statement balance
d. Subtracted from the bank statement balance
____ 24. Outstanding checks
____ 25. Bank service charge
____ 26. Deposit in transit
____ 27. NSF check
____ 28. EFT deposit from a customer
____ 29. Charges for some other companys safe deposit box were posted to your account
____ 30. A $1,000 note from one of your customers was collected by the bank
____ 31. Interest revenue earned by the note above
Name___________________________________

BA 201 - Chapter 9 Homework Assignment (40 points)

True/False
Indicate whether the statement is true or false. (5 points)

____ 1. Generally accepted accounting principles do not normally allow the use of the direct write-off method of
accounting for uncollectible accounts.

____ 2. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a
credit balance before adjusting entries are recorded at the end of the accounting period.

____ 3. When the allowance method for accounting for uncollectible receivables is used, net income is reduced when
a specific receivable is written off.

____ 4. The due date of a 60-day note dated July 10 is September 10.

____ 5. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value
times interest rate times time.

Multiple Choice
Identify the choice that best completes the statement or answers the question. (10 points)

____ 6. Notes or accounts receivables that result from sales transactions are often called
a. non-trade receivables.
b. trade receivables.
c. merchandise receivables.
d. sales receivables.
____ 7. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. at the end of each accounting period.
b. when a credit sale is past due.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be worthless.

____ 8. Two methods of accounting for uncollectible accounts are the

a. direct write-off method and the allowance method.
b. allowance method and the accrual method.
c. allowance method and the net realizable method.
d. direct write-off method and the accrual method.
____ 9. One of the weaknesses of the direct write-off method is that it
a. understates accounts receivable on the balance sheet
b. violates the matching principle
c. is too difficult to use for many companies
d. is based on estimates
____ 10. Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $17,900. Which of the
following entries records the proper adjustment for Bad Debt Expense?

a. debit Allowance for Doubtful Accounts, $16,400; credit Bad Debt Expense, $16,400
b. debit Allowance for Doubtful Accounts, $19,400; credit Bad Debt Expense, $19,400
c. debit Bad Debt Expense $19,400; credit Allowance for Doubtful Accounts, $19,400
d. debit Bad Debt Expense, $16,400; credit Allowance for Doubtful Accounts, $16,400
____ 11. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
debited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Allowance for Doubtful Accounts
c. Accounts Receivable
d. Interest Expense
____ 12. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and
bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the
adjusting entry to record the estimated uncollectible accounts receivables is
a. $8,500
b. $8,500
c. $9,000
d. Cannot be determined
____ 13. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
a. Liabilities decrease.
b. Net Income is unchanged.
c. Total Assets are unchanged.
d. Total Assets decrease.
____ 14. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. The maturity value
of the note is
a. $10,000
b. $10,200
c. $11,200
d. $9,800
____ 15. On October 1, Black Company receives a 6% interest bearing note from Reese Company to settle a $20,000
account receivable. The note is due in six months. At December 31, Black should record interest revenue
of
a. $0
b. $300
c. $600
d. $1,200
Matching

Match each of the following terms associated with notes receivable with the best description of that term. (8
points)
a. Face Amount e. Dishonored Note
b. Term f. Maker
c. Interest g. Notes Receivable
d. Maturity Value h. Interest Rate
____ 16. A formal written instrument that represents amounts due from customers.
____ 17. The amount due when the note is paid off.
____ 18. The amount charged for using the money of another party.
____ 19. The stated rate charged for using the money of another party
____ 20. A note that is not paid when it is due
____ 21. The dollar amount listed on the promissory note.
____ 22. The party promising to pay a note
____ 23. The time between the date a note is issued and the due date of the note.

Match each of the following terms associated with the best description(s) of that term. Each term may be
used more than once. (8 points)
a. Direct Write-off Method
b. Aging of Receivables Method
c. Percent of Sales Method
d. Allowance Method
____ 24. This method records bad debts when specific accounts are deemed uncollectible.
____ 25. When using this method, estimated bad debts are added to the existing allowance balance.
____ 26. This method is most often used by small companies with few receivables.
____ 27. This method is based on the theory that older accounts are less likely to be collected.
____ 28. This method focuses on the balance sheet.
____ 29. Offers two methods to record bad debt expense by estimating uncollectible accounts.
____ 30. With this method, there is no allowance account.
____ 31. This method focuses on the income statement.

Problems

32. Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account. (Assume a
360-day year when calculating interest.) (3 points)
a. Determine the interest.
b. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
c. Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.
33. For each of the following scenarios, indicate the Bad Debt Expense to be recorded in 2011 and the balance in
the Allowance for Doubtful Accounts Account at December 31, 2011. (6 points)

a) An analysis of Simmons Companys $830,000 balance in Accounts Receivable at December 31, 2011,
indicates $15,500 of uncollectible receivables. Before adjustment the balance in Allowance for Doubtful
Accounts is a credit balance of $1,200.

b) Blake Company had net credit sales of $900,000 during 2011, and has an Accounts Receivable balance of
$425,000 at December 31, 2011, and an Allowance for Doubtful Accounts credit balance of $8000. Blake
estimates Bad Debt Expense as 3/4 of 1% of net credit sales.

c) Hidgon Inc. has a balance of $312,000 in Accounts Receivable at December 31, 2011. An analysis of
those receivables shows $2400 will probably not be collected. Before adjusting entries are prepared, the
Allowance for Doubtful Accounts has a debit balance of $750.