Comm 293 Practice Midterm

Long Questions

Keegan is in the black market for flip phones. On May 31st, Keegan had an ending inventory of 9,650
units at a total cost of 77,200 dollars. The following are Keegan operations in the month of June.

1. On June 2nd, Keegan purchases 12,450 additional units from Richard with cash, at 9 dollars each.
2. Keegan sells 9,875 units to Steve for 158,000 dollars on June 7th. But because Steve forgot his
other suitcase at home, he was only able to pay for half of the inventory with cash, leaving the
other half as credit sales with terms of 2.75/10, n/30.
3. On June 9th, Keegan predicts that his sales for the rest of the month would exceed 24,000 units,
so he decides to restock his inventory again. On the very same day, Keegan contacts Jack and
buys 17,500 units for 7.50 each to be paid at a later date.
4. When Keegan was walking around his warehouse on June 10th, he noticed that some of the
inventory he purchased on June 2th were faulty and returns them right away. The refunded
inventory totalled to an amount of 6,750.
5. On June 11th, Keegan sells 12,000 units to Sam at a price of 15.50 dollars each. The amount is
promised to be paid at a later date on terms of 1.5/10, n/30.
6. On June 15th, Sam realizes that he might not need the entire inventory he purchased from
Keegan and plans to return a part of it. The excess inventory is estimated to be 15% of his total
purchase.
7. Coincidently, Steve and Sam both paid for their purchases on the 20th of June. Keegan’s
secretary reminds him that Steve made his purchase on June 7th and Sam made his purchase on
June 11th.
8. On June 25th, Keegan pays for his purchase on the 9th in full.
9. On June 29th, Keegan notices that his warehouse has been broken into and when he performs a
physical inventory check, he counted a total of 16,000 units.

Keegan Limited follows a perpetual inventory system and reports its figures monthly.

Using the FIFO method, record all of Keegan’s journal entries for the month of June.

What is Keegan’s total sales and COGS for the month of June?
Adjustment entries

Ms. Mallia has always had an addiction to numbers, and one day, she decided to start her own
calculator retailing company. The following are her business transactions throughout the year of 2014

1. On January 8th, Ms. Mallia withdraws 70,000 dollars from her personal bank account and invests
65,000 dollars into her business.
2. Ms. Mallia makes her first purchase of calculators from Iugene on February 13th. The total cost
of her 1,400 calculators amounted to a total of 35,000 dollars on terms 3.5/10, n/30.
3. Because Ms. Mallia was away during the 10 days of the discount period, when she paid for her
purchase on February 13th, she was not able to get the discount. The full amount was paid on
February 27th.
4. On March 1st, Ms. Mallia contacts Max from her local bank for a long term bank loan of 36,000
dollars payable after 3 years. The interest rate on the loan is 7% and interest is payable at
maturity.
5. On the 1th of April, Ms.Mallia sells 15,000 worth of inventory to the Jason brothers on account.
She sold each of the calculators at a selling price of 60 dollars. The term on the sale is 3/15, n/45.
6. On May 31th, Ms. Mallia realizes that she needs to buy a special piece of equipment in order to
boost the growth of her company. She then buys her equipment from Elyse for 14,250 dollars
cash. The equipment has a useful life of 8 years with a residual value of 650 dollars.
Subsequently, Ms. Mallia bumps into the Jason brothers and got the full payment for the April
1st sale.
7. On the 11th of June, Carson buys 1,000 calculators from Ms. Mallia. But because she did not
have enough calculators at hand, Carson pays Ms. Mallia in advance for calculators to be picked
up later. The cash amount totalled to 55,000 dollars.
8. On the 1th of July, Ms. Mallia purchases insurance from Dabir for her equipment purchased
earlier. The total insurance cost was 600 dollars and it lasts a year. The insurance was paid on
this day.
9. On August 17th, Ms. Mallia purchases more 400 calculators from Chloe and Peter at a cost of 25
dollars each. The amount was paid with cash.
10. It is September 9th, Ms. Mallia buys 800 dollars worth of office supplies from Chris with cash.
11. On October 31st, Ms. Mallia borrows more money from her friends Kayla and Jasmine. The 2
year borrowing totalled to 15,000 dollars at 9% interest. The interest is payable at the end of Ms.
Mallia’s accounting periods.
12. On November 11th, Ms. Mallia buys a night gown from Sheena and Imran for 750 dollars. The
money came from her personal bank account and the night gown is for a charity function she is
attending.
13. At the end of the year, Ms. Mallia’s inventory had a net realizable value of 20 dollars each.
Additionally, Ms. Mallia’s supplies at the end of the year amounted to 320 dollars. Oh, almost
forgot, Carson picked up his inventory at the end of the month. Ms. Mallia also adjusted all the
accounts necessary and paid for whatever expenses required.

Please, prepare all the journal entries required for Ms. Mallia’s operations throughout the year.
Fill in the blanks

1. Joe’s construction company took on a 3 year project from Tess. The contract states that at the
end of the 3 year project, a full payment of 20 million dollars will be paid to Joe. The total cost
for the project will be 12 million dollars. The following is Joe’s operations for the 3 years. How
much revenue should be recognized in year 2?

Year 1 Year 2 Year 3

Expenses Incurred 3,600,000 X 45%
Cash Paid 6,000,000 0 6,000,000
Cash Received 0 0 20,000,000

2. Steven follows the aging A/R method when it comes to estimating for doubtful accounts. Steven
had beginning allowance for doubtful accounts credit balance of 1,250. Calculate the bad debts
expense at the end of the year.

A/R % estimated
0-30 days 3,000 5%
31-180 days 4,500 30%
180+ days 1,600 60%

3. Using the information below, calculate how much Jenny’s inventory is worth at the end of
January. The ending inventory from the previous accounting period is 1,500. Jenny follows a
perpetual inventory system.
a. On Jan 8th, Jenny purchased 7,000 dollars worth of inventory from a supplier. The term
on the purchase was 1.25/10, n/30, FOB shipping point.
b. The shipping cost of the inventory totalled to 150 dollars, paid by the responsible party.
c. Jenny pays for half of her purchase on Jan 15th.
d. Jenny pays for the rest of the amount owing on Jan 20th.
4. Record the adjusting entry necessary for the following transaction at year end. Assume the
company adjusts entries at the end of each month. (Round to the nearest dollar)
a. April 1st, the total borrowing of the 3 year loan totalled 175,000 dollars. The interest
rate for the loan is 7%.

5. Calculate for the company’s interest expense from this transaction at the end of the year.
Assume the company adjusts entries monthly.
a. February 1st, a loan of 100,000 dollars with a 6 month term. The interest rate for the
loan is 5%.

6. Calculate for the rent expense on March 31st. The company adjusts its accounts quarterly.
a. On Jan 1st, 2013, owner pays 12,000 cash for rent expense for the next 15 months.

7. Bill had beginning supplies of 750 dollars. Throughout the month, he spent an extra 1,250 on
office supplies. Calculate for Bill’s supplies expense for the month if he has ending supplies of
451 dollars.

8. Krista owns a machine that produces keyboards fully automatically. The machine costs 450,000
dollars and it follows a unit of production depreciation. The estimated production from the
machine is 2.7 million keyboards and the machine is estimated to have a residual value of
25,000 dollars. Calculate for the depreciation expense if the current year’s production was
450,000 keyboards. (Round answer to the nearest dollar)
9. Sally purchases a total of 17,000 dollars worth of inventory on the 9th of September. The term
on the purchase is 4/15, n/30. Two days after her purchase, Sally immediately notices faulty
inventory received amounting to 2,000 dollars and were returned on the day of. On September
15th, Sally pays for 80% of the amount outstanding from her purchase on the 9th. At the end of
the month, Sally paid for the rest of the amount owing to the supplier. Calculate the total
amount of cash Sally paid for her purchase on September the 9th.

10. Calculate for the company’s gross profit for the month of February. This company uses a period
inventory system, calculate using the average method. (Round to the nearest dollar)

Unit Total
Date Explanation Units Cost Costs

Feb 1st Beginning Inventory 25 $ 35.00 $ 875.00

Feb 4th Sale 7 32 224
Feb 8th Purchase 15 42 630
Feb
14th Return 5 42 210
Feb
19th Purchase 8 38 304
Feb
21st Sale 17 36 612
Fill in the following blanks for the year end report.

Assets Debit Credit

Current Assets
Cash
Accounts Receivable 107075

Long Term Assets 250000

Equipment
Depreciation 25000
Land
Total Assets

Liabilities
Accounts Payable 87500
Short Term Bank Loan 100000

Equity
Common Shares
Retained Earnings
Revenue 124500
Cost of Good Sold
Expenses 11700
Total L + SE

Additional Information:

1. Beginning retained earnings was zero

2. The gross profit ratio for the company is 42%
3. The current ratio for the company is 1.2
4. The company’s equipment was all purchased on January 1st of the current year. The equipment
has an expected useful life of 5 years with zero residual value.
5. A = L + SE

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