1. Identify accounts by category in the financial statements
Identify the category for each of the following financial accounts and in which financial statement those accounts appear:
2013 Spring2
Category | Financial Statement |
Assets | A | Balance Sheet | BS |
Liability | L | Income Statement | IS |
Owners’ Equity | OE | | |
Revenue | R | | |
Expense | E | | |
Gain | G | | |
Loss | LS | | |
Instructions: classify using abbreviations, A, L, OE, R, E, G, LS in column 2 and BS or IS in column 3 below:>
| Category | Financial Statement(s) |
Cash………………………………… | A | BS |
Accounts payable…………….…………….. | | |
Common stock……………………………… | | |
Depreciation expense……………………….. | | |
Net sales…………………………………….. | | |
Income tax expense…………………………. | | |
Short‑term investments……………………... | | |
Gain on sale of land…………………………. | | |
Retained earnings…………………………… | | |
Dividends payable………………………….. | | |
Accounts receivable………………………… | | |
Short‑term debt……………………………… | | |
2. Transaction analysis – various accounts
For each of the following transactions or adjustments indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each account affected the amount indicating whether it is an addition / increase (+) or subtraction / decrease (-), following the example of transaction a shown below. In some cases only one column may be affected because all of the specific accounts affected by the transaction are included in that category.
Instructions: for each row of transaction, fill in the appropriate column with the entry title (e.g. Interest Receivable, Interest Income, Cash, Accounts Receivable, etc.) and the amount with its sign (e.g., +15, +1,000, -1,500, etc.).
The following table is what our Exercises refer to as the horizontal model. Therefore the Net Income column in the table below really refers to Revenues accounts and Expenses accounts.
| Balance Sheet | |
| Transaction | Current Assets | Current Liabilities | Owners Equity | Net Income |
a. | Accrued interest income of $15 on a Note Receivable. | +15 Interest Receivable | | | +15 Interest Income |
b. | Borrowed $1,000 from the bank. | | | | |
c. | Issued new equity to shareholders receiving $500 in cash. | | | | |
d. | Paid $800 of wages for the current month. | | | | |
e. | Paid $2,600 of wages accrued at the end of the prior month. | | | | |
f. | Received cash of $1,500 on accounts receivable accrued in prior month. | | | | |
g. | Determined that the Allowance for Bad Debts balance should be increased by $1,200. | | | | |
h. | Recognized bank service charges of $50 for the month. | | | | |
i. | Received $50 cash for interest receivable that had been accrued in a prior month. | | | | |
j. | Purchased 10 units of a new item of inventory on account at a cost of $55 each. | | | | |
k. | Purchased 10 more units of the above item at a cost of $58 each. [assume either with cash or on account] | | | | |
l. | Sold 15 of the items purchased for Inventory (in j and k above), and recognized the cost of goods sold using the FIFO cost‑flow assumption. | | | | |
3. Bad Debt Analysis – Allowance Account
On January 1, 2010 the balance in Zenith Co.’s Accounts Receivable was $200,000 and Allowance for Bad Debts account was $15,200.
a. Based on the state of the economy, management decides to increase the provision for bad debts by $3,000. Record this adjusting entry by:
<filling the journal entry below …>
Journal entry title | Debit | Credit |
| | |
| | |
<… OR by filling in the horizontal model below>
Assets | Liabilities | Owners’ Equity | | Net Income | Revenues | Expenses |
| | | | | | |
b. After a comprehensive review of its customers, Zenith decides that customers owing it $4,200 will never pay what they owe. The company had previously made provisions for possible bad debts. Record this adjusting entry by:
<filling the journal entry below…>
Journal entry title | Debit | Credit |
| | |
| | |
<… OR by filling in the horizontal model below>
Assets | Liabilities | Owners’ Equity | | Net Income | Revenues | Expenses |
| | | | | | |
c. After these transactions what was the NET Accounts Receivable?
(Hint: The balance of any account will always be the Beginning Balance + Additions – Subtractions = Ending Balance.)
| Before Transactions | a) Create New Provisions for Bad Debt | Balance after (a) | b) Write-off $4200 of Bad Debts | c) Ending Balance |
Gross Accounts Receivable | +200,000 | | | | |
Allowance for Bad Debts | -15,200 | | | | |
Net Accounts Receivable | +184,800 | | | | |
Net Income | | | | | |
4. Notes Receivable – Interest accrual and collection
Apollo, Inc. accepted a 10-month 10.8% (annual rate) $8,500 note from one of its customers on September 15th, interest is payable with the principal at maturity.
- Calculate how much interest income will have accrued by December 31st.
Show interest calculation in space here …
Then record the interest earned by Apollo during the year ended Dec. 31st
<by filling in the horizontal model below …>
Assets | Liabilities | Owners’ Equity | | Revenues | Expenses |
| | | | | |
<… OR by filling in the journal entry below>
Journal entry title | Debit | Credit |
| | |
| | |
- Calculate the total amount of interest earned on the note by maturity.
<show any other interest calculations in space here below. Hint: in (a), you calculated interests till end of the year. Here, you calculate the remaining interest from beginning of year till maturity>
Show calculations here …
Then record collection of the note and interest at maturity
<by filling the horizontal model below …>
Assets | Liabilities | Owners’ Equity | | Revenues | Expenses |
| | | | | |
<… OR by filling in the journal entry below>
Journal entry title | Debit | Credit |
| | |
| | |
| | |
| | |
5. Capitalizing versus Expensing
For each of the following expenditures, indicate the type of account (Capitalize into asset or Expensed) in which the expenditure should be recorded. Also explain your answers.
a. $15,000 annual cost of routine repair and maintenance expenditures for a fleet of delivery vehicles.
Put answer here …
b. $60,000 cost to develop a coal mine, from which an estimated 1 million tons of coal can be extracted.
Put answer here …
c. $124,000 cost to replace the roof on a building.
Put answer here …
d. $4,000 cost of grading and leveling land so that a building can be constructed.
Put answer here …
6. Calculating Depreciation
Jones Manufacturing buys a new injection moulding machine for $10,000. It has an estimated economic life of 5 years at the end of which the used machine could be sold for $1,000.
a. What would be the straight line depreciation amount on the machine in the first year?
b. If Jones uses double declining balance accelerated depreciation method, what would be the depreciation in the first and second year?
<show calculations below>
7. Effect of depreciation on ROI
Alpha Inc. and Beta Co. are sheet metal processors that supply component parts for consumer product manufacturers. Alpha has been in business since 1980 and is operating in its original plant facilities. Much of its equipment was acquired in the 1980s. Beta was stared two years ago and acquired its building and equipment (new) then. Each firm has about the same sales revenue and material and labor costs are about the same for each firm. What would you expect Alpha’s ROA (Return on Assets = Net Income / Assets) to be relative to Beta’s? Explain your answer. What are the implications of this ROA difference for a firm seeking to enter an established industry?
<provide your essay response below>
CLICK HERE TO GET THE ANSWER !!!! 1. Identify accounts by category in the financial statements Identify the category for each of the following financial accounts and in which financial statement those accounts appear: 2013 Spring2 Category Financial Statement Assets A Balance Sheet BS Liability L Income Statement IS Owners’ Equity OE Revenue R Expense E Gain G Loss LS Instructions: classify using abbreviations, A, L, OE, R, E, G, LS in column 2 and BS or IS in column 3 below:> Category Financial Statement(s) Cash………………………………… A BS Accounts payable…………….…………….. Common stock……………………………… Depreciation expense……………………….. Net sales…………………………………….. Income tax expense…………………………. Short‑term investments……………………... Gain on sale of land…………………………. Retained earnings…………………………… Dividends payable………………………….. Accounts receivable………………………… Short‑term debt……………………………… 2. Transaction analysis – various accounts For each of the following transactions or adjustments indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each account affected the amount indicating whether it is an addition / increase (+) or subtraction / decrease (-), following the example of transaction a shown below. In some cases only one column may be affected because all of the specific accounts affected by the transaction are included in that category. Instructions: for each row of transaction, fill in the appropriate column with the entry title (e.g. Interest Receivable, Interest Income, Cash, Accounts Receivable, etc.) and the amount with its sign (e.g., +15, +1,000, -1,500, etc.). The following table is what our Exercises refer to as the horizontal model. Therefore the Net Income column in the table below really refers to Revenues accounts and Expenses accounts. Balance Sheet Transaction Current Assets Current Liabilities Owners Equity Net Income a. Accrued interest income of $15 on a Note Receivable. +15 Interest Receivable +15 Interest Income b. Borrowed $1,000 from the bank. c. Issued new equity to shareholders receiving $500 in cash. d. Paid $800 of wages for the current month. e. Paid $2,600 of wages accrued at the end of the prior month. f. Received cash of $1,500 on accounts receivable accrued in prior month. g. Determined that the Allowance for Bad Debts balance should be increased by $1,200. h. Recognized bank service charges of $50 for the month. i. Received $50 cash for interest receivable that had been accrued in a prior month. j. Purchased 10 units of a new item of inventory on account at a cost of $55 each. k. Purchased 10 more units of the above item at a cost of $58 each. [assume either with cash or on account] l. Sold 15 of the items purchased for Inventory (in j and k above), and recognized the cost of goods sold using the FIFO cost‑flow assumption. 3. Bad Debt Analysis – Allowance Account On January 1, 2010 the balance in Zenith Co.’s Accounts Receivable was $200,000 and Allowance for Bad Debts account was $15,200. a. Based on the state of the economy, management decides to increase the provision for bad debts by $3,000. Record this adjusting entry by:
Journal entry title Debit Credit <… OR by filling in the horizontal model below> Assets Liabilities Owners’ Equity Net Income Revenues Expenses b. After a comprehensive review of its customers, Zenith decides that customers owing it $4,200 will never pay what they owe. The company had previously made provisions for possible bad debts. Record this adjusting entry by: Journal entry title Debit Credit <… OR by filling in the horizontal model below> Assets Liabilities Owners’ Equity Net Income Revenues Expenses c. After these transactions what was the NET Accounts Receivable? (Hint: The balance of any account will always be the Beginning Balance + Additions – Subtractions = Ending Balance.) Before Transactions a) Create New Provisions for Bad Debt Balance after (a) b) Write-off $4200 of Bad Debts c) Ending Balance Gross Accounts Receivable +200,000 Allowance for Bad Debts -15,200 Net Accounts Receivable +184,800 Net Income 4. Notes Receivable – Interest accrual and collection Apollo, Inc. accepted a 10-month 10.8% (annual rate) $8,500 note from one of its customers on September 15th, interest is payable with the principal at maturity. Calculate how much interest income will have accrued by December 31st. Show interest calculation in space here … Then record the interest earned by Apollo during the year ended Dec. 31st Assets Liabilities Owners’ Equity Revenues Expenses <… OR by filling in the journal entry below> Journal entry title Debit Credit Calculate the total amount of interest earned on the note by maturity. Show calculations here … Then record collection of the note and interest at maturity Assets Liabilities Owners’ Equity Revenues Expenses <… OR by filling in the journal entry below> Journal entry title Debit Credit 5. Capitalizing versus Expensing For each of the following expenditures, indicate the type of account (Capitalize into asset or Expensed) in which the expenditure should be recorded. Also explain your answers. a. $15,000 annual cost of routine repair and maintenance expenditures for a fleet of delivery vehicles. Put answer here … b. $60,000 cost to develop a coal mine, from which an estimated 1 million tons of coal can be extracted. Put answer here … c. $124,000 cost to replace the roof on a building. Put answer here … d. $4,000 cost of grading and leveling land so that a building can be constructed. Put answer here … 6. Calculating Depreciation Jones Manufacturing buys a new injection moulding machine for $10,000. It has an estimated economic life of 5 years at the end of which the used machine could be sold for $1,000. a. What would be the straight line depreciation amount on the machine in the first year? b. If Jones uses double declining balance accelerated depreciation method, what would be the depreciation in the first and second year? 7. Effect of depreciation on ROI Alpha Inc. and Beta Co. are sheet metal processors that supply component parts for consumer product manufacturers. Alpha has been in business since 1980 and is operating in its original plant facilities. Much of its equipment was acquired in the 1980s. Beta was stared two years ago and acquired its building and equipment (new) then. Each firm has about the same sales revenue and material and labor costs are about the same for each firm. What would you expect Alpha’s ROA (Return on Assets = Net Income / Assets) to be relative to Beta’s? Explain your answer. What are the implications of this ROA difference for a firm seeking to enter an established industry? CLICK HERE TO GET THE ANSWER !!!!
1. Identify accounts by category in the
financial statements
Identify the
category for each of the following financial accounts and in which financial
statement those accounts appear:
2013 Spring2
Category
|
Financial Statement
|
Assets
|
A
|
Balance Sheet
|
BS
|
Liability
|
L
|
Income Statement
|
IS
|
Owners’ Equity
|
OE
|
|
|
Revenue
|
R
|
|
|
Expense
|
E
|
|
|
Gain
|
G
|
|
|
Loss
|
LS
|
|
|
Instructions: classify using abbreviations, A, L, OE, R,
E, G, LS in column 2 and BS or IS in column 3 below:>
|
Category
|
Financial
Statement(s)
|
Cash…………………………………
|
A
|
BS
|
Accounts
payable…………….……………..
|
|
|
Common
stock………………………………
|
|
|
Depreciation
expense………………………..
|
|
|
Net
sales……………………………………..
|
|
|
Income tax
expense………………………….
|
|
|
Short‑term
investments……………………...
|
|
|
Gain on
sale of land………………………….
|
|
|
Retained
earnings……………………………
|
|
|
Dividends
payable…………………………..
|
|
|
Accounts
receivable…………………………
|
|
|
Short‑term
debt………………………………
|
|
|
2. Transaction analysis – various accounts
For each of the
following transactions or adjustments indicate the effect of the transaction or
adjustment on the appropriate balance sheet category and on net income by
entering for each account affected the amount indicating whether it is an
addition / increase (+) or subtraction / decrease (-), following the example of
transaction a shown below. In some cases
only one column may be affected because all of the specific accounts affected
by the transaction are included in that category.
Instructions: for each row of transaction, fill in the
appropriate column with the entry title (e.g. Interest Receivable, Interest
Income, Cash, Accounts Receivable, etc.) and the amount with its sign (e.g.,
+15, +1,000, -1,500, etc.).
The following table is what our Exercises refer to as the
horizontal model. Therefore the Net
Income column in the table below really refers to Revenues accounts and
Expenses accounts.
|
Balance Sheet
|
|
|
Transaction
|
Current Assets
|
Current Liabilities
|
Owners Equity
|
Net Income
|
a.
|
Accrued interest income of $15 on a Note Receivable.
|
+15 Interest Receivable
|
|
|
+15
Interest Income
|
b.
|
Borrowed
$1,000 from the bank.
|
|
|
|
|
c.
|
Issued
new equity to shareholders receiving $500 in cash.
|
|
|
|
|
d.
|
Paid
$800 of wages for the current month.
|
|
|
|
|
e.
|
Paid
$2,600 of wages accrued at the end of the prior month.
|
|
|
|
|
f.
|
Received
cash of $1,500 on accounts receivable accrued in prior month.
|
|
|
|
|
g.
|
Determined
that the Allowance for Bad Debts balance should be increased by $1,200.
|
|
|
|
|
h.
|
Recognized bank service charges of $50 for the month.
|
|
|
|
|
i.
|
Received $50 cash for interest receivable that had been
accrued in a prior month.
|
|
|
|
|
j.
|
Purchased 10 units of a new item of inventory on
account at a cost of $55 each.
|
|
|
|
|
k.
|
Purchased 10 more units of the above item at a cost of $58
each. [assume either with cash or on
account]
|
|
|
|
|
l.
|
Sold
15 of the items purchased for Inventory
(in j
and k above), and
recognized the cost of goods sold using the FIFO cost‑flow assumption.
|
|
|
|
|
3. Bad Debt Analysis – Allowance Account
On
January 1, 2010 the balance in Zenith Co.’s Accounts Receivable was $200,000
and Allowance for Bad Debts account was $15,200.
a.
Based on the state of the economy, management decides
to increase the provision for bad debts by $3,000. Record this adjusting entry
by:
<filling the journal entry below …>
Journal
entry title
|
Debit
|
Credit
|
|
|
|
|
|
|
<… OR by filling in the horizontal
model below>
Assets
|
Liabilities
|
Owners’ Equity
|
|
Net Income
|
Revenues
|
Expenses
|
|
|
|
|
|
|
|
b.
After a comprehensive review of its customers, Zenith
decides that customers owing it $4,200 will never pay what they owe. The
company had previously made provisions for possible bad debts. Record this adjusting entry by:
<filling
the journal entry below…>
Journal entry title
|
Debit
|
Credit
|
|
|
|
|
|
|
<… OR by filling in the horizontal
model below>
Assets
|
Liabilities
|
Owners’ Equity
|
|
Net Income
|
Revenues
|
Expenses
|
|
|
|
|
|
|
|
c.
After these transactions what was the NET Accounts
Receivable?
(Hint: The
balance of any account will always be the Beginning Balance + Additions –
Subtractions = Ending Balance.)
|
Before
Transactions
|
a) Create New
Provisions for Bad Debt
|
Balance after (a)
|
b) Write-off $4200 of
Bad Debts
|
c) Ending Balance
|
Gross Accounts Receivable
|
+200,000
|
|
|
|
|
Allowance for Bad Debts
|
-15,200
|
|
|
|
|
Net Accounts Receivable
|
+184,800
|
|
|
|
|
Net Income
|
|
|
|
|
|
4. Notes Receivable –
Interest accrual and collection
Apollo, Inc.
accepted a 10-month 10.8% (annual rate) $8,500 note from one of its customers
on September 15th, interest is payable with the principal at
maturity.
- Calculate
how much interest income will have accrued by December 31st.
Show interest calculation in space here …
Then record the interest earned by Apollo during the year ended
Dec. 31st
<by filling in the horizontal model below
…>
Assets
|
Liabilities
|
Owners’ Equity
|
|
Revenues
|
Expenses
|
|
|
|
|
|
|
<… OR by filling in the journal entry below>
Journal entry title
|
Debit
|
Credit
|
|
|
|
|
|
|
- Calculate
the total amount of interest earned on the note by maturity.
<show any other interest calculations in space here
below. Hint: in (a), you calculated interests till end of the year. Here, you
calculate the remaining interest from beginning of year till maturity>
Show calculations here …
Then record collection of the note and interest at maturity
<by filling the horizontal model below
…>
Assets
|
Liabilities
|
Owners’ Equity
|
|
Revenues
|
Expenses
|
|
|
|
|
|
|
<… OR by filling in the journal entry below>
Journal entry title
|
Debit
|
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Capitalizing versus Expensing
For each of the
following expenditures, indicate
the type of account (Capitalize
into asset or Expensed) in which the expenditure should be
recorded. Also explain your answers.
a.
$15,000 annual cost of routine repair and maintenance
expenditures for a fleet of delivery vehicles.
Put answer
here …
b.
$60,000 cost to develop a coal mine, from which an
estimated 1 million tons of coal can be extracted.
Put answer
here …
c.
$124,000 cost to replace the roof on a building.
Put answer
here …
d.
$4,000 cost of grading and leveling land so that a
building can be constructed.
Put answer
here …
6. Calculating
Depreciation
Jones
Manufacturing buys a new injection moulding machine for $10,000. It has an estimated economic life of 5 years
at the end of which the used machine could be sold for $1,000.
a. What
would be the straight line depreciation amount on the machine in the first
year?
b. If
Jones uses double declining balance accelerated depreciation method,
what would be the depreciation in the first and second year?
<show calculations below>
7. Effect of depreciation on ROI
Alpha Inc. and
Beta Co. are sheet metal processors that supply component parts for consumer
product manufacturers. Alpha has been in
business since 1980 and is operating in its original plant facilities. Much of its equipment was acquired in the
1980s. Beta was stared two years ago and
acquired its building and equipment (new) then.
Each firm has about the same sales revenue and material and labor costs
are about the same for each firm. What
would you expect Alpha’s ROA (Return on Assets = Net Income / Assets) to be relative to Beta’s? Explain your answer. What are the implications of this ROA
difference for a firm seeking to enter an established industry?
<provide your essay response below>
CLICK HERE TO GET THE ANSWER !!!!
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