exam
bProblem 1. Adjusting entries (18 points)
The following trial balance was taken from the books of Fisk Corporation on December 31, 2004. Account Debit Credit
Cash $ 12,000
Accounts Receivable 40,000
Note Receivable 7,000
Allowance for Doubtful Accounts $ 1,800
Merchandise Inventory 54,000
Unexpired Insurance 4,800
Furniture and Equipment 125,000
Accumulated Depreciation of F. & E. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 55,000
Sales 310,000
Cost of Goods Sold 131,000
Salaries Expense 50,000
Rent Expense 12,800 Totals $436,600 $436,600
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $2,000.
b. Estimated bad debts, 1% of gross sales.
c. Depreciation on furniture and equipment, 12% per year.
d. Interest at 8% is receivable on the note for one full year.
e. Rent paid in advance at December 31, $5,400 (originally charged to expense).
f. Accrued salaries at December 31, $5,800.
Instructions
(a) Prepare the necessary adjusting entries.
a. Insurance Expense 2,000 Unexpired Insurance 2,000
b. Bad Debt Expense 3,100 Allowance for Doubtful Accounts 3,100
c. Depreciation Expense 15,000 Accumulated Depreciation 15,000
d. Accrued Interest Receivable 560 Interest Revenue 560
e. Prepaid Rent 5,400 Rent Expense 5,400
f. Salary Expense 5,800 Salaries payable 5,800 Problem 2 Multiple-step income statement (15 points)
Presented below is information related to Gregg Company.
Retained earnings, December 31, 2003 $ 650,000
Sales 1,600,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 250,000
Cash dividends declared on common stock 33,600
Cost of goods sold 960,000
Gain resulting from computation error on depreciation charge in 2002 (pre-tax) 520,000
The following trial balance was taken from the books of Fisk Corporation on December 31, 2004. Account Debit Credit
Cash $ 12,000
Accounts Receivable 40,000
Note Receivable 7,000
Allowance for Doubtful Accounts $ 1,800
Merchandise Inventory 54,000
Unexpired Insurance 4,800
Furniture and Equipment 125,000
Accumulated Depreciation of F. & E. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 55,000
Sales 310,000
Cost of Goods Sold 131,000
Salaries Expense 50,000
Rent Expense 12,800 Totals $436,600 $436,600
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $2,000.
b. Estimated bad debts, 1% of gross sales.
c. Depreciation on furniture and equipment, 12% per year.
d. Interest at 8% is receivable on the note for one full year.
e. Rent paid in advance at December 31, $5,400 (originally charged to expense).
f. Accrued salaries at December 31, $5,800.
Instructions
(a) Prepare the necessary adjusting entries.
a. Insurance Expense 2,000 Unexpired Insurance 2,000
b. Bad Debt Expense 3,100 Allowance for Doubtful Accounts 3,100
c. Depreciation Expense 15,000 Accumulated Depreciation 15,000
d. Accrued Interest Receivable 560 Interest Revenue 560
e. Prepaid Rent 5,400 Rent Expense 5,400
f. Salary Expense 5,800 Salaries payable 5,800 Problem 2 Multiple-step income statement (15 points)
Presented below is information related to Gregg Company.
Retained earnings, December 31, 2003 $ 650,000
Sales 1,600,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 250,000
Cash dividends declared on common stock 33,600
Cost of goods sold 960,000
Gain resulting from computation error on depreciation charge in 2002 (pre-tax) 520,000