13 QUES of acct 200 correspondence exam three version B 2

acct 200 correspondence exam three version B 2
I.Fortheyear2006KolarCompanyhasthefollowinginformationavailable.Usethisinformationtoanswer
qnestionsA,B,C,&D.
GrossCreditSalesof$90,000 SalesDiscountsof$4,000
DebitbalanceinAllowanceforDonbtfulAcconnts
(beforeadjustingentries)
of$6,000BalanceinAcconnts
Receivable(beforeadjusting
entries)of$22,000.
AnswereachofthefollowingquestionsINDEPENDENToftheotherquestions. (10points)

A.
IfKolarCompanyestimatesbaddebtexpense
tobe4%ofNetCreditSales,
whatamountofbaddebtexpenseshouldbereportedonthe2006Income Statement?.

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B.

IfKolarCompanyperforms
anagingofAccountsReceivable anddeterminesthat
$8,000worthof accountsareuncollectible,maketheadiustm<'ournalentrytorecordbaddebtsexpense for2006. C. AssumethatonDecember 31,2006, KolarCompany makesajournalentrytorecord$7,500ofBad DebtExpense. Assume that onJanuary1,2007(beforeanymorecredit salesaremade)KolarCompany decidestowrite-offasuncollectiblea$1,000account receivable.Aftermakingthisjournal entry,what willbethenetrealizablevalueof accountsreceivable? D. AssumethatonDecember 31,2006,KolarCompanymakes a journalentrytorecord$7,500ofBad DebtExpense. AssumethatonJanuruy 1,2007(before anymorecredit salesaremade)KolarCompany decidestowrite-offasnncollectiblea$1,000account receivable.Ifthebookkeeperforgets tomakethis 1ourna1entry,whatw1·nbethenetrear1zable va1ueofaccountsrece1·vable.? .gif">

II. Finley
Companyhadthefollowingtransactionsin2006. (9points)
Jan
I Usedcashtopurchase
aminefor$70million.
Themineisestimatedtohave250,000tonsofore andasalvage
valueof$10million.

JulyI Purchasedapatentfor$1,500,000cash.Thepatent’s
legallifeis17yearsbutthe company estimatesthepatent’s
usefullifetobe5yearsbecauseatthattimethepatentwillnolongerhave anyvalue.

Dec29Paid cash forresearchanddevelopmentcostof$400,000 duringtheprevious12months. Maketheappropnategeneraljourna entriesforJan!,Julv1 &Dec29

MaketheappropriateadjustingentryonDecember
31forthemine(assume
50,000tonsoforeminedand
40,000tonssold)

IIIJournalEntries
12points
Forthefollowing
situations,ifajournalentryisrequiredon December31toadjustthecashbalanceperthebooksmaketheappropriateentry. IfnoentryisrequiredwriteNONE.

Wh”1le
reconc1T1ngthebankstatementthecompanyd”1scoversthereare$4,000m.

outstandingchecks.

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.gif”>Whilereconcilingthebankstatement
thecompanydiscovers
thebankhaschargedthecompanyaservicechargeof$45forhavingsomechecksprinted.

Whilereconcilingthebankstatement
thecompanydiscovers
thebankhasmadeanerrorrelated
toacompanydeposit ofcashsales. Thebankadded$7,800
tothecompany’scheckingaccountwheninfact
therewas$8,100incashdeoosited.

Whilereconcilingthebankstatement
thecompanydiscovers
thatanotereceivablewithafacevalueof
$1,200hasbeencollected
forthecompany.Thetotalamountcollected
was$1,280with$100of interest

accruinganda$20bankcharge.

Noi·nterestrevenue
hasbeenrecordedre1atedtothenote.

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Whilereconcilingthebankstatement thecompanydiscoversthatacashpaymenttoavendorintheamountof$250hasaccidentlybeenrecordedinthecashpayments1ournal
for$520.

IVEssay 5points
Thefollowing
narrativedescribesthebusiness
processatCompanyB. Afterreading
thenarrative, identifyandexplain
WHYeachSPECIFIC
internal controlweaknessatCompanyBisaviolationof goodinternal
control.

Rodneyisnormallyresponsibleforwritingallchecks.
Whenthebankstatement
arrivesRodneydoes thereconciliationofthebankstatementandreportsanydiscrepanciestotheowner. Inadditionto writing
thechecks,Rodneyisresponsibleforapprovingallvendor
invoicesforpaymentbeforehesigns andmailsthechecks. After writingthepayrollchecksRodney
leavesthepaychecksinanenvelope
in theemployeebreakroom. Inordertosavemoney,
Rodneyorderschecksthatareunnumbered.
BecauseRodneyissometimesbusywithothertasks,twootheremployeesalsohavepermissiontosign andmailchecks.

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V OnJanuary
1CompanyBestablishesapettycashfundin theamountof$200. OnFebruary20the necessarybalanceinthefundisincreased
to$250. OnFebruary
28″thepettycashfundisreplenished whenthereis only
$82cashleftinthepettycashdrawer. Thepettycashdrawer
includedpettycash vouchersasfollows. (8points)
postageexpense $45
miscellaneousexpense$50 freight-out $55

MaketheionrnalentrvonFebrnarv20.

Makethejonrnal
entrytorep1enishthefnndonFebruary28

VI. OnOctober12,BradyStorhaugCompany
ownsaPorsche911Turbo
thatoriginallycost$40,000 andcurrentlyhasaccumulateddepreciationof$32,000. ThefairmarketvalueofthePorscheis$6,000. Storhaug
exchangesthisPorschefor
aCavalierwithafairmarket
valueof$9,000andpays$3,000cash toboot. MAKETHEJOURNAL
ENTRYTORECORD
THEEXCHANGEOFVEHICLESON STORHAUG’SBOOKS.
(6points)

VII.
Usethefollowinginformationtomaketheappropriatejournal
entriesasrequired.
Sellin’Inc.receivedanotesreceivablefromBuyin’Inc onApril15. Thefacevalue of
thenotewas
$3,000withamaturitydateofJune15andamaturity
valueof$3,040.On
April30Sellin’properlycalculatedaccruedinteresttobe
$10.(6points)

Makethe A•PrI”J30entrvrelatedtotheaccruaIofm”

terestforSellI’D’Inc.

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OnJune15Buyin’Inc.informedSellin’IncthatBuyin’waslowoncashandwouldnotbeabletopaythematurity
valueofthe note
untilJuly18. Assume
Sellin’madeanother
journalentryrelatedtotheaccrualofinterestonthenotereceivableonMay31for$20.Also,fromJune1toJune15assumeanother$10ofinterest
hasaccruedwithnojournal
entrybeingmade. Make
theappropriatejournalentryonSe11I’D’IUC. booksonJuue15

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VIII.
Poorly
ManagedInc.had totalnetcredit
salesof$100,000. Atthebeginningoftheyear,PoorlyManagedhadabalance inaccounts receivableof$35,000andattheendoftheyearthisbalancehadincreasedto$65,000.
Theterms for
allofPoorlyManaged’screditsalesare 1/5,N30.
Therearenofinancecharges
onoverduebalances.
REQUIRED(7points):
CalculatePoorlvMaua2ed’saccounts
receivableturnover
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X.
Calculatingdepreciationexpense.
AbuildingisacquiredonJanuaryI,atacostof$300,000hasan
estimatedusefullifeof8years.
The
salvagevalue isestimatedtobe$25,000
attheendoftheasset’susefullife.
UsetheaboveinformationtoanswerthefollowingINDEPENDENTquestions.

A
Calculateaccumulateddepreciationattheendofyear2ifthestraight-linemethodisused(3 points).

$ year2

B
CalculatedepreciationexpenseforyearsI&2ifthedouble-decliningbalancemethodisused(5points).

$ year1

$ year2

C
Calculateaccumulateddepreciationattheendofyear2iftheunitsofactivity
methodisused andtheassetisexpected
tobeusedatotalof500,000
hours.Theasset willbeused75,000hoursinyearoneand90,000
hoursinyeartwo(3points).

$ year2

XI.
JoyceCompany hasissneda4-month,
9%,$6,000notereceivabletoacustomer.
Calculatethe following
(9pts).

FaceValue
——

Totalinteresttoaccrueover
the4-monthtime
periodofthenote _

Maturityvalue
ofthenote———-

Onthematurity
date,thecustomer
paysJoyceCompanythematurity
valueofthenote.
Makethe requiredjournal
entryonthematuritydateassumingNOadjustingentries
havebeenmadeforinterest
revenue.

XII.
RodneyCompany
hasamachine thatoriginallycost$32,000andhasbeendepreciatedatotalof
$20,000. AfterfiveyearsRodneysellsthe machinefor$15,000 (7points).

Calculatethebook
valueofthemachine _

Calculatethegain
(loss)onthedisposalofthemachine _

XIII. Thefollowing
informationisavailableforJonesCompany
forthemonthended April30:
A. ThebalanceperthebankstatementasofApril30was$6440.55
B. ThecashaccountbalanceinthegeneralledgerasofApril30was$5,835.55.
C. Acustomer’scheckwasreturned
withtheAprilbankstatementmarkedNSFfor$123.ThiswasthefirsttimeJonesCompany
hadbeennotified
thecheckbounced.
D. JonesCompanyincorrectlyrecordedacashpaymentfor$469.
Thecorrect
amountofthe paymentwas$649.
E.
DepositsintransitasofApril
30equaled$1,200.25.
F. Thebankstatementincluded
adebitmemofor$24.75asacheckprinting
charge.
G. Anotecollected
bythebankonApril28hasnotyetbeenrecorded
inJones’Company
cash receiptsjournal. Thefaceamountofthenotewas$2,000andtheinterest
was$150. The bankcharged
acollectionfeeof$17.NOTE:**JonesCo.
hasalreadyrecordedallofthe interestrevenne.**NOTE

Reqnired (10points):

A PrepareabankreconciliationforJones CompanyforApril30.

BalanceperBankStatement

Balanceper
Books