Economics 2150A/B Lecture Notes - Lecture 2: Income Statement, Loan, Finished Good

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ECON 2150A/B Full Course Notes

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One month rent*number of months paid in cash. One month of rent (taken from balance sheet) Amount from cash disbursements cash from above old lease (or (number of months used this year + one month prepaid)*monthly rent payment) Amount from cash disbursements (should be the same as cash from should) (cash-prepaid)*wip proportion. If there are wages remaining from last year: Dr wages and salaries expense (or dr wip) If there are wages outstanding from this year: Dr wip or expense (depending on type of wages, label) calculate. Fifo . purchase amount/number of units in purchase*(number of units available or units in ending inventory whichever is applicable) Ending inventory: partial raw materials given, partial direct labour given or number of hours*wage rate, partial factory overhead, partial machine hours/total machine hours*total factory overhead, partial direct labour dollars/total direct labour dollars*total. Factory overhead: partial direct labour hours/total direct labour hours*total factory. Overhead: add three partials to come up with ending inventory.

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CP6-4 Preparing a Multistep Income Statement with Sales Discounts and Sales Returns and Allowances and Computing the Gross Profit Percentage [LO 6-5]

[The following information applies to the questions displayed below.]

Psymon Company, Inc. sells construction equipment. The annual fiscal period ends on December 31. The following adjusted trial balance was created from the general ledger accounts on December 31:

Account Titles	Debits		Credits
Cash	$	59,810
Accounts Receivable		24,800
Inventory		90,500
Property and Equipment		67,000
Accumulated Depreciation			$	28,100
Liabilities				41,900
Common Stock				124,000
Retained Earnings, January 1				15,000
Sales Revenue				258,500
Sales Returns and Allowances		8,700
Sales Discounts		11,400
Cost of Goods Sold		138,800
Salaries and Wages Expense		23,800
Office Expense		24,800
Interest Expenses		3,700
Income Tax Expense		14,190

Totals	$	467,500	$	467,500

Required:

1.	Prepare a multistep income statement that would be used for internal reporting purposes. Treat Sales Discounts and Sales Returns and Allowances as contra-revenue accounts. TIP: Some of the accounts listed will appear on the balance sheet rather than the income statement.

2.	Prepare a multistep income statement that would be used for external reporting purposes, beginning with the amount for Net Sales.

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Question 11 pts

Which of the following terms describe the types of adjusting entries?

expenses and revenues

prepaid expenses and prepaid revenues

deferrals and accruals

deferrals and depreciation

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Question 21 pts

Unearned Revenue is always

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Question 31 pts

The adjusted trial balance shows

assets, liabilities, and common stock only

revenues and expenses only

amounts that may be out of balance

amounts that are ready for the financial statements

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Question 41 pts

Which of the following accounts is not closed?

Salaries Expense

Dividends

Accumulated Depreciation, Equipment

Service Revenue

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Question 51 pts

Given the following adjusted trial balance:

	Debit	Credit
Cash	$1,562
Accounts receivable	2,098
Inventory	3,124
Prepaid rent	86
Equipment	300
Accumulated depreciation-equipment		52
Accounts payable		82
Unearned service revenue		122
Common stock		206
Retained earnings		6,610
Service revenue		268
Interest revenue		56
Salaries and wages expense	160
Travel expense	66
Total	$7,396	$7,396

Net income for the year is

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Question 61 pts

Wolf Pack Services receives $10,000 cash in advance of services performed and credits a liability account. Which of the following adjusting entries will need to be made after the services are performed?

Accounts		Debit	Credit
Unearned Service Revenue		10,000
	Cash		10,000

Accounts		Debit	Credit
Unearned Service Revenue		10,000
	Service Revenue		10,000

Accounts		Debit	Credit
Unearned Service Revenue		10,000
	Prepaid Expense		10,000

Accounts		Debit	Credit
Unearned Service Revenue		10,000
	Accounts Receivable		10,000

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Question 71 pts

Accumulated Depreciation is a(n)

liability account

stockholderâs equity account

contra asset account

asset account

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Question 81 pts

Kimmel Companyâs accountant makes the following entry to record $2,000 of depreciation expense on the companyâs equipment on December 31, 2013:

	Dr.	Cr.
Depreciation Expense	2,000
Cash		2,000

The effect of this entry is to

adjust the accounts to their proper amounts on December 31, 2013

understate total assets on the balance sheet as of December 31, 2013

overstate the book value of the depreciable assets at December 31, 2013

understate the book value of the depreciable assets as of December 31, 2013

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Question 91 pts

The weekly payrool of Wolverine Corporation is $3,000. Employees work five days per week, Monday through Friday. December 31, 2013, the end of the fiscal year, is a Tuesday. Wolverine Corporation will not pay its employees for the full week until Friday, its normal payday. Wolverine Corporation will make which of the following adjusting entries on Tuesday, December 31?

Accounts	Debit	Credit
Salaries Payable	1,200

Accounts	Debit	Credit
Salaries Expenses	1,200
Accumulated Salaries		1,200

Accounts	Debit	Credit
Salaries Expense	1,200
Cash		1,200

Accounts	Debit	Credit
Salaries Expense	1,200
Salaries Payable		1,200

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Question 101 pts

Which of the following statements regarding closing entries is true?

Closing entries bring the Retained Earnings account to its correct ending balance.

Closing entries transfer unearned revenues, expenses, and dividends to retained earnings.

Closing entries zero out the assets, expenses, and dividends accounts to prepare them for the next accounting period.

All of these statements are true.

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Marion has just received the year-end financial statements shown below. Evaluate the state of her company from the perspective of shareholders. What should Marion conclude based on this, and what possible actions can be recommended?
Marion's, Inc.
Income Statement		2012	Cash Flow Statement
Revenue		$3,906,000	Balance Forward		$212,500
	Returns, Credits, etc.	($1,400)	Net Income	$124,480
	Net Sales (Revenue)	$3,904,600	Depreciation	$75,000
Direct Costs			Change in Working Capital	($17,140)
	Labor	($1,450,000)	Capital Expenditures	($70,000)
	Materials	($989,000)	Financial Activities	($75,000)
	Cost of Goods Sold (COGS)	($2,439,000)	Net change in cash	$37,340
	Gross Margin	$1,465,600	Ending Cash Balance		$249,840
Selling General and Admin.
	Marketing	($400,000)
	Research and Development	($350,000)
	Administration	($250,000)
	Other	($200,000)
	Depreciation	($75,000)
	S G & A	($1,275,000)
Earnings Before Interest and Taxes (EBIT)		$190,600
	Interest Expense/Income	($35,000)
	Pre-tax Income	$155,600
	Income Tax @ 20%	($31,120)
	Net Income	$124,480

Balance Sheets, 2011
Assets			Liabilities
Current Assets			Current Liabilities
	Cash	$249,840		Accounts Payable	$125,000
	Accounts receivable	$60,160		Taxes Payable	$10,000
	Finished Goods Inventory	$40,000	Total Current Liabilities		$135,000
	Materials Inventory	$85,000	Long Term Liabilities
Total Current Assets		$435,000		Bank Loans @ 6%	$125,000
				Mortgage @ 4.5%	$460,000
Long term Assets			Total Long Term Liabilities		$585,000
	Buildings	$1,050,000
	Equipment and machines	$80,000	Capital	Stock	$650,000
	Other	$100,000		Retained Earnings	$295,000
Total Fixed Assets		$1,230,000	Stockholders Equity		$945,000
Total Assets		$1,665,000	Total Liabilities and Stockholders equity		$1,665,000

	Current Stock Price	$44.25
	Current Outstanding Shares	5,000

Economics 2150A/B Lecture Notes - Lecture 2: Income Statement, Loan, Finished Good

ECON 2150A/B Full Course Notes

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