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Final

ACC 100 Study Guide - Final Guide: Accounts Receivable, Weighted Arithmetic Mean, No Entry


Department
Accounting
Course Code
ACC 100
Professor
Else Grech
Study Guide
Final

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Question 1
Castalucci Ltd. purchased equipment on January 1, 2010 for $36,500. It is expected to last for 5
years and have a residual value of $1,500. Castalucci uses the double-declining-balance
method for depreciation.
1. Calculate the depreciation expense, accumulated depreciation and the book value for
the first two years of the equipment’s life Depreciation Rate = 1/useful years
2. What factors may have influenced Castalucci to use the double-declining balance
method?
3. Assume that the company sells the equipment for $10,000 on April 1st, 2012. Record the
entries required for 2012.
1. Year Depreciation expense Accumulated
Depreciation
Net book value
Dec 31 2010 $14600 $14600 $21900
Dece 31, 2011 $8760 $23360 $13140
2. To have a consistent combination of depreciation expenses and repair and maintenance
expense during the life of the asset. In other words, in the early years of the asset’s life,
when repair and maintenance expenses are low, depreciation expenses will be high. In
the later years of the asset’s life, repair and maintenance expenses will be high, and
depreciation expenses will be low. *Rarely in cases do companies use double-declining
method*
3. Date Assets = Liabilities + Shareholders' Equity
January 1, 2010
April 1, 2012
Cash -36500
Equipment +36500
Cash +10000 Depreciation Expense
-1314
(find the depreciation
expense of Year 3/12

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months x 3)
Check figures: NBV 2010 $21,900, Accumulated depreciation 2011 $23,360, Depreciation
expense 2012 $1,314 (3months), Loss on disposal of equipment 1,826
Question 2
Fitness Ltd. is a new health club operating in a suburb of Toronto. The company has selected a
December 31 year end. For each item listed below prepare the transaction entry and the
adjusting entry required. Be sure to include the account names, the dollar amounts and
indicate using “+” or a “-“ whether Assets, Liabilities or Shareholder’s Equity will decrease
or increase OR explicitly indicate “No entry required”. For each adjusting entry indicate
the type of adjusting entry.
1. On September 1st, 2012 ABC Company purchased a two year insurance policy for
$22,800.
2. On November 1st, 2012 a customer paid $600 for a one year gym membership.
3. The company pays their employees on a weekly basis. The gym is open 7 days a week.
On Friday December 28th the company paid the employees $3,500 for the week.
4. On December 31st a customer owed the gym $120 for tanning sessions received during
the month of December. The customer paid for the session on January 10th, 2013.
Date Assets = Liabilities + Shareholders' Equity
September 1,
2012
Cash -$22800
Insurance Policy +
$22800
November 1, 2012 Cash +$100 Service Revenue +$100
December 28,
2012
Cash -$3500 Wages Expense -$3500
December 31,
2012
Wages Payable +
$1500
Wages Expense -$1500
December 31,
2012
Accounts Receivable
+$120
Service Revenue +$120

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January 10, 2013 Accounts Receivable
-$120
Cash +$120
Check figures: Ending balances on Dec 31 Prepaid insur $19,000, Unearned rev $500 Wages
Pay $1,500
Question 3
Harvard Inc.’s inventory records for the month of May reveal the following:
Inventory, May 1st 200 units @ $6 each
May 4th purchase 150 units @$6.50 each
May 7th sale 100 units @$24.00 each
May 10th purchase 220 units @$6.70 each
May 14th sale 265 units @$24.00 each
May 20th purchase 100 units @$7.00 each
Calculate the cost of goods sold and ending inventory under each of the following two methods
(assume a periodic inventory system): a) weighted average and b) FIFO
Date Units Unit Cost Total Cost
May 1 200 $6 $1200
May 4 150 $6.50 $975
May 10 220 $6.70 $1474
May 20 100 $7 $700
Total 670 $4349
a) Weighted Average
Weighted Average Cost = 4349/670 = $6.49
COGS = 365 units x 6.49 = $2368.85
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