ACC 100 Study Guide - Final Guide: Net Income, Accounts Receivable, Share Capital

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4 Feb 2016
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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-
decli ning-balance method for depreciation.
1. Calculate the depreciation expense, accumulated depreciation and the book
value for the 'rst two years of the equipment’s life
2. What factors may have in+uenced 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
Dece 31, 2011
2. ______________________________________________________________________________
______________________________________________________________________________
3. Date Assets = Liabilities + Shareholders' Equity
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Check gures: 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
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Check gures: 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
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