Homework 2 Chapters 4, 5 and 6

  ACC 557

ACC 557 Homework 2: Chapter 4, 5, and 6

Strayer University

 TransactionDebitCredit
Jun 30Service Revenue4,300 
  Income Summary 4,300
    
June 30Income Summary3,500 
  Salaries & wages Expense 1,344
  Miscellaneous Expense 256
  Supplies Expense 1,900
    
June 30Income Summary800 
  Retained Earnings 800
    
June 30Retained Earnings628 
  Dividend 628

b) Prepare a post-closing trial balance.

TransactionDebitCredit
Cash3,712 
Accounts Receivable3,904 
Supplies480 
Accounts Payable 1,556
Unearned Service Revenue 160
Salaries & Wages Payable 448
Common Stock 4,000
Retained Earnings 1,932
Total80968096

E4-13 Prepare the correcting entries.

 TransactionDebitCredit
1Accounts Payable360 
  Cash 360
2Supplies560 
  Equipment 56
  Accounts payable 504
3Dividend500 
  Salaries & Wages Expense 500

E5-4A Prepare separate entries for each transaction on the books of Tuzun Company.

DateTransactionsDebitCredit
Jun 10Merchandise Inventory8,000 
  Accounts payable 8,000
    
Jun 11Merchandise Inventory400 
  Cash 400
    
Jun 12Accounts payable300 
  Merchandise Inventory 300
    
Jun 19Accounts payable7,700 
  Merchandise Inventory 154
  Cash 7,546

B) Prepare separate entries for each transaction for Epps Company. The merchandise purchased by Tuzun on June 10 had cost Epps $4,800.

DateTransactionsDebitCredit
Jun 10Accounts Receivable8,000 
  Sales 8,000
    
 Cost of Goods Sold4,800 
  Merchandise Inventory 4,800
    
Jun 12Sales Return and Allowances300 
  Accounts Receivable 300
    
 Merchandise Inventory70 
  Cost of Goods Sold 70
    
Jun 19Cash7,546 
 Sales Discount154 
  Accounts Receivable 7,700

E5-7A Prepare the adjusting entry necessary as a result of the physical count.

TransactionDebitCredit
Cost of Goods sold 1,100 
Inventory  1,100

B) Prepare closing entries.

TransactionsDebitCredit
Sales115,000 
Income Summary 115,000
   
Income Summary93,000 
Sales Discounts 1,200
Sales return & Allowances 1,700
Cost of Goods Sold 61,100
Operating expenses 29,000
   
Income Summary22,000 
Retained Earnings 22,000

E6-1 Determine the correct inventory amount on December 31.

1. Correct, not included in ending inventory

2. Correct, not included in ending inventory

3. Wrong, needs to be included in inventory

4. Wrong, needs to be included in inventory

5. Wrong, should not be included in inventory

E6-6A) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO.

DateTransactionUnitsPer UnitTotal Cost
Jun 1Beg. Inventory20051,000
Jun 12Purchase40062,400
Jun 23Purchase30072,100
 Total units Available for sale9006.115500

B) Which costing method gives the higher ending inventory? Why?

FIFO method gives the higher ending inventory because it remained in ending inventory which is valued with the newest and highest cost.

C) Which method results in the higher cost of goods sold? Why?

LIFO method results in the higher cost of goods sold because it consists of latest price.

P4-3A Prepare an income statement, a retained earnings statement, and a classified balance sheet.

Service Revenue 60,000
Less Expenses  
Maintenance & Repairs expenses1,600 
Depreciation expense3,100 
Insurance expense1,800 
Salaries & wages expense30,000 
Utilities expense1,400 
Total expenses 37,900
Net Income 22,100
TransactionDebitCredit
Opening Balance of Retained Earnings7,500 
Add Net Income22,100 
Less Dividend(11,000) 
Closing Balance of Retained Earnings 18,600
TransactionsDebitCredit
Assets  
Cash8,900 
Accounts Receivable10,800 
Prepaid Insurance2,800 
Total Current Assets 22,500
Equipment24,000 
Less Accumulated Depreciation(4,500)19,500
Total Assets 42,000
   
Liabilities & shareholder’s equity  
Accounts Payable9,000 
Salaries & wages Payable2,400 
Total Liabilities 11,400
Common Stock12,000 
Retained Earnings18,60030,600
Total Liabilities & Shareholder’s Equity 42,000

B) Prepare the closing entries.

TransactionDebitCredit
Sales60,000 
Income Summary 60,000
   
Income Summary37,900 
Maintenance & Repairs expenses 1,600
Depreciation expense 3,100
Insurance expense 1,800
Salaries & wages expense 30,000
Utilities expense 1,400
   
Income Summary22,100 
Retained Earnings 22,100

C) Post the closing entries and underline and balance the accounts. (Use T-accounts.) Income Summary is account No. 350.

D) Prepare a post-closing trial balance.

TransactionDebitCredit
Cash 8,900 
Accounts Receivable 10,800 
Prepaid Insurance 2,800 
Equipment 24,000 
Accumulated Depreciation  4,500
Accounts Payable  9,000
Salaries & wages Payable  2,400
Common Stock  12,000
Retained Earnings  18,600
Total 46,500 46,500

P5-2A Journalize the transactions using a perpetual inventory system.

DateTransactionReferenceDebitCredit
May 1Merchandise inventory1204200 
  Accounts Payable201 4200
     
May 2Accounts Receivable1122100 
  Sales401 2100
     
 Cost of goods Sold5051300 
  Merchandise Inventory120 1300
     
May 5Accounts Payable201300 
  Merchandise Inventory120 300
     
May 9Cash1012079 
 Sales discount41421 
  Accounts receivable112 2100
     
May 10Accounts Payable2013900 
  Merchandise Inventory120 78
  Cash101 3822
     
May 11Supplies126400 
  Cash101 400
     
May 12Merchandise Inventory1201400 
  Cash101 1400
     
May 15Cash101150 
  Merchandise Inventory120 150
     
May 17Merchandise inventory1201300 
  Accounts Payable201 1300
     
May 19Merchandise inventory120130 
  Cash101 130
     
May 24Accounts Receivable1123200 
  Sales401 3200
     
 Cost of goods Sold5052000 
  Merchandise Inventory120 2000
     
May 25Merchandise inventory120620 
  Cash101 620
     
May 27Accounts Payable2011300 
  Merchandise Inventory120 26
  Cash101 1274
     
May 29Sales return & allowances41270 
  Cash101 70
     
 Merchandise inventory12030 
  Cost of goods Sold505 30
     
May 31Accounts Receivable1121000 
  Sales401 1000
     
 Cost of goods Sold505560 
  Merchandise Inventory120 560

B) Enter the beginning cash and common stock balances and post the transactions. (Use J1 for the journal reference.)

 Cash 101
DateTransactionsReferenceDebitCreditBalance
May 1Balance   5000
May 9 J12079 2921
May 10 J1 38226743
May 11 J1 4007143
May 12 J1 14008543
May 15 J1150 8393
May 19 J1 1308523
May 25 J1 6209143
May 27 J1 127410417
May 29 J1 7010487
 Accounts Receivable112
DateTransactionsReferenceDebitCreditBalance
May 2 J12100 2100
May 9 J1 21000
May 24 J13200 3200
May 31 J11000 4200
 Merchandise Inventory 120
DateTransactionsReferenceDebitCreditBalance
May 1 J14200 4200
May 2 J1 13002900
May 5 J1 3002600
May 10 J1 782522
May 12 J11400 3922
May 15 J1 1503772
May 17 J11300 5072
May 19 J1130 5202
May 24 J1 20003202
May 25 J1620 3822
May 27 J1 263796
May 29 J130 3826
May 31 J1 5603266
 Accounts payable 201
DateTransactionsReferenceDebitCreditBalance
May 1 J1 42004200
May 5 J1300 3900
May 10 J13900 0
May 17 J1 13001300
May 27 J11300 0
 Capital 301
DateTransactionReferenceDebitCreditBalance
May 1BalanceJ1 50005000
 Sales 401
DateTransactionsReferenceDebitCreditBalance
May 2 J1 21002100
May 24 J1 32005300
May 31 J1 10006300
 Sales return & allowance412
DateTransactionReferenceDebitCreditBalance
May 29 J170 70
 Sales Discount414
DateTransactionReferenceDebitCreditBalance
May 9 J121 21
 Cost of Goods Sold 505
DateTransactionsReferenceDebitCreditBalance
May 2 J11300 1300
May 24 J12000 3300
May 29 J1 303270
May 31 J1560 3830

C) Prepare an income statement through gross profit for the month of May 2015.

Sales60,000 
Less sales return & allowances(70) 
Sales Discount(21) 
Net Sales 59,909
Less Cost of Goods Sold (3830)
Gross Profit 56,079

P6-3A Determine the cost of goods available for sale.

DateTransactionsUnitsPer UnitTotal Cost
Jan 1Beginning Inventory150203,000
Mar 15Purchase400239,200
Jul 20Purchase250246,000
Sep 4Purchase350269,100
Dec 2Purchase100292,900
 Total units Available for sale125024.1630200

b)Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.

TransactionsFIFOLIFOAverage cost
Ending Inventory6,8005,3006,040
Cost of Goods Sold23,40024,90024,160

c)Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?

FIFO method results in higher Inventory amount for the Balance sheet and LIFO method shows the highest cost of goods sold for the income statement.

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