Reference no: EM131736436

Q1. Briefly describe the fundamental qualities that make accounting information useful for financial statement users?  Also, briefly describe the ingredients that make up the fundamental qualities.  Lastly, briefly describe the 4 enhancing qualities.

Q2. Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sept.1 Kawabata begins practice as a dentist and invests $80,000 cash and equipment worth $300,000.

2 Purchases dental equipment on account from Green Jacket Co. for $110,500.

4 Pays rent for office space for this month and the next 4 months (for a total of 5 months.  Monthly rent is $800.

7 Takes out a loan at First LeBron Bank in the amount of $100,000.

10 Purchases dental supplies on account, $11,350.

14 Bills patients $26,375 services performed.

18 Receives electricity bill for August in the amount of $1,895.

23 Withdraws $2,510 cash from the business for personal use.

25 Receives $11,230 from patients on account.

30 Dental supplies remaining at the end of September amount to $2,310.  The only supplies the company had were the supplies purchased on Sept. 10.  Record used portion of supplies.

Required: Record the journal entries for the above transactions.

Q3. When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

1. The prepaid insurance account shows a debit of $18,000, representing the cost of a 3-year fire insurance policy dated May 1 of the current year.  Record the used portion of prepaid insurance at Dec. 31.

2. On October 1, Unearned Rent Revenue was credited for $6,000, representing advance rent from a tenant for a 4-month period beginning on that date ($1,500 per month).  Record the earned portion of rent at Dec. 31

3. Purchase of advertising materials for $8,100 during the year was recorded in the Advertising Supplies account. On December 31, advertising materials of $3,250 are on hand. Record the used portion of supplies at Dec. 31.

4. Record interest on notes payable of $250,000 with an annual rate of 6%.  The note was taken out on August 1 of this year.

5. The last payroll date was Friday, December 27th.  Employees work Monday through Friday and are paid every two weeks on Friday.  The per-day labor cost is $3,100.  Record the payroll accrual on Tuesday, December 31st.

6. Equipment costing $800,000 with an estimated salvage value of $50,000 was purchased 3 years ago.  The estimated useful life of the equipment is 15 years.  Record straight-line depreciation for the current year ended Dec. 31.

Required: Prepare journal entries for the above adjustments at December 31 of the current year.  No adjustments were made during the year.

Q4. The following information is related to Dickinson Company for 2014.

Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2014, there were 368,800 shares of common stock outstanding all year.

Required: Prepare a multiple-step income statement in good form.  Only calculate earnings per share on net income.

Q5. Aero Inc. had the following balance sheet at December 31, 2014.

During 2014, the following occurred.

1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000.  Aero started the year with $42,000 in the investments account.

2. A tract of land was purchased for $31,000 and equipment costing $10,000 was purchased.

3. An additional $25,000 in common stock was issued at par.

4. Dividends totaling $9,800 were declared and paid to stockholders.

5. Net income for 2014 was $27,500, including $11,800 in depreciation expense.

6. At December 31, 2013, Cash was $1,500, Accounts Receivable was $28,400, and Accounts Payable was $41,100.

Required: Prepare a statement of cash flows for the year 2014 for Aero.

Q6. Nerwin, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2014. Each employee covered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the Personnel Department and an actuary from an insurance company, the controller develops the following information related to the pension plan.

The interest rate to be used is 7%.

Required: Calculate the present value of this deferred annuity (at January 1, 2014).

Q7. The balance sheet of Starsky Company at December 31, 2013, includes the following.

Transactions in 2014 include the following.

1. Accounts receivable of $515,300 were collected.

2. $11,200 was received in payment of an account which was written off the books as worthless in 2013.

3. Customer accounts of $74,100 were written off during the year.

4. Sales on credit for the year were $955,320.  (all service revenue)

5. At year-end, bad debts were estimated to be 5% of the ending A/R balance (based on the % of A/R method).

Prepare all journal entries necessary to reflect the transactions above.

Q8. On March 1, 2014, Rasheed Company assigns $800,000 of its accounts receivable to the Third National Bank as collateral for a $500,000 loan due July 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3.5% of the accounts receivable, and interest on the loan is 9% (a realistic rate of interest for a note of this type).

a. Prepare the March 1, 2014, journal entry for Rasheed Company.

b. Prepare the journal entry for Rasheed's collection of $775,000 of the accounts receivable during the period from March 1, 2014, through June 30, 2014.

c. On July 1, 2014, Rasheed paid Third National all that was due from the loan it secured on March 1, 2014. Prepare the journal entry to record this payment.

Q9. Calculate the following time value of money problems.

a. What is the future value of 24 periodic payments of $4,620 each made at the beginning of each period and compounded at 8% per period?

b. What would you pay for a $200,000 face value bond that matures in 15 years and pays $15,000 a year in interest (end-of-period payments) if you wanted to earn a yield of 9%.

c. Mike Finley wishes to become a millionaire. His money market fund has a balance of $555,264.50 and has a guaranteed interest rate of 4%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?

d. Andrew Bogut just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund for 8 years (his planned retirement date).  If Bogut plans to establish the AB Foundation once the fund grows to $1,850,930, what annually compounded interest rate must he earn to achieve his goal?

Q10. On June 1, 2014, Grant Co. made sales of $69,700 with terms 2/15, n/45. On June 22, 2014, Grant Co. received full payment for the June 1 sale. 

Prepare the required journal entries for the sale and cash collection for Grant Co. under the following INDEPENDENT scenarios.  Ignore COGS and inventory:

a. Record the sale and cash collection using the GROSS Method.

b. Record the sale and cash collection using the NET Method.

Q11.  Wood Incorporated factored $300,000 of accounts receivable with Engram Factors Inc. on a with recourse basis. Engram assesses a 2.50% finance charge of the amount of accounts receivable and retains an amount equal to 8% of accounts receivable for possible adjustments.

Prepare the journal entry for Wood to record the sale, assuming that the recourse liability has a fair value of $9,330. Also, record the journal entry for Engram Factors, Inc. to record the purchase of the receivables.