Question 1
After the success of the company's first two month, Santana Rey continues to operate Business Solutions. The November 30, 2011, unadjusted trial balance of Business Solutions. ( reflecting its transactions for October and November of 2011) follows. No. Account Title Debit Credit 101 Cash $38,264 106 Account receivable 12,618 126 Computer supplies 2,545 128 Prepaid insurance 2,220 131 Prepaid Rent 3,300 163 Office equipment 8,000 164 Accumulated depreciation - office equipment 0 167 Computer equipment 20,000 168 Accumulated depreciation 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 301 S. Rey, Capital 73,000 302 S. Rey, Withdrawals 5,600 403 Computer services revenue 25,659 612 Depreciation expense -office equipment 0 613 Depreciation expense -Computer equipment 0 623 Wages expense 2,625 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,728 676 Mileage expense 704 677 Miscellaneous expense 250 684 Repairs expense- Computer 805 Totals $98,659 $98,659 Business Solutions had the following transactions and events in December 2011. Dec.2 Paid $1,025 cash to Hillside Mall for Business Solutions' share of mall advertising costs. 3 Paid $500 cash for minor repairs to the company's computer 4 Received $3,950 cash from Alex's Engineering Co. for the receivable from November. 10 Paid cash to Lyn Addie for six days of work at the rate of $125 per day. 14 Notified by Alex's Engineering Co. that Business Solutions' bid of $7,000 on proposed project has been accepted. Alex's paid a $1,500 cash advance to Business Solutions 15 Purchased $1,100 of computer supplies on credit from Harris Office Products. 16 Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8. 20 Completed a project for Liu Corporation and received $5,625 cash. 22-26 Took the week off for the holidays 28 Received $3,000 cash from Gomez Co. on its receivable. 29 Reimbursed S. Rey for business automobile mileage (600 miles at $0.32 per mile) 31 S. Rey withdrew $1,500 cash from the company for personal use. The following additional facts are collected for use in making adjusting entries prior to preparing financial statements for the company's first three months: a. The December 31 inventory count of computer supplies show $580 still available b. Three months have expired since the 12-month insurance premium was paid in advance. c. As a December 31, Lyn Addie has not been paid for four days of work at $125 per day. d. The company's computer is expected to have a four-year life with no salvage value. e. The office equipment is expected to have a five-year life with no salvage value. f. Three of the four months' prepaid rent has expired. Required 1. Prepare journal entries to record each of the December transactions and events for Business Solutions. Post those entries to the accounts in the ledger. 2. Prepaid adjusting entries to reflect a through f. Post those entries to the accounts in the ledger. 3. Prepare an adjusted trial balance as of December 31, 2011. 4. Prepare an income statement for the three months ended December 31, 2011 5. Prepare a statement of owner's equity for the three months ended December 31, 2011 6. Prepare a balance sheet as of December 31, 2011.
Question 2
Kane Inc.'s bank statement from Western Bank at August 31, 2010, gives the following information. Balance, August 1 $16,400 Bank debit memorandum: August deposits 73,000 Safety deposit box fee $ 25 Checks cleared in August 68,678 Service charge 50 Bank credit memorandum: Balance, August 31 20,692 Interest earned 45 A summary of the Cash account in the ledger for August shows the following: balance, August 1, $16,900; receipts $77,000; disbursements $73,570; and balance, August 31, $20,330. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $5,000 and outstanding checks of $4,500. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was journalized and posted for $40. (a) Determine deposits in transit. $ (b) Determine outstanding checks. (Hint: You need to correct disbursements for the check error.) $ (c) Complete a bank reconciliation at August 31. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 1.) KANE INC. Bank reconciliation August 31, 2010 Cash balance per bank statement $ Add: Less: $ Cash balance per books $ Add: Less: $ $ (d) Journalize the adjusting entry to be made by Kane Inc. at August 31. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Date Account/Description Debit Credit Aug. 31
Question 3
4. Determine whether each of the following situations would result in a modified unqualified opinion (i.e., a change to the auditor?s standard three paragraph report). For those situations that would result in a modified unqualified opinion, determine the format of the appropriate report. Assume any effects on the financial statements are material. (Please use the following key (e.g., ?A?) for your answers: A-F). Do not copy the rule itself into your student answer packet. Select from the options provided: A = Not modified unqualified B = Modified unqualified: change all three paragraphs C = Modified unqualified: explanatory paragraph before opinion paragraph D = Modified unqualified: explanatory paragraph after opinion paragraph E = Modified unqualified: explanatory paragraph either before or after opinion paragraph 1. The client has changed from accelerated depreciation to straight-line depreciation. The change had the result of improving the company?s bottom line. 2. Another auditor audits a subsidiary of the client, and the auditor decides to divide responsibility. 3. The client and another entity have developed a unique method of doing business together and current accounting policies don?t adequately reflect the substance of the related transactions. 4. The auditor concludes the client is on the verge of bankruptcy due to a significant competitive threat. 5. The client has changed from a LIFO to a FIFO cost flow assumption to better match the actual flow of its inventory. 6. Another auditor audits a subsidiary of the client and the auditor decides to assume responsibility. 7. The client is suffering from a severe cash flow shortage, but has arranged for a loan from the bank that will alleviate this problem. 8. The client is a component of a larger entity, and the auditor wishes to alert the readers of the financial statements to this fact.
Question 4
3a. (8 Points total, 4 points each). Assume that you are considering the purchase of a $1,000 par value bond that pays $70 each six months and has 10 years before it matures. If you buy this bond today, you expect to hold it for 5 years and then sell it in the secondary market. You (and other investors) currently require a nominal annual rate of 16 percent, but you expect the market to require a nominal rate of only 12 percent when you sell the bond (in 5 years) due to a general decline in interest rates. How much should you be willing to pay for this bond today (on December 4, 2011)? Current Bond Price, VB, (12/4/2011) = ____________________. 3b. Weaver Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of retained earnings common equity (rs) for Weaver Chocolate Co.? What would be the cost of equity from new common stock (re)? Cost of Retained Earnings Common Equity (rs) = ____________________. Cost of Newly Issued Common Stock (re) = ____________________.
Question 5
Summary Paper A Summary Paper is due the last class session. Focus of the Summary Paper: The student will submit a summary paper on the final day of class for the term, which will make up one component of the final grade. The paper should take an in-depth look at a legal/ethical issue or situation relating to current, previous, or potential future work environment(s) for the student. The summary paper must be a minimum of eight to ten double-spaced pages in length with a cover page, not included in the eight to ten pages, and include at least five, outside, scholarly citations (six if the text is used as one of the citations). A successful paper will contain all of the following: Evidence of the student?s understanding of the issue/situation in relationship to business, government and society. An understanding of current ethical issues, sources of ethical behavior, legal viewpoints in relation to the issue/situation being examined. Suggestions/ideas for corrective action pertaining to the issue/situation. The summary assignment must be typed, double spaced, Times New Roman font, 12 point, with 1? margins. References cited must follow the APA format style. No late work will be accepted unless prearranged with the instructor. Writing the Summary Paper The Summary Paper: Must be 8-10 double-spaced pages in length, exclusive of Appendix, References, Exhibits, etc., and formatted according to APA style as outlined in the approved APA style guide. Must include a cover page that includes: Student?s name Course name and number Name of paper Instructor?s name Date submitted Must include an introductory paragraph with a succinct thesis statement. Must address the topic of the paper with critical thought. If possible, provide a context of a first-person experience where you saw this academic concept in operation. Do not simulate third-party statements of experience. Readdress the concept and the experience with critical thought. That is, what is your response to the content, either positive or negative, and then defend your position. If multiple options/alternatives/positions are present and are being rejected you must also defend the reasons for rejecting an option. Must conclude with a restatement of the thesis and a conclusion paragraph. Must use APA style as outlined in the approved APA style guide to document all sources. Must include, on the final page, a Reference List that is completed according to APA style as outlined in the approved APA style guide.,Grading Rubic
