Question 1
1) Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future? A. Current liabilities B. The budget variance C. Investment assets D. Current assets 2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of A. $23,000 B. $45,000 C. $67,000 D. $22,000 3) A budget deficit would result when a person's or family's A. actual expenses are less than planned expenses B. net worth decreases C. assets exceed liabilities D. actual expenses are greater than planned expenses 4) The tax base for an individual tax return is A. gross income B. realized income from whatever source derived C. adjusted gross income minus from AGI deductions D. adjusted gross income 5) All of the following are for AGI deductions EXCEPT A. rental and royalty expenses B. moving expenses C. charitable contributions D. business expenses 6) Which of the following series of inequalities is generally most accurate? A. Adjusted gross income is greater than or equal to gross income which is greater than or equal to taxable income B. Gross income is greater than or equal to adjusted gross income which is greater than or equal to taxable income C. Gross income is greater than or equal to taxable income which is greater than or equal to adjusted gross income D. Adjusted gross income is greater than or equal to taxable income which is greater than or equalt to gross income 7) Which of the following has the lowest authoritative weight? A. Private letter ruling B. Legislative regulation C. Interpretive regulation D. Revenue ruling 8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris? A. Tax treaty B. Determination letter C. Private letter ruling D. Regulation 9) Which of the following has the highest authoritative weight? A. Tax article B. Text book C. Private letter ruling D. Revenue ruling 10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because A. health insurance premiums cannot be deducted otherwise B. employers are allowed to deduct social security (FICA) taxes as a business expense C. self-employed taxpayers need an alternate mechanism for reducing the cost of health care D. this deduction provides a measure of equity between employees and the self-employed 11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI? A. Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. B. Hector chose not to participate in the employer-sponsored plan of his spouse. C. Hector's spouse participates in an employer-sponsored plan, but Hector is not eligible to participate in this plan. D. Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income? A. $4,000 B. $4,000 C. $9,000 D. $5,500 13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense? A. None?the meals and entertainment are not deductible except during travel. B. $540 C. $415 D. $270 14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return? A. $4,000 B. $5,300 C. $6,000 D. $12,000 15) Which of the following taxes will not qualify as an itemized deduction? A. Real estate taxes on a residence B. Personal property taxes assessed on the value of specific property C. Gasoline taxes on personal travel D. State, local, and foreign income taxes 16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss? A. $400,000 ordinary gain B. $40,000 ordinary and $360,000 Section 1231 gain C. $400,000 capital gain D. $200,000 ordinary and $200,000 Section 1231 gain 17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss: A. Capital and Section 1231 B. Capital and ordinary C. Section 1245 and Section 1231 D. Ordinary only 18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process? A. $7,000 ordinary loss, $4,000 Section 1231 gain B. $3,000 ordinary loss, $0 Section 1231 loss C. $1,000 ordinary gain, $4,000 Section 1231 loss D. $7,000 ordinary gain, $10,000 Section 1231 loss 19) On the sale of a passive activity, any suspended losses can be used to offset income from A. wages and tips B. other passive activities C. All answers are correct. D. capital gains 20) Which of the following would be considered passive income? A. Dividends B. Rental real estate income C. Capital gains from sale of mutual funds D. Salary for part-time job 21) Which of the following would be considered active income? A. Rental real estate income B. Salary for part-time job C. Dividends D. Capital gains from sale of mutual funds 22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount? A. Zero; all of her loss is allowed to be deducted. B. $2,000 disallowed because of her at-risk amount C. $2,000 disallowed because of her tax basis D. $7,000 disallowed because of her tax basis 23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009? A. $35,000 B. $25,000 C. $5,000 D. $0 24) What happens when a taxpayer experiences a net loss from a rental home? A. The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources. B. The loss is fully deductible against the taxpayer's ordinary income, no matter the circumstances. C. If the taxpayer is not an active participant in the rental, the taxpayer may be allowed to deduct the loss even if the taxpayer does not have any sources of passive income. D. If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property. 25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed? A. S corporation ? No minimum ownership percentage is required. B. Taxable corporation ? 80% before property contribution C. Partnership ? 80% after the property contribution D. LLC ? No minimum ownership percentage is required. 26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder? A. Recognizes either gain or loss B. Does not recognize gain or loss C. Recognizes gain only D. Recognizes loss only 27) What item(s) affect the tax basis of a shareholder in a taxable corporation? A. Income allocated from the entity to owner B. Distributions from earnings and profits to the shareholder C. Distributions in excess of earnings and profits to the shareholder D. Liabilities allocated from the corporation to the shareholder 28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange? A. $500 B. $600 C. $450 D. $550 29) Which of the following requirements do not have to be met in a Section 351 transaction? A. Only property transferred to a corporation is eligible for deferral. B. Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred. C. All transfers of property to a corporation must be made simultaneously to qualify for deferral. D. In the aggregate, the transferors of property to the corporation must collectively control the corporation immediately after the transfers. 30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange? A. $250 B. $150 C. $300 D. $200 31) Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be A. $603,000 B. $875,000 C. $553,000 D. $653,000 32) BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss deduction in the current year? A. Temporary; favorable B. Permanent; favorable C. Temporary; unfavorable D. Permanent; unfavorable 33) A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true? A. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. B. $500 of the distribution will be a dividend because total earnings and profits is $500. C. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. D. $0 of the distribution will be a dividend because current earnings and profits is negative. 34) El Toro Corporation declared a common stock dividend to all shareholders of record on June 30, 2010. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 2010. What are the tax consequences of the stock dividend to Raoul? A. $0 dividend income and a tax basis in the new stock of $100 per share B. $0 dividend income and a tax basis in the new stock of $20 per share C. $15,000 dividend and a tax basis in the new stock of $100 per share D. $0 dividend income and a tax basis in the new stock of $60 per share 35) Which of the following stock dividends would be tax-free to the shareholder? A. A 2-for-1 stock split to all holders of common stock B. A stock dividend to all holders of preferred stock C. All answers are correct. D. Stock dividend where the shareholder could choose between cash and stock 36) Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption? A. Parents B. Grandparents C. Spouse D. Grandchildren 37) Which of the following statements is true when property is contributed in exchange for a partnership interest? A. Any contributed property in a partnership has a carryover basis, and the character of the property is determined by the way the contributing partner used the property. B. The holding period for a partner's partnership interest depends on the type of assets a partner contributes. C. Services are not allowed to be contributed to a partnership in return for a partnership interest. D. The partnership's inside basis is typically increased by any gain the partner recognizes from the property contribution. 38) Which of the following are prohibited from being an S corporation shareholder? A. Foreign citizens that are U.S. residents B. Corporations C. 51 unrelated individuals D. U.S. citizens 39) Under which of the following circumstances will a partner recognize a loss from an operating distribution? A. A partner will never recognize a loss from an operating distribution. B. A partner will recognize a loss from an operating distribution when the partnership distributes money in an amount that is less than the partner's basis in the partnership interest. C. A partner will recognize a loss from an operating distribution when the partnership distributes money in an amount that is greater than the partner's basis in the partnership interest. D. A partner will recognize a loss from an operating distribution when the partnership distributes property other than money with an inside basis greater than the partner's basis in the partnership interest. 40) Suppose at the beginning of 2010, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2010, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation? A. $37,000 B. $27,000 C. $10,000 D. $40,000 41) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2011? A. $20,000 B. $30,000 C. $40,000 D. $5,000 42) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011? A. $20,000 B. $50,000 C. $60,000 D. $10,000 43) Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest? A. $42,000 B. $40,000 C. $37,500 D. $45,000 44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner: A. Recourse ? to partners with the ultimate responsibility for paying the debt; nonrecourse ? profit-sharing ratios B. Recourse ? capital ratios; nonrecourse ? capital ratios C. Recourse ? profit-sharing ratios; nonrecourse ? profit-sharing ratios D. Recourse ? profit-sharing ratios; nonrecourse ? to partners with the ultimate responsibility for paying the debt 45) Which of the following statements is true when property is contributed in exchange for a partnership interest? A. The holding period for a partner's partnership interest depends on the type of assets a partner contributes. B. The partnership's inside basis is typically increased by any gain the partner recognizes from the property contribution. C. Any contributed property in a partnership has a carryover basis, and the character of the property is determined by the way the contributing partner used the property. D. Services are not allowed to be contributed to a partnership in return for a partnership interest. 46) Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return? A. $25,000 B. $15,000 C. $10,000 D. $35,000 47) What form does a partnership use when filing an annual informational return? A. Form 1040 B. Form 1065 C. Form 1120 D. Form 1041 48) Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a $30,000 mortgage executed two years before. What is Vanessa's tax basis in Cook, Inc. after formation? A. $20,000 B. $60,000 C. $80,000 D. $30,000 49) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes? A. A marital deduction and a deduction for casualty losses B. The tax rate schedule for calculating gross transfer taxes C. A charitable deduction and an annual exclusion D. A marital deduction for transfers of all terminable interests 50) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes? A. A unified credit and a marital deduction B. A gift-skipping election and a deduction for income taxes paid by the fiduciary C. A charitable deduction and the amount of the exemption equivalent D. A charitable deduction and an annual exclusion 51) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes? A. The same amount of unified credit B. A gift-skipping election and a charitable deduction C. A charitable deduction and a marital deduction D. An annual exclusion 52) This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year? A. $6,000 B. $45,000 C. Zero ? None of the gifts exceed the annual exclusion. D. $32,000 53) Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift? A. $64,000 B. $77,000 C. $90,000 D. Zero ? There is no completed gift until the trustee makes a distribution from the trust. 54) This year Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years, after which the corpus is to be distributed to Natalie's niece. At year-end, the trustee paid $14,000 of income to the aunt. Which of the following is a true statement? A. Natalie has not made a completed gift because the trust is revocable. B. Natalie has made a taxable gift of $1,000. C. Natalie has made a completed gift of $500,000. D. Natalie has made a taxable gift of $474,000.
Question 2
Resubmitted condensed question - Hi, Attached is my completed set of general journal entries for the following transactions/problem. I am struggling with them and know I am in need of help, please check to see what I could be misunderstanding or simply missing. Included in the instructions are the correct balances, which are very different than what I have come to. Thank you very much for your help with this!!!!!! Introduction The transactions in this practice set were completed by Bath Designs Inc. during January, the first month of the company?s fiscal year. The company designs and manufactures a limited variety of custom bathroom storage cabinets and sauna units, and it maintains a job-order cost system. You have accepted a position with Bath Designs Inc. as assistant controller, and you will begin your duties on January 1 of the current year. In your review of the previous assistant controller?s records, you notice some jobs were incomplete as of December 31 of the previous year. These jobs are contained in the Job Cost Records. You plan to complete most of these jobs in January and to accept new jobs from builders and contractors. You are responsible for the daily accounting operations, preparation of interim financial statements, and end-of-month adjusting and closings entries. Bath Designs Inc. manufactures all products in a single production department. An individual job-order cost sheet is maintained for each job. The job-order cost sheet contains accumulated costs for each job, including actual direct materials, actual direct labor, and applied factory overhead. Gross pay for direct labor is recorded by a debit to Work in Process. Salaries for all other factory personnel are recorded by a debit to Factory Overhead. Salaries of non-factory personnel are recorded at the end of each month by a debit to the appropriate salary expense accounts. Deductions for FICA tax at 7.65% of gross pay (this includes the Medicare Tax deduction) and employees? income tax at 18% of gross pay are recorded whenever gross pay is recorded. All wages are paid on the last day of the month. All employer payroll taxes are recorded at the end of the month. Payroll taxes related to factory personnel are debited to Factory Overhead. Payroll taxes related to all other company personnel are debited to Payroll Taxes Expense?General. Bath Designs Inc. maintains two materials accounts, one for Direct Materials and one for Indirect Materials and Factory Supplies. Factory overhead is applied to each job based on 125% of direct labor cost for that job. Bath Designs Inc. maintains only one factory overhead account. Remember that debits to Factory Overhead represent actual overhead and credits to Factory Overhead represent applied overhead. Since the difference between actual factory overhead and applied factory overhead is insignificant, the over-applied or under-applied balance is closed out to Cost of Goods Sold as an adjusting entry at the end of each month. Bath Designs Inc. marks up all work by 40% of the job cost. Refer to the individual Job Cost Record for the total cost of the job and multiply the total cost by 140% to determine the selling price for each job. Since Bath Designs Inc. sells to builders and contractors, sales are exempt from state sales tax. All sales are on account and are subject to terms of 1/10, net 30 days, FOB shipping point. Accounts Payable is used solely for the purchase of direct materials and indirect materials and factory supplies. All vendors except full payment within 30 days. Operating expenses, with the exception of any accrued salaries, payroll taxes, property taxes, and income taxes, are paid when incurred. All cash received is deposited in the bank, and all payments are made by check. When dealing with an accounts receivable or accounts payable item, be sure to record the company name in the General Ledger and post to Accounts Receivable or Accounts Payable Ledger. It is January 1, and you are ready to assume your new responsibilities. General Instructions 1. Journalize the entries for the month of January in the General Journal. When using the Work in Process account, be sure to post to the appropriate Job Cost Record. NARRATIVE OF TRANSACTIONS Note: Certain transactions, such as those dealing with payroll, require detailed computational work before preparing the journal entry. These transactions are explained initially in the narrative as they occur. Please refer to the original transaction when preparing a subsequent similar transaction. Jan. 2 Paid Berkeley Road Properties $3,600 for January rent. Of this amount, 30% is for office Facilities and 70% is for factory facilities. Jan. 2 Paid Pierce Advertising Agency $490 for preparing advertisements in local newspapers. Jan. 3 Paid Liberty Wood Products Company $8413.12 in payment of December 31 balance. Jan. 3 Received a check from Kian Corporation for the amount due within the discount period. Jan. 4 Paid State National Bank $25,681.41 for December payroll taxes payable as follows: Employee?s Income Tax Payable, $15,812.27; FICA Tax Payable, $9143.73; Federal Unemployment Tax, $319.19; State Unemployment Tax, $406.22. Jan. 4 Paid $7,423.36 for Income Tax Payable. Jan. 4 Paid Ohio Plastics Company $10,714.00 in payment of the December 31 balance. Jan. 4 Applied $3,624.00 of direct materials (requisition No. 670) and $8,120 of direct labor (time ticket No. 129) to Job No. 403, which will complete the job. The FICA rate is 7.65% of gross pay and the employees? income tax rate is 18% of gross pay. When preparing the entry for applying direct labor, debit Work in Process for the gross pay, and credit Employees? Income Tax Payable and FICA Tax Payable for the appropriate amounts and Salaries Payable for net pay. Remember that employees are paid on the last day of each month. Applied factory overhead to Job No. 403 is based upon 125% of direct labor cost. Transferred the completed job to the finished goods account. Jan. 5 Sold and shipped Job No. 403 to the appropriate customer. All sales are on account 1/10, net 30 days, FOB shipping point. Bath Designs Inc. marks up all work by 40% of the job cost (NOTE IN THE ORIGINAL INSTRUCTION SHEET IT SAYS BY 35%, SO NOT SURE WHICH TO USE). Refer to the individual Job Order Cost Sheet for the total cost of the job and multiply the total cost by 140% to determine the selling price for each job. Bath Designs, Inc. maintains a perpetual inventory system. Each time a sale is made to a customer, you must debit Cost of Goods Sold and credit Finished Goods for the cost of the job. Jan. 8 Requisitioned $1,241.27 of indirect materials and factory supplies to be used in the manufacture of all jobs currently in process. (Materials requisition No. 680) Jan. 9 Paid Bob Davis, County Tax Collector, $6321.00 for property taxes accrued as of December 31. Jan. 9 Purchased from Glory Container Corporation $2,243.26 of indirect factory supplies, credit terms net 15 days. Jan. 9 Accepted a job for the manufacture of 17 closet units for Bloomingdale Engineering. The promise date is Feb. 14. Began the job today by applying $5,914.00 of direct materials to Job. No. 406. (Materials requisition No. 681.) Jan. 10 Received a check from Tarara Design Corporation for the amount due within the discount period. Jan. 11 Paid Rorick Hardware Inc. $9,100.00 in payment of the December 31 balance. Jan. 11 Applied $1,327.14 of direct materials to Job. No. 402 (No. 682) Jan. 12 Received a check from Ryan Sales Company for the amount due after the discount period has expired. Jan. 15 Applied $2,214.06 of direct materials to Job No. 404 (No. 683) Jan. 16 Purchased $503.00 of factory supplies from Samantha Supplies, Inc. and paid cash. Jan. 16 Applied $3,216.50 of direct labor to Job. No. 405, which will complete the job. (Time ticket No. 130) Applied factory overhead using the appropriate rate. Transferred the completed job to the finished goods account. Jan. 16 Sold four standard vanity units to a cash customer for $1,400. The cost of the goods shipped from finished goods inventory was $1,000.00. Jan. 17 Requisitioned $614.50 of indirect materials and factory supplies to be used in all factory jobs currently in process (Materials requisition No. 684) Jan. 17 Signed a contract with Elliana Interiors for the manufacture of 120 counter units. The promise date is Feb. 15. Began the job today by applying $4,220.00 of direct materials to Job. No. 407 (Materials requisition No.685) Jan. 17 Paid the sales manager of Bath Designs Inc. $142.62 for customer entertaining. Jan. 18 Received a report from the treasurer that Pickens Contractors, one of our customers, has declared bankruptcy. Wrote off the balance owed to Bath Designs Inc. by Pickens Contractors. Jan. 18 Sold and shipped Job. No. 405 to the appropriate customer. Refer to that job?s Cost Record for the total cost of the job to determine the selling price. Jan. 22 Purchased $10,232.16 of direct materials from Neola Supply Company, credit terms net 30 days. Jan. 22 Accepted a job for the manufacture of 12 sauna units for Maplewood Designers. The promise date is Jan. 31. Began the job today by applying $2,468.10 of direct materials to Job No. 408 (Materials requisition No. 686) Jan. 24 Paid Glory Container Corp. the amount due today from the Jan. 9 purchase. Jan. 25 Applied $1,660 of direct labor to Job. No. 402, which will complete the job. (Time ticket No.131) Applied factory overhead using the appropriate rate. Transferred the completed job to the finished goods account. Jan. 26 Sold and shipped Job No. 402 to the appropriate customer. Refer to that job?s Cost Record for the total cost of the job to determine the selling price. Jan. 26 Ap0plied $3,640 of direct labor to Job. No. 408, which will complete the job. (time ticket No 132) Applied factory overhead using the appropriate rate. Transferred the completed job to the finished goods account. Jan. 29 Sold and shipped Job No 408 to the appropriate customer. Refer to that job?s Cost Records for the total cost of the job for billing purposes. Jan. 29 Paid Foley Tool Company amount due in payment of the Jan. 1 balance. Jan. 29 Received a check from Powell Contractors Inc. for the amount due after the discount period has expired. Jan. 29 Paid Post Office $500.00 for postage added to postage meter. Expense this amount. Jan. 29 Paid Telephone Company $250.00 for Jan. phone service. Jan. 29 Paid Owen Advertising Company $1,000.00 for designing ads for our new Internet website. Jan. 29 Paid Allied Power and Light company $4,216.00 for heat, power, and light. Allocate 25% of this amount to Electricity Expense and 75% to Factory Overhead. Jan. 31 Applied $1,000.00 of direct labor to Job 404 (time ticket No. 133) Applied factory overhead using the appropriate rate. This job will not be completed until Feb. Jan. 31 Applied $4,220.00 of direct labor to Job 407 (time ticket No. 134) Applied factory overhead using the appropriate rate. This job will not be completed until March. Jan. 31 Applied $1,160.00 of direct labor to Job 406 (time ticket No. 135) Applied factory overhead using the appropriate rate. This job will not be completed until Feb. Jan. 31 Received the following data on the monthly payroll from the payroll clerk: Direct Labor (already recorded): $23,016.50 New payroll data (to be recorded): Indirect $11,220.00 Superintendent?s Salary 3,100.00 Sales salaries 11,975.00 Officers? salaries 7,140.00 Office salaries 6310.10 Record the monthly payroll in the general journal. Remember that direct labor payroll already has been recorded as it was incurred in Jan. Salaries for indirect labor are recorded only at the end of the month. Debit Factory Overhead for Indirect Labor and Superintendent?s salaries, debit other salary expense account for the appropriate amounts, credit FICA Tax Payable for 7.65% of gross pay, credit Employees? Income Tax Payable for 18% of gross pay, and credit Salaries Payable for the net pay. All payroll taxes relating to factory personnel are debited to Factory Overhead; all payroll taxes related to non-factory personnel are debited Payroll Taxes Expense ? General. The FICA tax is 7.65% of gross pay, state unemployment. Tax is 5.4% of gross pay and federal unemployment. Tax is 0.8% of gross pay. Since this is the first month in the current year, no employee has reached the ceilings on the payroll taxes. Round the charge to Factory Overhead down to the next cent. Jan. 31 Received a check from Seng Contractors for the amount due after the discount period has expired. Jan. 31 Received a check from Ruth Builders for the amount due after the discount period has expired. Jan. 31 Paid all employees for wages earned in Jan. Jan. 31 Purchased $8,214.00 of direct materials on account from Rorick Hardware Inc. (Take a trial balance at this point.) According to the book, the total for the debit and credit columns on the general journal BEFORE adjusting and closing entries are made should be $921,436.06. The total for adjusting entries is $18,635.08. Note: The figure for Factory Overhead and Cost of Goods Sold is rounded. Schedule of Accounts Receivable Bright Interior Systems ----------$13,275.44 Hughes Building Company ------$3,240.00 Kian Corp.----------------------------$8,431.00 Pickens Contractors ---------------$2,173.00 Powell Contractors Inc. ---------$22,941.61 Ruth Builders -----------------------$19,713.00 Ryan Sales Company -------------$7,214.97 Tarara Design Corp. ---------------$10,622.00 Schedule of Accounts Payable Foley Tool Company ------------$18,622.00 Liberty Wood Products --------$8,413.12 Ohio Plastics Company --------$10,714.00 Rorick Hardware Inc ------------$9,100.00
Question 3
1. (TCO1) Financial statements are: ______________ (Points: 5) standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms. standard documents that tell us how well a business is performing and where it stands in financial terms. reports created by management that states it is responsible for the acts of the corporation. reports issued by outside consultants who are hired to analyze key operations of the business. 2. (TCO2) A company purchased inventory on account. This transaction increased assets and: (Points: 5) increased equity increased liabilities increased revenues decreased assets 3. (TCO1) Which principle states that assets acquired by the business should be recorded at their actual price? (Points: 5) cost principle. objectivity principle. reliability principle. stable dollar principle. 4. (TCO2) A company paid cash for employee wages. This transaction ________________. (Points: 5) increased cash and increased expenses. increased cash and decreased expenses. decreased cash and increased expenses. decreased cash and decreased revenues. 5. (TCO2) Which type of account is increased when a company records a debt? (Points: 5) expense retained earnings liability none of the above are correct. 6. (TCO2) A trial balance has which of the following features? (Points: 5) totals for balance sheet accounts only totals for income statement accounts only totals for all accounts listed in the general ledger both A and B are correct 7. (TCO3) A company started the year with $400 of supplies. During the year the company purchased additional supplies costing $1,600. There were $800 of supplies on hand at the end of the year. An adjusted trial balance prepared at the end of the accounting period will show the which of the following balance in Supplies: (Points: 5) $1,400. $800. $600. $0. 8. (TCO3) Hamilton Tool and Die Company purchased $72,000 of equipment with an estimated service life of 4 years. The equipment will be worth $4,000 at the end of its life. The annual amount of depreciation on this equipment is: (Points: 5) $17,000. $18,000. $19,000. $0. 9. (TCO5) Which of the following items will cause a difference between the book balance and the bank balance? (Points: 5) deposits in timing bank collections canceled checks outstanding voided checks 10. (TCO5) Under the allowance method, the entry to write off a $2,600 uncollectible account includes a(n) : (Points: 5) increase to accounts receivable for $2,600. increase to uncollectible-account expense for $2,600. increase to allowance for uncollectible accounts for $2,600. decrease to Accounts Receivable for $2,600. 11. (TCO5) Portia Incorporated uses the percentage-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $2,000,000, and management estimates 2% will be uncollectible. Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $1,900. The amount of expense reported on the income statement and the balance in Allowance for Uncollectible accounts, respectively, will be: (Points: 5) $41,900 and $40,000. $40,000 and $38,100. $38,100 and 40,000. $40,000 and $41,900. 12. (TCO5) On December 31, 2007, the payee on a $4,500, 120-day, 10% note dated November 1, 2007, will recognize: (Points: 5) interest receivable, $150. interest receivable, $75. interest payable, $150. interest payable, $75. 13. (TCO4) A perpetual inventory system offers which of the following advantages? (Points: 5) inventory balances have to be counted to be accurate. this system is used for inexpensive goods. this system is more expensive than a periodic system. this system helps to determine if there is a sufficient supply of inventory on hand to fill customer orders, just by reviewing the inventory records. 14. (TCO4) A company whose inventory consists of very unique items would probably use which inventory method? (Points: 5) first-in, first-out last-in, first-out specific unit cost weighted-average of only the unique items 15. (TCO4) When inventory prices are falling, the LIFO costing method will generally result in a: (Points: 5) lower gross profit than under fifo. higher gross profit than under fifo. lower inventory value than under fifo. lower owners? equity balance than under FIFO. 16. (TCO6) Which of the following should be included in the cost of land? (Points: 5) construction cost of a parking lot landscaping real estate brokerage commission lighting 17. (TCO6) Which of the following statements is false? (Points: 5) depreciation is a process of subjective valuation. depreciation is a non-cash expense. accumulated depreciation represents a growing amount of cash to be used to replace the existing asset. accumulated depreciation is that portion of a plant asset?s cost that has been recorded previously as an expense. 18. (TCO6) On January 2, 2006, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. What is the book value of the asset on December 31, 2007, if KJ Corporation uses the straight-line method of depreciation? (Points: 5) $80,000 $96,000 $104,000 $164,000 19. (TCO6) A gain is recorded on the sale of a plant asset when the: (Points: 5) cash received exceeds the asset?s book value. asset?s book value is less than its historical cost. asset?s book value is greater than the amount of cash received from the sale. cash received exceeds the cash paid for the replacement asset. 20. (TCO6) Current liabilities fall into two categories which are referred to as: (Points: 5) liabilities of a known amount and estimated liabilities. contingent liabilities and noncontingent liabilities. contingent liabilities and contra-liabilities. unearned liabilities and accrued liabilities. 21. (TCO7) How does an investment of cash in a corporation affect the corporation?s balance sheet? (Points: 5) it increases assets and decreases stockholders? equity. it increases assets and increases stockholders? equity. it increases assets and increases liabilities. it increases assets and decreases liabilities. 22. (TCO7) A company issues one hundred shares of no-par common stock with a $10 stated value for $17 per share. The entry to record this issuance includes a: (Points: 5) decrease to paid-in capital in excess of stated value?common for $1,000. increase to paid-in capital in excess of stated value?common for $700. increase to common stock for $1,700. increase to common stock for $700. 23. (TCO7) Treasury stock accounts for the difference between: (Points: 5) authorized shares and outstanding shares. issued shares and authorized shares. issued shares and preferred shares. outstanding shares and issued shares. 24. (TCO2) Consider the following transactions: I. Borrowed cash on a note payable, $80,000 II. Provided services on account, $10,000 III. Received cash from a customer as payment on account, $8,000 IV. Received a utility bill, $1,200 Total liabilities would be: (Points: 5) $1,200 $81,200 $98,000 $80,000
