Financial Information Journal Entries & Current Ratios Exam Practice

STUDENT NAME: MCC ACCT 113 ACCOUNTING & FINANCIAL REPORTING I EXAM 2 – MICROSOFT WORD PORTION GENERAL REQUIREMENTS 1) This assignment is to be completed on an individual basis. Students who work together or copy from another student will be issued a failing grade for the course. Cheating of any kind will not be tolerated. 2) Please label and present all work in an organized fashion. Failure to show supporting work may be construed as cheating on the exam. 3) Please type all answers and supporting work directly in the body of THIS document. Do not change the file format and do not submit more than one document. 1. A service business has the following financial information as of the end of the year prior to recording closing entries: Revenues Expenses Owner’s capital Owner’s withdrawals Assets Liabilities $12,000 $7,000 $10,000 (credit balance) $2,000 $28,000 $15,000 A. Determine the balance of the income summary account after closing all other accounts EXCEPT income summary. Be sure to label the balance as DEBIT or CREDIT. B. Determine the balance of the owner’s capital account after closing ALL accounts including income summary. Be sure to label the balance as DEBIT or CREDIT. 2. A service business has the following financial information as of December 31 prior to recording closing entries: Service revenue Rent expense Salary expense Depreciation expense Owner’s withdrawals $8,000 $1,000 $3,500 $1,500 $750 Prepare all the necessary closing journal entries required at December 31. 1 3. A business has the following financial information at the end of the year: Cash Accounts receivable Long term debt Inventory Total equity Accounts payable Wages payable Total plant assets Accumulated depreciation $2,000 $14,000 $10,000 $12,000 $62,000 $8,000 $1,500 $25,000 $6,000 Determine the current ratio as of the end of the year. 4. On January 15, a business purchases $11,000 of merchandise inventory on credit from a vendor. The terms of the sale are 2%/10, net 30. The business uses the perpetual inventory system. A. Prepare any necessary journal entries to record the purchase on January 15. B. On January 17, the business returns $1,000 of merchandise inventory from the January 15 purchase to the vendor. Prepare any necessary journal entries to record the return on January 17. C. On January 22, the business pays the entire amount due on the January 15 purchase. Prepare any necessary journal entries to record the payment on January 22. 5. On January 15, a business sells merchandise inventory on credit to a customer for $11,000. The terms of the sale are 2%/10, net 30. The cost of the inventory to the business was $8,000. The business uses the perpetual inventory system. A. Prepare any necessary journal entries to record the sale January 15. B. On January 17, the customer returns $1,000 of merchandise inventory from the January 15 sale. The cost of the inventory to the business was $727. Prepare any necessary journal entries to record the return on January 17. C. On January 22, the business receives payment from the customer for the entire amount due on the January 15 sale. Prepare any necessary journal entries to record the receipt on January 22. 2 6. A merchandising business has the following financial data for the month of January: $15,000 $50,000 $3,000 $2,000 $1,000 $10,000 $65,000 $1,500 $5,000 Merchandise inventory balance on January 1 Purchases Purchase discounts Purchase returns & allowances Incoming freight costs Merchandise inventory balance on January 31 Sales revenue Sales returns and allowances Operating expenses A. Determine cost of goods sold for January. B. Determine gross profit for January. 7. A service business has the following financial data at the end of January: $10,000 $25,000 $15,000 $20,000 $42,000 $20,000 ?? $20,000 Cash Accounts receivable Prepaid rent Land Building Accumulated depreciation Accounts payable Wages payable $52,000 John smith, capital-January 1 ?? John smith, capital-January 31 $10,000 John smith, drawings $5,000 Net income $50,000 Service revenue $8,000 Consulting revenue $15,000 Rent expense $20,000 Wage expense $5,000 Depreciation expense ?? Insurance expense A. Using the basic equation for an income statement, determine insurance expense for January (you do NOT need to prepare a formal income statement). B. Using the basic equation for a statement of owner’s equity, determine John smith, capital at January 31 (you do NOT need to prepare a formal statement of owner’s equity). C. Using the basic equation for a balance sheet, determine accounts payable at January 31 (you do NOT need to prepare a formal balance sheet). 3 Bonus questions (incorrect answers will not affect your grade) 1. What do the letters “FOB” stand for? 2. Rent expense is classified as an operating expense. True or false. 3. Cost of goods sold is classified as an operating expense. True or false. 4. Name two intangible assets. 5. How should land be classified on a classified balance sheet if it is held as a speculative investment?

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