ASAP Please Accounting Exam 3

UMUC – ACCT 220

EXAM 3 – Part 2 (LEO)

This is Part 2 of Exam 3. Part 1 is a multiple choice exam and it is located on WileyPlus. Part 1 is a timed exam.

 

You should treat Part 2 (this part) like a Take-home Exam. You can open it, save the document with your filename, work through the problems, add your answers to your saved document and then submit it via the LEO Assignments location for Exam 3 Part 2.

 

Part 2 of the Exam is worth 35 points. It is based on three chapters (Chapters 8-10). You can type in your answers below each question.

 

Part 1. Chapter 8. A Bank Reconciliation and related Journal Entries from Chapter 8 – 8 points

 

Please use the following information to complete a bank reconciliation for the Flag Company.

 

1. The ledger account for Cash showed a balance of $125,568 on October 31.
2. The October bank statement showed a closing balance of $114,828.
3. The Flag Company’s manager deposited $16,000 in the bank’s night depository on October 31. Therefore, the bank had not recorded it on the bank statement for October.
4. The bank statement included a debit memorandum from the bank for a $50 monthly service charge.
5. Comparison of the bank statement with the book’s records revealed that the accountant mis-recorded one of the checks. The amount for check #722 was incorrectly recorded as $915. The correct amount was $519. The bank statement showed the correct amount. The check was for payment to a supplier (A/P)
6. A credit memorandum included by the bank showed that the bank collected a $4,000 Note Receivable payment from Lillian Berchette (a customer of Flag Company). The proceeds were deposited in the Flag Company account.
7. The bank statement did not include three checks written late in the month. They were: #715, for $315, #720 for $524 and #728 for $275.
8. A customer of the Flag Company, Sharon Jameson, had written a check for $200 in payment for her account balance. It showed up on the bank statement as a NSF check. It had been included with an October 26^th deposit, but the bank deducted that amount on the October 31 statement.

 

Directions:

 

1. Please complete the bank reconciliation using the form below. The Adjusted Cash Balance is given for the Bank side and the Book side as a Check Figure. Item 4, the Bank Service Charge is also given, and so is the balance shown on the Bank Statement. Each correct amount is worth 1 point (6 points).
2. Then prepare the journal entries needed to adjust the accounts at October 31. You can use the space below. Each correct journal entry is worth .50 point (2 points total).

 

 

Flag Company
Bank Reconciliation
October 31
Balance per bank statement, October 31		$114,828
Adjusted cash balance		$         129,714
Balance per accounting records, October 31
Deduct: Service Charges		$50
Adjusted cash balance		$         129,714

 

 

Item #	Journal Entries for the Bank Reconciliation Problem	Debit	Credit

 

Part 2. Chapter 9. Adjusting journal entry for the Allowance for Doubtful Accounts using the percentage-of-receivables method (5 points)

 

Basehart company uses the percentage-of-receivables basis to record bad debts expense. It estimates that 2% of accounts receivable will become uncollectible. Accounts Receivable is $900,000 at the end of the year, and the allowance for doubtful accounts has a Credit balance of $3,000. Prepare the journal entry to record bad debts expense for the year. Show your work for partial credit. Remember, you need to consider the balance in the Allowance account.

 

	Journal Entry for Part 2	Debit	Credit

 

 

Part 3. Chapter 9. Adjusting journal entry for the Allowance for Doubtful Accounts using the percentage-of-sales method (4 points)

 

Lifestyles Limos uses the percentage-of-sales basis in FY 2012 to record bad debts expense. The company estimates that 2.5% of net credit sales will be uncollectible. Net sales for FY 2012 were $400,000, and the allowance for doubtful accounts had a balance in it totaling 3,500CR. Prepare the adjusting journal entry to record bad debts expense at the end of FY 2012.

 

	Journal Entry for Part 3	Debit	Credit

 

Part 4. Chapter 9. Journal entries for Notes Receivable (3 points)

 

Please use the following information to answer the next three questions.

 

One of the customers for Larry’s Fun House is a daycare center, whose owner has had some financial difficulties. She owes Larry’s Fun House $24,000, which Larry’s accountant correctly recorded as Accounts Receivable. Delores Mims, owner of Wee Care Daycare came in to set up payment arrangements with Larry’s accountant. Larry’s agreed to accept a Note from Ms. Mims with the following terms

 

Ø  The Note is for $24,000

Ø  The interest rate is 6%

Ø  The note was issued on October 1, 2011

Ø  The note will be repaid in 12 months, on September 30, 2012

 

a.       What is the correct journal entry to record Larry’s Fun House receiving the Note Receivable?

 

b.      What is the correct journal entry to record Interest Revenue earned in 2011?

 

c.       What is the correct journal entry to record repayment of the Note with interest on September 30, 2012?

 

Part 5.  Depreciation – Chapter 10.Please use the following information to answer the next series of questions. Each correct answer is worth 1.5 points, or 15 total points for this part.

 

Due to age of production equipment, ACAP Enterprises decided to replace its equipment on January 1, 2009. The following information applies to this equipment.

 

Ø  Cost is $849,000

Ø  Estimated residual value is $49,000

Ø  Estimated useful life is 5 years

Ø  The equipment has estimated hours of use totaling 32,000 machine hours

Ø  In 2009 the equipment was used for 6,000 actual machine hours

Ø  In 2010 the equipment was used for 7,500 actual machine hours

 

HINT: To determine the correct answers for some of the questions related to 2010, you need to consider what happened in 2009.

 

1.                  What is the JE to record depreciation expense for 2009 if the Straight-line method is used?

2.                  What is the (net) book value of the asset at the end of 2009 (assuming straight-line)?

3.                  What is the (net) book value of the asset at the end of 2010 (assuming straight-line)?

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4.                  What is the JE to record depreciation expense for 2009 if the units-of-production method is used?

5.                  What is the (net) book value of the asset at the end of 2009 (assuming the units-of-production method)?

6.                  What is the JE to record depreciation expense for 2010 if the units-of-production method is used?

7.                  What is the (net) book value of the asset at the end of 2010 (assuming the units-of-production method)?

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8.                  What is the JE to record depreciation expense for 2009 if the double-declining balance (DDB) is used?

9.                  What is the (net) book value of the asset at the end of 2009 (assuming DDB)?

10.              What is the JE to record depreciation expense for 2010 if the double-declining balance (DDB) is used?