Mgmt 30a: Midterm 1 5r1v1u
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M30A: PRINCIPLES OF ING PRACTICE EXAM MIDTERM NO.1 – WITH SOLUTIONS
CHAPTER 1 1.
Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year? a. $490,000 b. $410,000 c. $790,000 d. $450,000
Solution: $330,000 + ($500,000 $380,000) $40,000 $410,000 2.
Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston’s net income for the year? a. $60,000 b. $150,000 c. $105,000 d. $195,000
Solution: $825,000 $720,000 $105,000 3.
Jimmy’s Repair Shop started the year with total assets of $200,000 and total liabilities of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in expenses, and dividends of $40,000. Stockholders’ equity at the end of the year was a. $240,000. b. $200,000. c. $160,000. d. $180,000.
Solution: ($200,000 $160,000) ($420,000 $220,000) $40,000 $200,000 4.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses Cash
500,000 140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s assets on December 31, 2014 are a. $940,000. b. $680,000. c. $320,000. d. $380,000. Solution: $160,000 $140,000 $20,000 $60,000 $380,000
5.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses
500,000
Cash
140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s retained earnings on December 31, 2014 are a. $300,000. b. $360,000. c. $320,000. d. $ 20,000. Solution: $300,000 ($560,000 $500,000) $40,000 $320,000
6.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses
500,000
Cash
140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s stockholders’ equity on December 31, 2014 is a. $420,000. b. $440,000. c. $320,000. d. $480,000. Solution: $120,000 [$300,000 ($560,000 $500,000) $40,000] $440,000
CHAPTER 2
7.
Use the following data to determine the total dollar amount of assets to be classified as current assets. Eddy Auto Supplies Balance Sheet December 31, 2014
Cash
$ 84,000
s receivable
80,000
Inventory
140,000
Prepaid insurance
60,000
Stock investments
170,000
Land
190,000
Buildings
$226,000
Less: Accumulated depreciation
s payable Salaries and wages payable Mortgage payable
186,000
Trademarks
140,000
Total assets
$1,050,000
20,000 180,000
Total liabilities
$310,000
Common stock
$240,000
Retained earnings (40,000)
$ 110,000
Total stockholders’ equity
500,000 $740,000
Total liabilities and stockholders’ equity
a. $534,000 b. $224,000 c. $364,000 d. $304,000 Solution: $84,000 + $80,000 + $140,000 + $60,000 $364,000
$1,050,000
8.
The following lettered items represent a classification scheme for a balance sheet, and the numbered items represent data found on balance sheets. In the blank next to each , write the letter indicating to which category it belongs.
A.
Current assets
B.
Investments
C.
Property, plant, and equipment
D.
Intangible assets
E.
Current liabilities
F.
Long-term liabilities
G.
Stockholders’ equity
H.
Not on the balance sheet
Solution _____
1.
Accumulated depreciation-equip.
_____
6.
Inventory
_____
2.
Common stock
_____
7.
Patents
_____
3.
Interest expense
_____
8.
Prepaid insurance
_____
4.
Salaries and wages payable
_____
9.
Mortgage payable
_____
5.
Retained earnings
_____ 10.
1. C
2. G
3. H
4. E
5. G
6. A
7. D
8. A
Land (held for investment)
9. F
10. B
CHAPTER 3 9.
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction.
1.
Owner invested $60,000 in exchange for common stock of the corporation.
2.
Hired an employee to be paid $400 per week, starting tomorrow.
3.
Paid two years’ rent in advance, $7,200.
4.
Paid the worker’s weekly wage.
5.
Recorded service revenue earned and received for the week, $1,500.
Solution 1.
Cash ...................................................................................................
60,000
Common Stock...........................................................................
2.
No entry
3.
Prepaid Rent .......................................................................................
60,000
7,200
Cash...........................................................................................
4.
Salaries and Wages Expense................................................................
7,200
400
Cash...........................................................................................
5.
Cash ................................................................................................... Service Revenue.........................................................................
400
1,500 1,500
10. Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.
1.
Received $50,000 from stockholders.
2.
Purchased equipment for $75,000, paying $15,000 in cash and giving a note payable for the remainder.
3.
Paid $3,000 rent for the month.
4.
Recorded $12,500 of services provided on .
5.
Paid wages of $9,500.
6.
Received $7,000 in cash for services provided.
7.
Collected $2,000 from customers on .
Solution 1. Cash ...................................................................................................
50,000
Common Stock...........................................................................
2.
3.
Equipment............................................................................................
50,000
75,000
Cash...........................................................................................
15,000
Notes Payable.............................................................................
60,000
Rent Expense.......................................................................................
3,000
Cash...........................................................................................
4.
s Receivable............................................................................
3,000
12,500
Service Revenue.........................................................................
5.
Salaries and Wages Expense................................................................ Cash...........................................................................................
12,500
9,500 9,500
6.
Cash ...................................................................................................
7,000
Service Revenue.........................................................................
7.
Cash ................................................................................................... s Receivable..................................................................
7,000
2,000 2,000
11. Transactions for the Hartman Company for the month of November are presented below. Journalize each transaction and identify each transaction by number. You may omit journal explanations. 1. Stockholders invested an additional $40,000 cash in the business. 2. Purchased land costing $18,000 for cash. 3. Purchased equipment costing $45,000 for $4,500 cash and the remainder on credit. 4. Purchased supplies on for $800. 5. Paid $3,000 for a one-year insurance policy. 6. Received $2,000 cash for services performed. 7. Received $5,000 for services previously performed on . 8. Paid wages to employees for $2,500. 9. Paid dividends to stockholders of $400.
Solution 1. Cash ...................................................................................................40,000 Common Stock ..........................................................................
2.
40,000
Land ...................................................................................................18,000 Cash ..........................................................................................
3.
4.
Equipment ...........................................................................................
18,000
45,000
Cash ..........................................................................................
4,500
s Payable ......................................................................
40,500
Supplies .............................................................................................. s Payable ......................................................................
800 800
5.
Prepaid Insurance ................................................................................
3,000
Cash ..........................................................................................
6.
3,000
Cash ...................................................................................................2,000 Service Revenue ........................................................................
7.
2,000
Cash ...................................................................................................5,000 s Receivable .................................................................
8.
Salaries and Wages Expense ...............................................................
5,000
2,500
Cash ..........................................................................................
9.
Dividends ............................................................................................ Cash ..........................................................................................
2,500
400 400
12. This information relates to Hanshew Real Estate Agency.
Oct.
1 Stockholders invested $35,000 in exchange for common stock of the corporation. 2 Hires an istrative assistant at an annual salary of $36,000. 3 Buys equipment for $3,500 on . 6 Sells a house and lot for M Springer; commissions due from Springer, $10,000 (not paid by Springer at this time). 10 Receives cash of $140 as commission for acting as rental agent renting an apartment. 27 Pays $700 on for the equipment purchased on October 3. 30 Pays the istrative assistant $3,000 in salary for October.
Instructions (a) Journalize the transactions. Do not provide explanations.
Solution General Journal Date
Titles
Debit
Oct. 1
Cash................................................................................
35,000
Common Stock........................................................... 2
No entry.
3
Equipment......................................................................
35,000
3,500
s Payable....................................................... 6
s Receivable......................................................
3,500 10,000
Service Revenue......................................................... 10
Cash................................................................................
10,000 140
Service Revenue......................................................... 27
s Payable........................................................... Cash............................................................................
Credit
140 700 700
30
Salaries and Wages Expense........................................... Cash............................................................................
3,000 3,000
CHAPTER 1 1.
Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year? a. $490,000 b. $410,000 c. $790,000 d. $450,000
Solution: $330,000 + ($500,000 $380,000) $40,000 $410,000 2.
Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston’s net income for the year? a. $60,000 b. $150,000 c. $105,000 d. $195,000
Solution: $825,000 $720,000 $105,000 3.
Jimmy’s Repair Shop started the year with total assets of $200,000 and total liabilities of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in expenses, and dividends of $40,000. Stockholders’ equity at the end of the year was a. $240,000. b. $200,000. c. $160,000. d. $180,000.
Solution: ($200,000 $160,000) ($420,000 $220,000) $40,000 $200,000 4.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses Cash
500,000 140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s assets on December 31, 2014 are a. $940,000. b. $680,000. c. $320,000. d. $380,000. Solution: $160,000 $140,000 $20,000 $60,000 $380,000
5.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses
500,000
Cash
140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s retained earnings on December 31, 2014 are a. $300,000. b. $360,000. c. $320,000. d. $ 20,000. Solution: $300,000 ($560,000 $500,000) $40,000 $320,000
6.
Benedict Company compiled the following financial information as of December 31, 2014: Service revenue
$560,000
Common stock
120,000
Equipment
160,000
Operating expenses
500,000
Cash
140,000
Dividends
40,000
Supplies
20,000
s payable
80,000
s receivable
60,000
Retained earnings, 1/1/14
300,000
Benedict’s stockholders’ equity on December 31, 2014 is a. $420,000. b. $440,000. c. $320,000. d. $480,000. Solution: $120,000 [$300,000 ($560,000 $500,000) $40,000] $440,000
CHAPTER 2
7.
Use the following data to determine the total dollar amount of assets to be classified as current assets. Eddy Auto Supplies Balance Sheet December 31, 2014
Cash
$ 84,000
s receivable
80,000
Inventory
140,000
Prepaid insurance
60,000
Stock investments
170,000
Land
190,000
Buildings
$226,000
Less: Accumulated depreciation
s payable Salaries and wages payable Mortgage payable
186,000
Trademarks
140,000
Total assets
$1,050,000
20,000 180,000
Total liabilities
$310,000
Common stock
$240,000
Retained earnings (40,000)
$ 110,000
Total stockholders’ equity
500,000 $740,000
Total liabilities and stockholders’ equity
a. $534,000 b. $224,000 c. $364,000 d. $304,000 Solution: $84,000 + $80,000 + $140,000 + $60,000 $364,000
$1,050,000
8.
The following lettered items represent a classification scheme for a balance sheet, and the numbered items represent data found on balance sheets. In the blank next to each , write the letter indicating to which category it belongs.
A.
Current assets
B.
Investments
C.
Property, plant, and equipment
D.
Intangible assets
E.
Current liabilities
F.
Long-term liabilities
G.
Stockholders’ equity
H.
Not on the balance sheet
Solution _____
1.
Accumulated depreciation-equip.
_____
6.
Inventory
_____
2.
Common stock
_____
7.
Patents
_____
3.
Interest expense
_____
8.
Prepaid insurance
_____
4.
Salaries and wages payable
_____
9.
Mortgage payable
_____
5.
Retained earnings
_____ 10.
1. C
2. G
3. H
4. E
5. G
6. A
7. D
8. A
Land (held for investment)
9. F
10. B
CHAPTER 3 9.
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction.
1.
Owner invested $60,000 in exchange for common stock of the corporation.
2.
Hired an employee to be paid $400 per week, starting tomorrow.
3.
Paid two years’ rent in advance, $7,200.
4.
Paid the worker’s weekly wage.
5.
Recorded service revenue earned and received for the week, $1,500.
Solution 1.
Cash ...................................................................................................
60,000
Common Stock...........................................................................
2.
No entry
3.
Prepaid Rent .......................................................................................
60,000
7,200
Cash...........................................................................................
4.
Salaries and Wages Expense................................................................
7,200
400
Cash...........................................................................................
5.
Cash ................................................................................................... Service Revenue.........................................................................
400
1,500 1,500
10. Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.
1.
Received $50,000 from stockholders.
2.
Purchased equipment for $75,000, paying $15,000 in cash and giving a note payable for the remainder.
3.
Paid $3,000 rent for the month.
4.
Recorded $12,500 of services provided on .
5.
Paid wages of $9,500.
6.
Received $7,000 in cash for services provided.
7.
Collected $2,000 from customers on .
Solution 1. Cash ...................................................................................................
50,000
Common Stock...........................................................................
2.
3.
Equipment............................................................................................
50,000
75,000
Cash...........................................................................................
15,000
Notes Payable.............................................................................
60,000
Rent Expense.......................................................................................
3,000
Cash...........................................................................................
4.
s Receivable............................................................................
3,000
12,500
Service Revenue.........................................................................
5.
Salaries and Wages Expense................................................................ Cash...........................................................................................
12,500
9,500 9,500
6.
Cash ...................................................................................................
7,000
Service Revenue.........................................................................
7.
Cash ................................................................................................... s Receivable..................................................................
7,000
2,000 2,000
11. Transactions for the Hartman Company for the month of November are presented below. Journalize each transaction and identify each transaction by number. You may omit journal explanations. 1. Stockholders invested an additional $40,000 cash in the business. 2. Purchased land costing $18,000 for cash. 3. Purchased equipment costing $45,000 for $4,500 cash and the remainder on credit. 4. Purchased supplies on for $800. 5. Paid $3,000 for a one-year insurance policy. 6. Received $2,000 cash for services performed. 7. Received $5,000 for services previously performed on . 8. Paid wages to employees for $2,500. 9. Paid dividends to stockholders of $400.
Solution 1. Cash ...................................................................................................40,000 Common Stock ..........................................................................
2.
40,000
Land ...................................................................................................18,000 Cash ..........................................................................................
3.
4.
Equipment ...........................................................................................
18,000
45,000
Cash ..........................................................................................
4,500
s Payable ......................................................................
40,500
Supplies .............................................................................................. s Payable ......................................................................
800 800
5.
Prepaid Insurance ................................................................................
3,000
Cash ..........................................................................................
6.
3,000
Cash ...................................................................................................2,000 Service Revenue ........................................................................
7.
2,000
Cash ...................................................................................................5,000 s Receivable .................................................................
8.
Salaries and Wages Expense ...............................................................
5,000
2,500
Cash ..........................................................................................
9.
Dividends ............................................................................................ Cash ..........................................................................................
2,500
400 400
12. This information relates to Hanshew Real Estate Agency.
Oct.
1 Stockholders invested $35,000 in exchange for common stock of the corporation. 2 Hires an istrative assistant at an annual salary of $36,000. 3 Buys equipment for $3,500 on . 6 Sells a house and lot for M Springer; commissions due from Springer, $10,000 (not paid by Springer at this time). 10 Receives cash of $140 as commission for acting as rental agent renting an apartment. 27 Pays $700 on for the equipment purchased on October 3. 30 Pays the istrative assistant $3,000 in salary for October.
Instructions (a) Journalize the transactions. Do not provide explanations.
Solution General Journal Date
Titles
Debit
Oct. 1
Cash................................................................................
35,000
Common Stock........................................................... 2
No entry.
3
Equipment......................................................................
35,000
3,500
s Payable....................................................... 6
s Receivable......................................................
3,500 10,000
Service Revenue......................................................... 10
Cash................................................................................
10,000 140
Service Revenue......................................................... 27
s Payable........................................................... Cash............................................................................
Credit
140 700 700
30
Salaries and Wages Expense........................................... Cash............................................................................
3,000 3,000
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