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Question 1

For the current fiscal year, Purchases were $210,000, Purchase Returns and Allowances were $3,600 and
Freight In was $15,000. If the beginning merchandise inventory was $140,000 and the ending
merchandise inventory was $81,000, the Cost of Goods Sold is:

Multiple Choice

$280,400

$132,400

$250,400

$287,600

Question 2

The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts.
The merchandise inventory amounted to $59,475 on January 1, 2019, and $52,425 on December 31,
2019. The expense accounts numbered 611 through 617 represent selling expenses, and those
numbered 631 through 646 represent general and administrative expenses.

Accounts
401Sales $247,000 Cr.
451Sales Returns and Allowances 4,320 Dr.
491Miscellaneous Income 370 Cr.
501Purchases 103,300 Dr.
502Freight In 1,945 Dr.
503Purchases Returns and Allowances 3,570 Cr.
504Purchases Discounts 1,770 Cr.
611Salaries Expense—Sales 45,000 Dr.
614Store Supplies Expense 2,280 Dr.
617Depreciation Expense—Store Equipment 1,480 Dr.
631Rent Expense 13,200 Dr.
634Utilities Expense 2,970 Dr.
637Salaries Expense—Office 20,800 Dr.
640Payroll Taxes Expense 5,700 Dr.
643Depreciation Expense—Office Equipment 540 Dr.
646Uncollectible Accounts Expense 690 Dr.
691Interest Expense 680 Dr.

The worksheet of Bridget's Office Supplies contains the following owner’s equity accounts. No additional
investments were made during the period.

Accounts
301 Bridget Swanson, Capital $ 63,460 Cr.
302 Bridget Swanson, Drawing 40,550 Dr.

Net income for the year $42,755.

Prepare a statement of owner's equity for the year ended December 31, 2019.

Question 3

The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts.
The merchandise inventory amounted to $58,875 on January 1, 2019, and $51,825 on December 31,
2019. The expense accounts numbered 611 through 617 represent selling expenses, and those
numbered 631 through 646 represent general and administrative expenses.

Accounts
401Sales $245,800 Cr.
451Sales Returns and Allowances 4,260Dr.
491Miscellaneous Income 310 Cr.
501Purchases 102,700Dr.
502Freight In 1,885Dr.
503Purchases Returns and Allowances 3,510 Cr.
504Purchases Discounts 1,710 Cr.
611Salaries Expense—Sales 44,400Dr.
614Store Supplies Expense 2,220Dr.
617Depreciation Expense—Store Equipment 1,420Dr.
631Rent Expense 12,600Dr.
634Utilities Expense 2,910Dr.
637Salaries Expense—Office 20,200Dr.
640Payroll Taxes Expense 5,100Dr.
643Depreciation Expense—Office Equipment 480Dr.
646Uncollectible Accounts Expense 630Dr.
691Interest Expense 560Dr.

Prepare a classified income statement for this firm for the year ended December 31, 2019.

Question 4
The following selected accounts were taken from the financial records of Los Olivos Distributors at
December 31, 2019. All accounts have normal balances.

Cash $ 19,740
Accounts receivable 47,400
Note receivable, due 2020 9,200
Merchandise inventory 35,400
Prepaid insurance 2,320
Supplies 1,380
Equipment 43,200
Accumulated depreciation, equipment 23,200
Note payable to bank, due 2020 32,000
Accounts payable 15,780
Interest payable 320
Sales 528,500
Sales discounts 2,900
Cost of goods sold 355,680

Accounts Receivable at December 31, 2018, was $54,300. Merchandise inventory at December 31, 2018,
was $58,200. Based on the account balances above, calculate the following:

a. The gross profit percentage.

b. Working capital.
c. The current ratio.
d. The inventory turnover.
e. The accounts receivable turnover. All sales were on credit.

Question 5

A company reported gross profit of $92,000, total operating expenses of $49,000 and interest income of
$3,700. What is the income from operations?

Multiple Choice

$35,600

$43,000

$46,700
 $39,300

Question 6

The Adjusted Trial Balance section of the worksheet for Van Zant Janitorial Supplies follows. The owner
made no additional investments during the year.

Accounts Debit Credit

Cash $ 19,600
Accounts Receivable 60,800
Allowance for Doubtful Accounts $ 220
Merchandise Inventory 187,200
Supplies 7,240
Prepaid Insurance 3,160
Equipment 52,000
Accumulated Depreciation—Equipment 18,800
Accounts Payable 9,700
Social Security Tax Payable 1,490
Medicare Tax Payable 410
Steven Van Zant, Capital 281,640
Steven Van Zant, Drawing 75,000
Income Summary 181,000 187,200
Sales 778,000
Sales Returns and Allowances 15,400
Purchases 487,900
Freight In 6,400
Purchases Returns and Allowances 9,500
Purchases Discounts 6,300
Rent Expense 34,800
Telephone Expense 6,340
Salaries Expense 124,140
Payroll Taxes Expense 12,700
Supplies Expense 7,600
Insurance Expense 1,660
Depreciation Expense—Equipment 9,100
Uncollectible Accounts Expense 1,220
Totals $1,293,260 $1,293,260

Prepare a postclosing trial balance for the firm on December 31, 2019.

Question 7
At the end of the year Stan Still Stationery Store had the following balances: Sales $710,000; Sales
Discounts $2,660; Sales Returns and Allowances $15,800; Sales Salaries Expense $77,000. The Net Sales
for the year are:

Multiple Choice

$691,540

$614,540

$707,340

$694,200

Hint: Sales – sales discount – Sales return and allowances

Question 8

Solomon Company reports the following in its most recent year of operations:

 Sales, $1,070,000 (all on account)

 Cost of goods sold, $623,100
 Gross profit, $446,900
 Accounts receivable, beginning of year, $97,000
 Accounts receivable, end of year, $117,000
 Merchandise inventory, beginning of year, $62,000
 Merchandise inventory, end of year, $72,000.

Based on these balances, compute:

a. The accounts receivable turnover.
b. The inventory turnover.

Question 9

Debit Credit
2019 (Adjustment a)
Dec.31 Uncollectible Accounts Expense 2,864.00
Allowance for Doubtful Accounts 2,864.00
 To record estimated loss from Uncollectible accounts based on 0.4%
of net credit sales, $716,000
(Adjustment b)
31 Supplies Expense 3,800.00
Supplies 3,800.00
To record supplies used during the year
(Adjustment c)
31 Insurance Expense 1,080.00
Prepaid Insurance 1,080.00
To record expired insurance on 1-year $4,320 policy purchased on
Oct. 1
(Adjustment d)
31 Depreciation. Exp.—Store Equipment 13,400.00
Accum. Depreciation—Store Equip. 13,400.00
To record depreciation
(Adjustment e)
31 Salaries Expense—Office 1,900.00
Salaries Payable 1,900.00
To record accrued salaries for Dec. 29–31
(Adjustment f)
31 Payroll Taxes Expense 145.35
Social Security Tax Payable 117.80
Medicare Tax Payable 27.55
To record accrued payroll taxes on accrued salaries: social security,
6.2% × 1,900 = $117.80; Medicare, 1.45% × 1,900 = $27.55
(Adjustment g)
31 Interest Expense 110.00
Interest Payable 110.00
To record accrued interest on a 4-month, 6% trade note payable
dated Nov. 1: $11,000 × 0.06 × 2/12 = $110.00
(Adjustment h)
31 Interest Receivable 158.00
Interest Income 158.00
To record interest earned on 6-month, 8% note receivable dated
Oct. 1: $7,900 × 0.08 × 3/12 = $158.00

Examine the above adjusting entries and determine which ones should be reversed. Show the reversing
entries that should be recorded in the general journal as of January 1, 2020. (Record the entries in the
order given. Round your answers to 2 decimal places.)

Question 10
For the current fiscal year, Purchases were $345,000, Purchase Returns and Allowances were $9,900,
Purchase Discounts were $3,900 and Freight In was $49,000. If the beginning merchandise inventory
was $70,000 and the ending merchandise inventory was $95,000, the Cost of Goods Sold is:

Multiple Choice

$380,200

$405,200

$355,200

$382,800

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