1. A company has Liabilities of $23,500 and Stockholders' Equity of $56,500.

How much does the

- The company has $80,000 in assets.

2. Beginning retained earnings are $65,000; sales are $29,500; expenses are $33,000; and dividends paid
are $3,500. How much is the net income or loss for the company?

- The net loss for the company is $3,500.

3. The account "Salaries Expense" began with a zero balance and then had the following changes:
increase of $450, decrease of $175, increase of $600, and an increase of $350. What is the final balance
of the "Salaries Expense" account, and is it a debit or credit?

- The final balance of the "Salaries Expense" account is $1,225, and it is a debit.

4. A $375 purchase of supplies on account was recorded by debiting Supplies for $375 and crediting
Cash for $375. What is the journal entry needed to correct this error?

- The journal entry needed to correct this error is to debit Accounts Payable for $375 and credit Supplies
for $375.

5. Allied, Inc. bought a two-year insurance policy on August 1 for $3,600. What's the adjusting journal
entry on December 31?

- The adjusting journal entry on December 31 is to debit Insurance Expense for $900 and credit Prepaid
Insurance for $900.

6. A company started the year with no supplies. During the year they bought $200 worth of supplies on
account and later paid $150 of this debt. If there were $40 worth of supplies left at the end of the year,
what is the supply expense for the period?

- The supply expense for the period is $310 ($200 - $40 + $150).

7. If ABC Corporation pays the invoice on the seventeenth day, they will receive a discount of 3% on the
invoice amount, which is $4,500. The discount amount is calculated as 3% of $4,500, which is $135.
Therefore, ABC Corporation will pay $4,365 for the invoice. The Cash account will be credited for $4,365,
which represents the decrease in the company's cash balance due to the payment.

8. Bond and Associates' current liabilities are the obligations that the company is expected to pay within
the next year. These include Accounts Payable, Wages Payable, Unearned Revenue, and the current
portion of Mortgage Payable. The current portion of Mortgage Payable is the amount of the long-term
debt that is due within the next year. Therefore, the total amount of Bond and Associates' current
liabilities is:

Current Liabilities = Accounts Payable + Wages Payable + Unearned Revenue + Current Portion of
Mortgage Payable

Current Liabilities = $8,500 + $4,500 + $6,000 + ($45,000/5)

Current Liabilities = $8,500 + $4,500 + $6,000 + $9,000

Current Liabilities = $28,000

Therefore, Bond and Associates' current liabilities are $28,000.

9. The cost of goods sold for the June 14 sale can be calculated using the average cost method.
Assuming a perpetual inventory system, we can calculate the average cost per unit of inventory as
follows:

Total cost of beginning inventory = 5 units x $52/unit = $260

Total cost of purchases = (10 units x $55/unit) + (9 units x $58/unit) = $995

Total units available for sale = 5 + 10 + 9 = 24

Average cost per unit = Total cost of beginning inventory + Total cost of purchases / Total units available
for sale = ($260 + $995) / 24 = $48.96/unit

To calculate the cost of goods sold for the June 14 sale, we need to know the total cost of the 8 units
sold. Using the average cost per unit calculated above, we can determine the cost of goods sold as
follows:

Cost of goods sold = 8 units x $48.96/unit = $391.68

Therefore, the cost of goods sold for the June 14 sale is $391.68.
10. To calculate the cost of goods sold, we can use the formula:

Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

We are given the beginning inventory ($1,800), ending inventory ($1,300), and gross profit ($3,200),
which can be used to calculate purchases:

Purchases = Net Sales - Gross Profit

Purchases = $4,500 - $3,200

Purchases = $1,300

Now we can calculate the cost of goods sold:

Cost of Goods Sold = $1,800 + $1,300 - $1,300

Cost of Goods Sold = $1,800

Therefore, the company's cost of goods sold is $1,800.

11. The inventory turnover can be calculated using the formula:

Inventory Turnover = Cost of Goods Sold / Average Inventory

We are given the beginning inventory ($16,000), ending inventory ($20,000), and cost of goods sold
($50,000), which can be used to calculate the average inventory:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Average Inventory = $18,000

Now we can calculate the inventory turnover:

Inventory Turnover = $50,000 / $18,000

Inventory Turnover = 2.78

Therefore, the inventory turnover is 2.78.

12. The element of internal control that deals with establishing procedures for things such as handling of
incoming checks is called "control activities". The element of internal control that deals with the
oversight of the internal control systems is called "monitoring".

13. An audit opinion is a statement made by an auditor expressing their opinion on the financial
statements of a company. The opinion can be unqualified, qualified, adverse, or a disclaimer of opinion.
An unqualified opinion means that the financial statements are presented fairly in all material respects,
while a qualified opinion means that there are some limitations to the scope of the audit or some
material misstatements in the financial statements.

14. To record estimated uncollectible accounts using the allowance method, we need to create an
adjusting entry. The journal entry would be:

Bad Debt Expense = Credit Sales x Estimated % of Uncollectible Accounts

Bad Debt Expense = $235,000 x 7% = $16,450

Allowance for Doubtful Accounts = Bad Debt Expense - Existing Credit Balance

Allowance for Doubtful Accounts = $16,450 - $7,250 = $9,200

Bad Debt Expense $16,450

Allowance for Doubtful Accounts $9,200

Sales $25,650

15. To record estimated uncollectible accounts using the allowance method, we need to create an
adjusting entry. The journal entry would be:

Bad Debt Expense = Credit Sales x Estimated % of Uncollectible Accounts

Bad Debt Expense = $142,000 x 2% = $2,840

Allowance for Doubtful Accounts = Bad Debt Expense + Existing Debit Balance

Allowance for Doubtful Accounts = $2,840 + $643 = $3,483

Therefore, the journal entry to record estimated uncollectible accounts is:

Bad Debt Expense $2,840

Allowance for Doubtful Accounts $3,483

Sales $6,323

16. The double-declining-balance method is an accelerated depreciation method that allows you to
depreciate assets more in the early years after you buy them. Under this method, the depreciation
expense is greater in the initial years of the asset's assumed useful life and declines over time. To
calculate the depreciation expense for the fourth year of the asset, we first need to determine the
asset's annual depreciation rate, which is twice the straight-line depreciation rate. The straight-line
depreciation rate is calculated by dividing the depreciable cost of the asset (cost - residual value) by the
asset's useful life. In this case, the depreciable cost is $50,000 - $10,000 = $40,000, and the useful life is
5 years. Therefore, the straight-line depreciation rate is $40,000 / 5 = $8,000 per year. The double-
declining-balance depreciation rate is twice this rate, or $16,000 per year. The depreciation expense for
the fourth year of the asset is equal to the beginning book value of the asset at the start of the fourth
year multiplied by the double-declining-balance depreciation rate. The beginning book value of the asset
at the start of the fourth year is the cost of the asset minus the accumulated depreciation for the first
three years. Assuming the asset was purchased on January 1 of year 1, the fourth year would be January
1 of year 4 to December 31 of year 4. Therefore, the accumulated depreciation for the first three years
would be $16,000 x 3 = $48,000. The beginning book value at the start of the fourth year would be
$50,000 - $48,000 = $2,000. The depreciation expense for the fourth year would be $2,000 x 2 =
$4,000[1].

17. The journal entry for the sale of the truck would be to debit cash for $8,500, debit accumulated
depreciation for $50,000, and credit the truck account for $56,000. The accumulated depreciation
account is credited for the total amount of depreciation that has been recorded for the truck up to the
date of sale. The difference between the cash received and the net book value of the truck (cost -
accumulated depreciation) is a loss, which is recorded as an expense. In this case, the loss would be
$56,000 - $50,000 - $8,500 = $2,500. Therefore, the journal entry would be:

Debit: Cash $8,500

Debit: Accumulated Depreciation $50,000

Credit: Truck $56,000

Debit: Loss on Sale of Truck $2,500.

18. The correct journal entry for recording the second semiannual payment would be to debit interest
expense for the amount of interest accrued during the period, debit mortgage payable for the amount
of principal paid, and credit cash for the total payment. The interest expense is calculated as the
outstanding balance of the mortgage at the beginning of the period multiplied by the semiannual
interest rate of 3% (6% annual rate divided by 2). The outstanding balance at the beginning of the period
is the original mortgage amount of $210,000 minus the principal payments made up to that point. The
principal payment is calculated as the semiannual payment of $7,585 minus the interest expense for the
period. Assuming this is the second semiannual payment, the interest expense for the period would be:

Outstanding balance at beginning of period = $210,000 - $7,585 = $202,415

Interest expense for the period = $202,415 x 3% = $6,072.45

Debit: Interest Expense $6,072.45

Debit: Mortgage Payable $1,512.55

Credit: Cash $7,585.

19. The correct entry for recording the June 30 interest payment on the bonds would be to debit
interest expense for the amount of interest accrued during the period and credit cash for the interest
payment. The interest expense is calculated as the outstanding balance of the bonds at the beginning of
the period multiplied by the semiannual interest rate of 4% (8% annual rate divided by 2). The
outstanding balance at the beginning of the period is the face value of the bonds of $500,000 minus any
unamortized premium or plus any unamortized discount. In this case, the bonds were sold at a premium
of $30,000, which is amortized over the life of the bonds using the effective interest method. Assuming
this is the first interest payment, the interest expense for the period would be:

Outstanding balance at beginning of period = $500,000 + $30,000 = $530,000

Interest expense for the period = $530,000 x 4% = $21,200

Therefore, the journal entry would be:

Debit: Interest Expense $21,200

Credit: Cash $21,200.

20. The preferred stockholders will receive a dividend of $7,500 ($15 par value x 10% dividend rate x
5,000 shares). The common stockholders will receive a dividend of $125,000 ($20 par value x 10,000
shares). The total dividend payment is $132,500 ($7,500 + $125,000). Since the preferred stock is non-
cumulative, the preferred stockholders are only entitled to receive the current year's dividend and do
not have any claim to past unpaid dividends. Therefore, the journal entry to record the dividend
payment would be:
Debit: Retained Earnings $20,000

Credit: Cash $20,000

Debit: Preferred Dividends Payable $7,500

Credit: Cash $7,500

Debit: Common Dividends Payable $125,000

Credit: Cash $125,000

21. To calculate the amount that will be credited to Paid-in Capital in Excess of Par Common Stock on
the date of declaration, we need to first calculate the number of shares that will be issued as a stock
dividend. The company has 250,000 shares of $7-par common stock outstanding and has declared a 7%
stock dividend. This means that the company will issue 0.07 x 250,000 = 17,500 additional shares of
common stock.

The current market price of the common stock is $11/share, so the total value of the stock dividend is
17,500 x $11 = $192,500.

To calculate the amount that will be credited to Paid-in Capital in Excess of Par Common Stock, we need
to subtract the par value of the additional shares from the total value of the stock dividend. The par
value of the additional shares is 17,500 x $7 = $122,500.

Therefore, the amount that will be credited to Paid-in Capital in Excess of Par Common Stock is $192,500
- $122,500 = $70,000.

22. To calculate the cash flow from operating activities using the indirect method, we need to start with
net income and make adjustments for non-cash items and changes in working capital.
Net income is reported as $300,000. We need to add back non-cash expenses such as depreciation and
amortization. If this information is not provided, we cannot calculate the cash flow from operating
activities using the indirect method.

23. To calculate the cash payments for operating expenses reported on the cash flow statement using
the direct method, we need to start with the total operating expenses for the year and adjust for
changes in working capital.

Operating expenses other than depreciation for the year were $400,000. Accrued expenses increased by
$35,000, which means that the company incurred $35,000 of expenses that have not yet been paid. To
calculate the cash payments for operating expenses, we need to subtract the increase in accrued
expenses from the total operating expenses:

Cash payments for operating expenses = $400,000 - $35,000 = $365,000.

24. The quick ratio is a measure of a company's ability to meet its short-term obligations using its most
liquid assets. It is calculated by dividing the sum of cash, short-term investments, and net receivables by
current liabilities.

Red Line, Inc. has a cash balance of $80,000, short-term investments of $20,000, net receivables of
$60,000, and inventory of $450,000. Current liabilities total $200,000.

The sum of cash, short-term investments, and net receivables is $80,000 + $20,000 + $60,000 =
$160,000.

Therefore, the quick ratio is:

Quick ratio = ($160,000) / ($200,000) = 0.8.

Red Line, Inc.'s quick ratio is 0.8.

From the given information, we know that the net income is $37,000 and the average number of shares
of common stock outstanding is 10,000.

Therefore, the earnings per share for River City, Inc. is:

$$\frac{37,000}{10,000} = 3.70$$

Rounding to the nearest cent, the earnings per share for River City, Inc. is $3.70.