Question 1 Fill in the blanks: Sales Revenue $800 Beginning Inventory $100 Purchases $700 Available

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Question 1

 

  1. Fill in the blanks:

    Sales Revenue

    $800

    Beginning Inventory

    $100

    Purchases

    $700

    Available for Sale

    ?

    Ending Inventory

    $500

    Cost of Goods Sold

    ?

    Gross Profit

    ?

    Operating Expenses

    $200

    Net Income

    ?

 

 

 

Question 2

 

  1. Assume you serve on the board of a local golf and country club. In preparation for renegotiating the club’s bank loans, the president indicates that the club needs to increase its operating cash flows before the end of the current year. The club’s treasurer reassures the president and other board members that he knows a couple of ways to boost the club’s operating cash flows. First, he says, the club can sell some of its accounts receivable to a collections company that is willing to pay the club $97,000 up front for the right to collect $1 00,000 of the overdue accounts. That will immediately boost operating cash flows. Second, he indicates that the club paid about $200,000 last month to relocate the 18th fairway and green closer to the clubhouse. The treasurer indicates that although these costs have been reported as expenses in the club’s own monthly financial statements, he feels an argument can be made for reporting them as part of land and land improvements (a long-lived asset) in the year-end financial statements that would be provided to the bank. He explains that, by recording these payments as an addition to a long-lived asset, they will not be shown as a reduction in operating cash flows.

     Required:

    1. Does the sale of accounts receivable to generate immediate cash harm or mislead anyone?  Would you consider it an ethical business activity? 

    2. What category in the statement of cash flows is used when reporting cash spent on long-lived assets, such as land improvements? What category is used when cash is spent on expenses, such as costs for regular upkeep of the grounds? 

    3. What facts are relevant to deciding whether the costs of the 18th hole relocation should be reported as an asset or as an expense? Is it appropriate to make this decision based on the impact it could have on operating cash flows? 

    4. As a member of the board, how would you ensure that an ethical decision is made?

 

 

 

 

Question 3

 

  1. Following is the adjusted trial balance of Post Company.  Based on this information prepare a Balance Sheet, Income Statement and Statement of Retained Earnings.
         
    POST COMPANY
    ADJUSTED TRIAL BALANCE
      Debit  Credit
    Cash 80,000  
    Accounts Receivable 12,000  
    Prepaid Insurance 2,000  
    Equipment 4,000  
    Accumulated Depreciation    100
    Supplies 400  
    Accounts Payable   800
    Wages Payable   200
    Unearned Revenue   1,200
    Contributed Capital   82,400
    Retained Earnings   0
    Sales   16,000
    Gas Expense 200  
    Supply Expense 400  
    Insurance Expense 400  
    Depreciation Expense 100  
    Wage Expense 200  
    Dividends 1,000  
      100,700 100,700

 

 

 

Question 4

 

  1. Explain the closing entry process and prepare the closing entries in journal form based on the information in question 4.

 

Question 5

 

  1. POST INC. BANK RECONCILIATION

    Cash balance per bank

    $8,200

    Cash balance per books (general ledger)

    $6,500

    Outstanding checks

    $2,460

    Check mailed to the bank for deposit had

     

     not reached the bank by the statement

     

     date.

    $500

    NSF check returned by the bank for 

     

     accounts receivable

    $100

    July interest earned on the bank statement

    $20

    Check no. 700 for misc. expense cleared

     

     the bank for $200; erroneously recorded

     

     in the Matrix books for $20

     

     

     

     

     

    Prepare a bank reconciliation.

     

     

     

    Shown the accounting entries that must be made by Matrix in journal entry and T-Account format.

 

 

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