# week 7 accounting exam 3 questions

EXAM #3 WEEK 7 (Chapters 8-12)

Should be completed by Sunday at 11:59 p.m. ET.

Question 1: On January 1, a machine costing \$260,000 with a 4-year life and an estimated \$5,000 salvage value was purchased. It was also estimated that the machine would produce 500,000 units during its life. The actual units produced during its first year of operation were 110,000. Determine the amount of depreciation expense for the first year under each of the following assumptions: (15 points)
1. The company uses the straight-line method of depreciation.
2. The company uses the units-of-production method of depreciation.
3. The company uses the double-declining-balance method of depreciation.

Question 2: A company sold for \$40,000 cash a machine that originally cost \$90,000. The accumulated depreciation on this machine was \$47,000 at the time of the sale. What was the company’s gain or loss on this sale? (10 points)

Question 3: On September 15, SportsWorld borrowed \$75,000 cash from FirstBank on a 12%, 60-day note payable.
a. Prepare SportsWorld’s general journal entry to record the issuance of the note payable
b. Prepare SportsWorld’s general journal entry to record the payment of the note at maturity. (15 points)

Question 4: A company issued 10-year, 9% bonds, with a par value of \$500,000 when the market rate was 9.5%. The issuer received \$484,087 in cash proceeds. Prepare the issuer’s journal entry to record the issuance of the bonds. (10 points)

Question 5: A company has \$200,000 par value, 10% bonds outstanding. Prepare the company’s journal entry to retire the bonds at the date of maturity. (5 points)

Question 6: On July 31, a company declared a cash dividend of \$0.25 per common share to the shareholders of record on August 15. The cash dividend will be paid on August 25. This company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the journal entries required on July 31, August 15 and August 25. (10 points)

Question 7: A company is authorized to issue 750,000 shares of \$5 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company’s first year of operations: (15 points)

 Jan. 10 Sold 102,000 shares of common stock for \$8 cash per share. 15 Exchanged 10,000 shares of common stock for equipment with a market value of \$80,000. Feb. 1 Exchanged 500 shares of common stock for \$3,000 of legal services, Incurred during the company’s organization.

Question 8: Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method. (20 points)

 Rashid Corporation Income Statement For Year Ended December 31, 2010 Sales \$504,000 Cost of goods sold \$327,600 Depreciation expense 42,000 Other operating expenses 125,500 (495,100) Other gains (losses): Gain on sale of equipment 7,200 Income before taxes \$ 16,100 Income tax expense (4,800) Net income \$ 11,300
 Rashid Corporation Balance Sheets At December 31 Assets 2010 2009 Cash \$ 64,650 \$ 55,800 Accounts receivable 21,000 29,000 Inventory 58,000 52,100 Equipment 240,000 222,000 Accumulated depreciation (106,000) ( 96,000) Total assets \$277,650 \$262,900 Liabilities: Accounts payable \$ 28,400 \$ 23,700 Income taxes payable 1,050 1,200 Total liabilities \$ 29,450 \$ 24,900 Equity Common stock \$106,000 \$106,000 Contributed Capital in excess of par value 18,000 18,000 Retained earnings 124,200 114,000 Total equity \$248,200 \$238,000 Total liabilities and equity \$277,650 \$262,900