Quiz Two

Solution

Accounting 115

Name: ______Student #______

The work shown on the quiz must support the answer that you give. An unsupported correct answer will receive no credit. State clearly any assumptions that you may have to make with regard to any question. You may use your book and notes, but you must work independently and not discuss the quiz with anyone.

Honor Code:

I have followed the above directions and have neither given nor accepted any help from another person on this quiz.

______

Signature

1.  Chicago Pizza reports net sales of $1,000,000, gross profit of $550,000, and net income of $80,000. The company’s cost of goods sold is:

A. $370,000.

B. $450,000. <-----

C. $920,000.

D. Some other amount.

2.  Dora Co. uses a periodic inventory system. An examination of its closing entries revealed a debit to the Cost of Goods Sold for $735,000. Its beginning inventory was $180,000 and the year-end inventory showed $200,000 of merchandise on hand. Purchases for the year amounted to:

A. $715,000

B. $20,000

C. $735,000

D. $755,000 . <-----

3.  Big Bird Pro Shop uses a periodic inventory system. The beginning inventory was $20,000, purchases amounted to $110,000, sales totaled $215,000, and the year-end inventory was $25,000. The cost of goods sold must have been:

A. $100,000.

B. $105,000. . <-----

C. $110,000.

D. Some other amount.

Reference the following for the next 2 questions:

Two Wheel Therapy is a small retail business that specializes in the sale of touring and mountain bicycles. This year, the store has begun to carry the Killer Bee mountain bike manufactured by Hillandale Co. Thus far this year, Two Wheel has recorded the following transactions involving the Killer Bee model:

Jan. 3. Purchased 5 Killer Bee bicycles at a unit cost of $700

Jan. 15. Purchased 3 additional Killer Bees at $700 each

Feb. 10. Sold 6 Killer Bee Bikes to the Dunmore Mountain Club for $6,000

Refer to the above data

4.  If Two Wheel uses a perpetual inventory system, the journal entry to record the purchase on January 15th would include which of the following?

A. a debit to the Purchases account for $2,100

B. a debit to the Cost of Goods Sold for $2,100

C. a credit to Inventory for $2,100

D. a debit to Inventory for $2,100 . <-----

Refer to the above data

5.  If Two Wheel uses a perpetual inventory system, the journal entry to record the sale on February 10th would include all of the following except:

A. a debit to the Cost of Goods Sold for $4,200

B. a credit to Sales Revenue for $6,000

C. a credit to Purchases for $4,200 . <-----

D. a credit to Inventory for $4,200


The accountant for Ernie’s Emporium, Inc. prepared the following trial balance at January 31, 2007, after one month of operations:

Debit Credit

Cash $ 5,600

Accounts Receivable 4,400

Unexpired Insurance 2,000

Office Equipment 18,000

Unearned Consulting Fees $ 3,200

Capital Stock 15,500

Retained Earnings, January 1, 2007 0

Dividends 3,200

Consulting Fees Earned 26,200

Salaries Expense 7,600

Utilities Expense 1,600

Rent Expense 2,000

Supplies Expense 500 ______

$44,900 $44,900

Additional information items:

a Consulting services rendered to a client in January, not yet billed or recorded, $2,300.

b Portion of insurance expiring in January, $200.

c Income taxes expense for January of $2,400.

d The office equipment has a life of 5 years.

Instructions. Prepare adjusting entries for a through d.

Adjusting Entries
Jan. 31 / A/R / $2,300
Consulting Fees Earned / $2,300
Ins Exp / 200
Unexpired Insurance / 200
Income Tax Expense / 2,400
Income Tax Payable / 2,400
Depn Exp / 300
Accum Depn / 300
STAR Inc.
Trial Balance
December 31
Debit / Credit
Cash / $ 12
Accounts Receivable / 22
Equipment / 187
Accounts Payable / $ 17
Capital Stock / 102
Retained Earnings / 52
Dividends / 7
Service Revenue / 173
Salaries Expense / 82
Depreciation Expense / 22
Supplies Expense / 12 / ____
$344 / $344

1 What is the balance in Income Summary before it is closed to Retained

Earnings?

A 57. <-----

B 50.

C 69.

D 116.

2 What is the balance in Retained Earnings after posting closing entries at December 31?

A 109.

B 102. <-----

C 57.

D 50.

3 What is the total debits on the after-closing trial balance?

A 228.

B 344.

C 221. <-----

D 171.

4 Which accounts are closed to Income Summary?

A All accounts.

B Revenue and expenses. <-----

C Revenue, expenses, and dividends.

D All accounts that are not nominal.

5 Which accounts will appear on the balance sheet?

A retained earnings of $52.

B dividends of $7.

C net income of $50.

D none of the above. <-----