Galilee Corporate Centre Joe Farrington Road

Galilee College

Accounting Principles II

Course No. ACC 112

Supplementary Questions

Galilee Corporate Centre • Joe Farrington Road

P.O. Box EE 16507 - Nassau, Bahamas –

Tel. (242)364-1776 Fax (242)364-1778

Email:

www.gcollege.org

TABLE OF CONTENTS

Chapter 1 Partnership Accounting

Chapter 2 Corporations

Chapter 3 Corporations (Financial Statements)

Chapter 4 Long-term Liabilities

Chapter 5 Investments and International Operations

Chapter 6 Statement of Cash Flows

Chapter 7 Financial Statements Analysis

Chapter 8 Introduction to Management Accounting

Galilee College

Accounting Principles II

Chapter 1 - Partnership Accounting

PROFIT & LOSS SHARING

CLASS 1 Quit Quitty and Blit Blitty formed a partnership in 2005. They contributed capital as follows: QQ $200,000 and BB $250,000. The agreement was that they receive the following:-

a. Salaries of $30,000 and $20,000 respectively

b. Interest on capital balances of 10%

Instructions: Show the profit/loss sharing under each of the following condition assuming the income was $100,000

1. The Profit sharing ratio is 40:60

2. There is no agreement as to profit sharing, and the income was $50,000

HOME 1 Grit Gritty and Flit Flitty formed a partnerhship in 2005 They contributed capital as follows: GG $300,000 and FF $350,000. The agreement was that they receive the following:-

a. Salaries of $40,000 and $60,000 respectively

b. Interest on capital balances of 10%

Instructions: Show the profit/loss sharing under each of the following condition assuming the income was $90,000

1. The Profit sharing ratio is 30:70

2. There is no agreement as to profit sharing, and the income was $75,000

LIQUIDATION

CLASS 2 Pled Pleddy and Cled Cleddy had capital balances of $100,000 and $150,000 and share profit and losses in the ratio of 40:60. Accounts Payable balance was $50,000. Cash was valued $130,000 and Other Assets totaled $170,000.

In liquidating the partnership, other assets were sold for $100,000.

Instruction: Complete the liquidation process

HOME 2 Fled Fleddy and Bled Bleddy had capital balances of $150,000 and $250,000 and share profit and losses in the ratio of 30:70. Accounts Payable balance was $100,000. Cash was valued $200,000 and Other Assets totaled $300,000.

In liquidating the partnership, other assets were sold for $200,000.

Instruction: Complete the liquidation process

Galilee College © 2006

Accounting Principles II –

Chapter 2 Corporations

Terminology

1. board of directors / 9. no-par-value stock
2. articles of incorporation / 10. stated value stock
3. charter / 11. subscribing for capital stock
4. common stock / 12. organization costs
5. preferred stock / 13. intangible assets
6. stock certificate / 14. declaring a dividend
7. par value / 15. date of declaration
8. par-value stock / 16. date of record
17. date of payment

Class Work 1 - Journalizing transactions for starting a corporation

Chad Chaddy Corporation received its charter on January 4 of the 2004. The corporation is authorized to issue 200,000 shares of $10.00 stated-value common stock and 50,000 shares of 12%, $100.00 par-value stock..

Instructions: 1. Journalize the following transactions. Use page 1 of a cash receipts journal, a cash payments journal, and a general journal. Source documents are abbreviated as follows: check, C; memorandum, M; receipts, R.

Jan. 4. Received cash from three incorporators for 48,000 shares of $10.00 stated-value

Common stock, $480,000.00. RT-3.

Jan 4. Paid cash to Myles Camp as reimbursement for organization costs, $2,000.00. C1.

Jan 5. Received a subscription from Mary Nettles for 2,000 shares of $10.00 stated-

Value, common stock, $20,000.00. M1.

Jan 16. Received a subscription from Kenneth Bryant for 10,000 shares of $10.00 stated

value common stock, $100,000.00. M2.

Feb 1. Received cash from Mary Nettles in payment of stock subscription, $20,000.00.

C1.

Feb 1. Issued Stock certificate No. 4 to Mary Nettles for 2,000 share of $10.00 stated-

value common stock, $20,000.00. M3

Feb 8. Received cash from Kenneth Bryant in partial payment of stock subscription,

$50,000.00. R5.

Feb 15. Received a subscription from Leigh Brooks for 300 shares of $10.00 stated-value

common stock, $3,000.00. M4.

Mar 1. Received cash from Kenneth Bryant in final payment of stock subscription,

$50,000.00. R6.

Mar 1. Issued Stock Certificate No. 5 to Kenneth Bryant for 10,000 shares of $10.00

stated-value common stock, $100,000. M5.

Home Work – 1 Journalizing transactions for starting a corporation

Nap Nappy, Inc., received its charter on August 1 of the current year. The corporation is authorized to issue 150,000 shares of $50.00 stated-value common stock and 50,00 shares of 10%, $100.00 par-value preferred stock.

Aug 4. Received cash from ten incorporators for 50,000 shares of $50.00 stated-value

Common stock,$250,000.00. R1-10.

Aug 4. Paid cash to Paul Kerwin as reimbursement for organization costs, $6,500.00.

C1.

Aug 6. Received a subscription from Deborah Andrews for 500 shares of $5.00stated-

value common stock, $2,500.00. M1.

Aug 21. Received a subscription from Kevin Clark for 3,000 shares of $5.00 stated-

value common, $15,000.00. M2.

Sept 16. Received cash from Deborah Andrews in payment of stock subscription,

$2,500.00. R11.

Sept 16. Issued stock Certificate No. 11 to Deborah Andrews for 500 shares of $5.00

stated value common stock, $2,500.00.M3.

Oct 1. Received cash from Kevin Clark in partial payment of stock subscription,

$7,500.000 R12.

Oct 15. Received a subscription from George Bagwell for 6,000 shares of $5.00 stated- value common stock, $30,000. M4

Nov 1. Received cash from Kevin Clark in final payment of stock subscription, $7,500. R13.

Nov 1. Issued Stock Certificate No. 12 to Kevin Clark for 3,000 shares of $5.00 stated-value common stock, $15,000.00. M5

Class 2 – Dividends

On December 31, 2005. Div Divey declared and paid $250,000 of dividends. No dividends were declared in 2004. Preferred Stock: 10,000, Par Value $10.00, 10%. Common Stock: 200,000, $2.00 Par Value. Prepared a schedules to distribute dividend assuming the following: P/S i. (non cumulative and non participating, ii. (cumulative and non participating and iii. (cumulative and participating).

HOME 2 – Dividends

On December 31, 2005. Pink Pinky declared and paid $400,000 of dividends. No dividends were declared in 2004 and 2003. Preferred Stock: 20,000, Par Value $9.00, 8%. Common Stock: 300,000, $3.00 Par Value. Prepared a schedules to distribute dividend assuming the following: P/S i. (non cumulative and non participating, ii. (cumulative and non participating and iii. (cumulative and participating).

Galilee College

Accounting Principles II

Chapter 3 - Corporations (Financial Statements)

Class Work 1 - Closing Entries

At December 31, 2005, Snit Snitty’s Corporation nominal accounts had the following balances:- 305 Retained Earnings $0, 405 Income Summary $0, 505 Sales $100,000, 605 Expenses $60,000.

Instructions:

1. Open T accounts and record and balance the T Accounts

2. Close all nominal accounts (use page 1 of the general journal)

Home Work 1 - Closing Entries

At December 31, 2004, Whit Whitty’s Corporation nominal accounts had the following balances:- 305 Retained Earnings $225,000, 405 Income Summary $0, 505 Sales $150,000, 605 Expenses $70,000.

Instructions:

3. Open T accounts and record and balance the T Accounts

4. Close all nominal accounts (use page 1 of the general journal)

Class Work 2 - Treasury Stock

On January 1, 2005 Gwen Gwenny Corporation issued 100,000 shares of $5.00 Par Value stock for $8.00 per share.

On March 2, 2005 Gwen Gwenny purchased 60,000 of the shares from shareholders at $10.00 each to hold as treasury stock.

On June 30, 2005, Gwen Gwenny reissued the 60,000 share held in treasury at $7.00 per share.

Instruction:- Record all transactions using the (i) Cost Method, and (ii) Par Value Method.

Home Work 2 - Treasury Stock

On February 28, 2005 Clock Clocky Corporation issued 150,000 shares of $10.00 Par Value stock for $12.00 per share.

On April 15, 2005 Clock Clocky purchased 60% of the shares from shareholders at $8.00 each to hold as treasury stock.

On November 25, 2005, Clock Clocky reissued the shares held in treasury at $12.00 per share.

Instruction:- Record all transactions using the (i) Cost Method, and (ii) Par Value Method.

Class Work 3- Corporation (Financial Statements)

Complete the Financial Statements for Cox Coxey

a. Income Statement

b. Retained Earnings Statement

c. Balance Sheet

i. Cox Coxey Class Work (Appendix C3-C)

Home Work 3- Corporation (Financial Statements)

Complete the Financial Statements for Mox Moxey

d. Income Statement

e. Retained Earnings Statement

f. Balance Sheet

i. Mox Moxey Home Work (Appendix C3-H)

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Accounting Principles II

Chapter 4: Long-term Liabilities

Class: 1

Assume Jet Jetty Corp. is authorized to issue $500,000 of 7%, ten-year bonds payable. On January2, when the market interest rate is 8%, the company issues $300,000 of the bonds and receives cash of $279,615. Jet Jetty Corp measures interest expense by the effective-interest method.

Required:

1. Prepare an amortization table for the first four semiannual interest periods.

2. Record the first semiannual interest payment on June 30 and the second payment on

December31.

Home Work: 1

On September 30, 20X2, the market interest rate is 7%. Sharp Sharpy, Inc., issues $200,000 of 8%, 20-year bonds payable at 110 5/8. The bonds pay interest on March 31 and September 30. Sharp Sharpy measures interest expense by the effective-interest method.

Required:

1. Prepare an amortization table for the first four semiannual interest periods.

2. Record issuance of the bonds on September 30, 20X2, the accrual of interest at December31,20X2, and the semiannual interest payment on March 31, 20X3.

A / B / C / D / E / F / G / H
H / B-C / C x MR / B x CR / E - F / C -/+ G
Date / Face V. / Beg. BV / Dist./Prem. / Int. Exp. / Int. Pay. / Amort. / End. BV

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Chapter 5: Investments and International Operations

SECURITIES - Class Work

On January 1, 2003 Saint Sainty purchased some Securities for $20,000. At December 31, 2003 and 2004, the securities were valued at $10,000 and $30,000 respectively. What are the entries to record purchase and values at the end of each year under each situation:-

A. Trading Securities C. Held to Maturity

B. Available For Sale Securities

SECURITIES -Home Work

On January 1, 2002 Jake Jakey purchased some Securities for $50,000. At December 31, 2002 and 2003, the securities were valued at $60,000 and $55,000 respectively. What are the entries to record purchase and values at the end of each year under each situation:-

C. Trading Securities

D. Available For Sale Securities

E. Held to Maturity

INVESTMENTS (EQUITY MEHTOD) Class Work

On January 1, 2004 Smith Smithy purchased 20% of the shares of ABC Co for $500,000. At December 31, 2004 ABC Co. has earnings of $200,000 and paid dividends of $80,000. Instructions: On the Books of Smith Smithy, Record the following entries:-

a. January 1, 2004 b. December 31, 2004 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 2004

INVESTMENTS (EQUITY MEHTOD) - Home Work

On January 1, 2005 Yard Yardy purchase 25% of the shares of DEF Co for $300,000. At December 31, 2005 DEF Co. has earnings of $100,000 and paid dividends of $50,000. On the Books of Yard Yardy, Record the following entries:-

a. January 1, 2004 b. December 31, 2004 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 04

INVESTMENTS (COST MEHTOD) Class Work

On January 1, 2004 Benn Benny purchased 10% of the shares of ABC Co for $500,000. At December 31, 2004 ABC Co. has earnings of $200,000 and paid dividends of $80,000. Instructions: On the Books of Benn Benny, Record the following entries:-

b. January 1, 2004 b. December 31, 2004 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 2004

INVESTMENTS (COST MEHTOD) - Home Work

On January 1, 2004 Will Willy purchase 15% of the shares of DEF Co for $300,000. At December 31, 2004 DEF Co. has earnings of $100,000 and paid dividends of $50,000. On the Books of Will Willy, Record the following entries:-

b. January 1, 2004 b. December 31, 2004 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 04

Chapter 6 – Statement of Cash Flows

A. General

· Changes in cash and cash equivalents during the period are to be explained in a statement of cash flows.

· Primary Purpose:-

i. Provide information about receipts and payments of a during a period. It also helps

a. Investors, creditors, and other users to assess ability to generate cash inflows

· Cash Equivalents: Short-term, highly liquid investments, no risk of change in value because maturity date is so near.

I. Ordinarily include only investments with original maturities to the holder of 3 months or less.

II. Cash Equivalents has no effect on statement of cash flows.

SFAS 95 states – Do not report cash flow per share (because it might imply that C/F is alternative to N/I as a measurement performance.) Disclose:

i. Information about transactions that do not directly affect cash flow for the period

ii. E.g. a. Converting debt to equity (disclose as supplemental info. In C/F Statement)

b. Obtaining assets by assuming liabilities or capital lease

c. Obtaining building or investment asset by receiving a gift

d. Exchanging noncash asset or liability for another

B. Operating, Investing, Financial Activities

· Cash inflows and Cash outflows ordinarily are not netted

i. These should be reported separately at gross amounts

· Operating activities may be reported in the statement of cash flows using the direct or indirect method. (SFAS 95 encourages the use of the direct method.)