Generally Accepted Accounting Principles and Net Income

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University of Dubuque
School of Business
BAC 241: Principles of Financial Accounting

Homework Chapter 4: Completing Accounting Cycle

Name:Due Thursday, October 04, 2012 in class

1.During 2013, Rumbo Corporation had cash and credit sales of $21,760 and $15,225, respectively. The company also collected accounts receivable of $9,765 and incurred operating expenses of $27,700, 80 percent of which were paid during the year. In addition, Rumbo paid $4,500 for an 18-month advertising campaign that began on September 30. Rumbo's accrual-basis net income (loss) for 2009 was a.| $9,285|

b.| $8,535|
c.| $14,075|
d.| $(775)|

2.The 2013 accrual-basis income statement for Razorri Corporation reports sales revenue of $81,000. The related balance sheet accounts for the beginning and end of the year were

| Jan. 1, 2013| Dec. 31, 2013|
Unearned Sales Revenue| 0| $29,250|
Accounts Receivable| 6,750| 2,250|

Based on this information, the amount of cash collected during 2013 from Razorri's customers was a.| $81,000|
b.| $119,250|
c.| $114,750|
d.| $99,000|

3.Nona Corporation, a calendar-year company, had the following transactions during 2012:

| Rented an office building to Erma Company. On September 1, Erma paid $27,000 for the year ending August 31, 2013.| | Received notice that a $1,200 dividend would be paid on January 2, 2013, by Leslie Corporation.| | Received a check for $13,000 from a client on December 31 for services that will be performed during 2013.|

Assuming cash-basis accounting for Nona Corporation, how much income should be reported on its 2012 income statement? a.| $21,000|
b.| $27,000|
c.| $40,000|
d.| $41,200|

4.Prior to making any adjusting entries, Terra Corporation had net income of $155,100. The following adjusting entries were made: salaries payable, $1,574; interest earned on short-term investments but not yet recorded or collected, $7,268; adjustment to prepaid insurance for $5,538 for an insurance policy that expired during the period; and fees of $586 collected in advance that have now been earned. After recording these adjustments, net income would be a.| $170,084|

b.| 158,008|
c.| 155,842|
d.| 155,836|

Exhibit 4-1
The following are a selection of account balances taken from the Adjusted Trial Balance of Cajon Corporation for December 31, 2012:

| Debit| Credit|
Cash| $150| |
Store Supplies| 300| |
Service Fees Revenue| | $600|
Retained Earnings (1/1/2012)| | 50|
Accounts Payable| | 70|
Dividends| 200| |
Unearned Service Fees Revenue| | 180|
Wage Expense| 200| |
Store Supplies Expense| 50| |

5.Refer to Exhibit 4-1. Given the information above, Cajon Corporation had net income in 2012 of a.| $150|
b.| $530|
c.| $330|
d.| $350|

6.Refer to Exhibit 4-1. Given the information above, what is the amount of total assets on Cajon Corporation's balance sheet in 2012? a.| $150|
b.| $300|
c.| $450|
d.| $650|

7.Refer to Exhibit 4-1. Given the information above, what is the amount of total liabilities and owner's equity on Cajon Corporation's balance sheet in 2012? a.| $100|
b.| $300|
c.| $250|
d.| $450|

8.In the course of your examination of the books and records of Griffin Company for the year ending December 31, 2012, you find the following data:

Salaries earned by employees| $ 40,000|
Salaries paid to employees| 50,000|
Total sales revenue| 700,000|
Cash collected from sales| 750,000|
Utility expense incurred| 4,500|
Utility bills paid| 4,200|
Cost of goods sold| 400,000|
Cash paid on inventory purchases | 370,000|
Tax assessment for the year| 5,000|
Taxes paid | 3,500|
Rent expense | 30,000|
Rent paid | 25,000|

a.| Compute Griffin Company's net income for 2012 using cash-basis accounting.| b.|...
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