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(TCO 6) BagODonuts Company bought a used delivery truck on January 1, 2010, for $19,200. The van was

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1. TCO 6) BagODonuts Company bought a used delivery truck on January 1, 2010, for $19,200. The van was expected to remain in service 4 years (30,000 miles). BagODonuts’ accountant estimated that the truck’s residual value would be $2,400 at the end of its useful life. The truck traveled 8,000 miles the first year, 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth year.  

 

1. Calculate depreciation expense for the truck for each year (2010-2013) using the:

a. Straight-line method.

b. Double-declining balance method.

c. Units of Production method.

 (For units-of-production and double-declining balance, round to the nearest two decimals after each step of the calculation.)

2. Which method best tracks the wear and tear on the van? 

3. Which method would BagODonuts prefer to use for income tax purposes? Explain in detail why BagODonuts prefers this method. (Points : 25)

 

 

2. (TCO 7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock:

 Preferred Stock: 7%, par value $100 per share, 100,000 shares.

 Common Stock: $1 par value, 500,000 shares.

 

The following transactions occurred during the year:

 

1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.

1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.

11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.

12/1/12 – Declared and paid a total dividend of $95,000. 

 

Required: 

1. Prepare the journal entry for each transaction listed above.

2. In your own words, explain the main differences between common and preferred stock.

(Points : 25)

 

 

4. (TCO 2) Below are the accounts of Super Pool Service, Inc. The accounts have normal balances on June 30, 2012. The accounts are listed in no particular order.Account                            Balance 

Common stock                   $5,100 

Accounts payable               $4,400 

Service revenue                  $17,100 

Land                                  $28,800 

Note payable                      $9,500 

Cash                                  $5,200 

Dividends                           $6,100 

Utilities expense                 $2,100 

Accounts receivable            $10,600 

Delivery expense                $700 

Retained earnings               $25,600 

Salary expense                   $8,200

Prepare the company’s trial balance as of June 30, 2012, listing accounts in proper sequence, as illustrated in the chapter. For example, Accounts Receivable comes before Land. List the expense with the largest balance first, the expense with the next largest balance second, and so on.

 

5. Linda’s Lampshades started business on Jan. 1, 2001. They had the following inventory transactions:

Journals - Jan. 2001

Purchases

Supplier        Date Received         Quantity       Unit Cost       Amount

Donna          01/10/01                110             12.00           1320.00

Thomas        01/15/01                160             14.00           2240.00

Cindy           01/18/01                150             15.00           2250.00

Sales

Customer     Date shipped   Quantity    Sel. Price              Amount         

Norilene       01/16/01       200                 25.00                   5000.00

 

1.    Calculate the ending inventory, using the perpetual inventory method: 

 

A.    Using FIFO

 

B.    Using LIFO

 

C.    Using Average Cost

 

2.    Prepare the following statement             

 

Using

                                     FIFO   LIFO      Average Cost

Sales

Cost of Sales          

 

Gross Profit

 

6.(TCO 5) Internal Control Procedures are in place to protect the assets of every business as mentioned in the textbook and our discussions. Of the seven internal control procedures, list five of these controls and describe how each procedure is implemented. (5 points each with 2 points for listing and 3 points for a description) (Points : 25)

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