AC1011 – Intro. to Financial Accounting – Exam #3 – Part TWO of TWO
Fall ‘20
PLEASE WRITE YOUR NAME BELOW AND AT THE TOP
OF EACH PAGE OF THE EXAM
I Joe Fernandez (PRINT NAME), hereby affirm that I (1) have neither given
nor received any assistance in completing this exam that was not explicitly
allowed by the instructor, and (2) will not share information about the content
of this exam with anyone. I understand that the instructor will pursue
appropriate sanctions if I violate this honor pledge.
Purchase Entries under the Perpetual System (20 Points)
Below are transactions for EHL Company for the month of June. EHL is using the
Perpetual Inventory System.
After each transaction, prepare the journal entry in the table provided. Prepare
them in proper format (debits first, indent the account that you credit, etc) Don’t
worry about writing the transaction description after each entry. I also provided
more rows for each journal entry than you will need. That is for calculations
that you make. SHOW ALL OF YOUR WORK AND CALCULATIONS FOR
FULL CREDIT. Round all numbers to the nearest dollar.
June 2: Purchased $6,000 of merchandise on credit, 3/10, n/30. Goods were shipped that
same day.
Account Name
DR Inventory
6,000
CR Accounts payable
6,000
Dr.
Cr.
NAME:____________________________________
June 2: The company paid for the shipping costs from the purchase, in cash, for $800 since it
was FOB shipping point.
Account Name
Dr Inventory
CR Cash
Dr.
Cr.
800
800
June 6: The Company decided to return $1,000 of the goods purchased on June 2
Account Name
DR Accounts payable
1,000
CR Inventory
1,000
Dr.
Cr.
June 15: The Company paid for the amount owed on the purchase originally made on June 2.
Dr Accounts payable
Cr cash
(6000-1000)=5000
Account Name
5,000
5,000
Dr.
Cr.
NAME:____________________________________
Inventory Count (15 points)
Nickal Company has just completed a physical inventory count at year end, December 31,
2020. The inventory count amounted to a cost of $320,000. During the audit, the
independent CPA discovered the following additional information:
1. On December 28, 2020, the Company bought goods at a cost of $3,500.
The shipping terms were FOB shipping point. The supplier informed
them on December 30, 2020 that the goods were shipped and on a
delivery truck. Because the shipment had not arrived by December 31,
2020 the Company excluded this shipment from the physical inventory
count.
2. On December 30, 2020, Nickal Company sold goods to a customer with
an FOB shipping point term. The goods had a selling price of $7,000 and
a cost of $2,000. The delivery truck picked the goods up on December
31, 2020. The goods were included in the physical inventory count since
the customer had not received them as of December 31.
3. There were goods purchased from a supplier that were in transit on
December 31, 2020 with terms FOB destination point, costing $5,000.
Because the goods had not arrived by December 31, the Company
excluded these goods in the physical inventory count.
In the table below, compute the correct inventory amount as of December 31,
2020. To get FULL CREDIT, show all the amounts that you increased and
decreased the inventory balance by to arrive at the final answer. If you only
give me the final amount without showing me your work, you will not get
credit.
(the table below doesn’t work for me :(
1. $3,500 wasn’t counted but should have been counted in inventory(+3,500)
2. $2,000 was counted in inventory but should no have been counted (-2,000)
3. $5,000 was correctly added to inventory
320,000+3,500-2,000= 321,500
Ending inventory balance = $321,500
NAME:____________________________________
Income Statement (15 points)
DEF company has the following ending balances, as of December 31, 2020:
Sales revenue
Sales returns and allowances
Operating expenses
Cost of goods sold
Gain on sale of equipment
Interest expense (from a bank loan)
$820,000
56,000
100,000
250,000
15,000
19,000
The tax rate to be applied to income before taxes is 20%
Instructions
Prepare a Multistep income statement (IN PROPER FORMAT) for the period ended
December 31, 2020. FOR FULL CREDIT, include title, subtotals and totals. You
may use only one column for numbers, subtotals and totals.
DEF company
Income statement
For the period ended December 31, 2020
Sales revenue
Sales returns and allowances
Cost of goods sold
Gross profit
Operating expenses
Interest expense
Income from operations
Gain on sale of equipment
Income before income tax
Income tax (20%)
Net income
$820,000
56,000
250,000
514,000
100,000
19,000
395,000
15,000
410,000
82,000
328,000