CLASS GROUP CASES – ACCT 2301
1) Problem 7-1A
Mayfair Co. allows select customers to make purchases on credit. Its other
customers can use either of two credit cards: Zisa or Access. Zisa deducts a 3%
service charge for sales on its credit card and credits the bank account of Mayfair
immediately when credit card receipts are deposited. Mayfair deposits the Zisa
credit card receipts each business day. When customers use Access credit
cards, Mayfair accumulates the receipts for several days before submitting them
to Access for payment. Access deducts a 2% service charge and usually pays
within one week of being billed. Mayfair completes the following transactions in
June. (The terms of all credit sales are 2/15, n/30, and all sales are recorded at the
gross price.)
June 4 Sold $650 of merchandise (that had cost $400) on credit to Natara Morris.
5 Sold $6,900 of merchandise (that had cost $4,200) to customers who used
their Zisa cards.
6 Sold $5,850 of merchandise (that had cost $3,800) to customers who used
their Access cards.
8 Sold $4,350 of merchandise (that had cost $2,900) to customers who used
their Access cards.
10 Submitted Access card receipts accumulated since June 6 to the credit
card company for payment.
13 Wrote off the account of Abigail McKee against the Allowance for
Doubtful Accounts. The $429 balance in McKee's account stemmed from a
credit sale in October of last year.
17 Received the amount due from Access.
18 Received Morris's check in full payment for the purchase of June 4.
Required
Prepare journal entries to record the preceding transactions and events. (The
company uses the perpetual inventory system. Round amounts to the nearest
dollar.)
CLASS GROUP CASES – ACCT 2301
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2) Problem 7-5A
The following selected transactions are from Ohlm Company.
2014
Dec.16 Accepted a $10,800, 60-day, 8% note dated this day in granting Danny
Todd a time extension on his past-due account receivable.
31 Made an adjusting entry to record the accrued interest on the Todd note.
2015
Feb. 14 Received Todd's payment of principal and interest on the note dated
December 16.
Mar. 2 Accepted a $6,100, 8%, 90-day note dated this day in granting a time
extension on the past-due account receivable from Midnight Co.
17 Accepted a $2,400, 30-day, 7% note dated this day in granting Ava Privet
a time extension on her past-due account receivable.
Apr. 16 Privet dishonored her note when presented for payment.
May 31 Midnight Co. refuses to pay the note that was due to Ohlm Co. on May 31.
Prepare the journal entry to charge the dishonored note plus accrued
interest to Midnight Co.'s accounts receivable.
July 16 Received payment from Midnight Co. for the maturity value of its
dishonored note plus interest for 46 days beyond maturity at 8%.
Aug. 7 Accepted a $7,450, 90-day, 10% note dated this day in granting a time
extension on the past-due account receivable of Mulan Co.
Sept. 3 Accepted a $2,100, 60-day, 10% note dated this day in granting Noah
Carson a time extension on his past-due account receivable.
Nov. 2 Received payment of principal plus interest from Carson for the
September 3 note.
Nov. 5 Received payment of principal plus interest from Mulan for the August 7
note.
Dec. 1 Wrote off the Privet account against Allowance for Doubtful Accounts.
CLASS GROUP CASES – ACCT 2301
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Required
1. Prepare journal entries to record these transactions and events. (Round
amounts to the nearest dollar.)
Analysis Component
2. What reporting is necessary when a business pledges receivables as
security for a loan and the loan is still outstanding at the end of the period?
Explain the reason for this requirement and the accounting principle being
satisfied.
CLASS GROUP CASES – ACCT 2301
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3) Problem 8-1A
Timberly Construction negotiates a lump-sum purchase of several assets from a
company that is going out of business. The purchase is completed on January 1,
2015, at a total cash price of $900,000 for a building, land, land improvements,
and four vehicles. The estimated market values of the assets are building,
$508,800; land, $297,600; land improvements, $28,800; and four vehicles,
$124,800. The company's fiscal year ends on December 31.
Required
1. Prepare a table to allocate the lump-sum purchase price to the separate
assets purchased (round percents to the nearest 1%). Prepare the journal
entry to record the purchase.
2. Compute the depreciation expense for year 2015 on the building using the
straight-line method, assuming a 15-year life and a $27,000 salvage value.
3. Compute the depreciation expense for year 2015 on the land improvements
assuming a five-year life and double-declining-balance depreciation.
Analysis Component
4. Defend or refute this statement: Accelerated depreciation results in
payment of less taxes over the asset's life.
CLASS GROUP CASES – ACCT 2301
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4) Problem 8-8B
On January 1, 2008, Mason Co. entered into a 12-year lease on a building. The
lease contract requires (1) annual (prepaid) rental payments of $36,000 each
January 1 throughout the life of the lease and (2) for the lessee to pay for all
additions and improvements to the leased property. On January 1, 2015, Mason
decides to sublease the space to Stewart Co. for the remaining five years of the
lease Stewart pays $40,000 to Mason for the right to sublease and agrees to
assume the obligation to pay the $36,000 annual rent to the building owner
beginning January 1, 2015. After taking possession of the leased space, Stewart
pays for improving the office portion of the leased space at a $20,000 cost. The
improvements are paid for by Stewart on January 3, 2015, and are estimated to
have a useful life equal to the 13 years remaining in the life of the building.
Required
1. Prepare entries for Stewart to record (a) its payment to Mason for the right
to sublease the building space, (b) its payment of the 2015 annual rent to
the building owner, and (c) its payment for the office improvements.
2. Prepare Stewart's year-end adjusting entries required on December 31,
2015, to (a) amortize the $40,000 cost of the sublease, (b) amortize the
office improvements, and (c) record rent expense.
CLASS GROUP CASES – ACCT 2301
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5) Problem 9-1A
Tyrell Co. entered into the following transactions involving short-term liabilities in
2014 and 2015.
2014
2015
Required
1. Determine the maturity date for each of the three notes described.
2. Determine the interest due at maturity for each of the three notes. (Assume
a 360-day year.)
3. Determine the interest expense to be recorded in the adjusting entry at the
end of 2014.
4. Determine the interest expense to be recorded in 2015.
5. Prepare journal entries for all the preceding transactions and events for
years 2014 and 2015.
CLASS GROUP CASES – ACCT 2301
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6) Problem 9-6BA
MLS Company has five employees, each of whom earns $1,600 per month and is
paid on the last day of each month. All five have been employed continuously at
this amount since January 1. On June 1, the following accounts and balances
exist in its general ledger:
1) FICA—Social Security Taxes Payable, $992; FICA—Medicare Taxes
Payable, $232. (The balances of these accounts represent total liabilities for
both the employer's and employees' FICA taxes for the May payroll only.)
2) Employees' Federal Income Taxes Payable, $1,050 (liability for May only).
3) Federal Unemployment Taxes Payable, $66 (liability for April and May
together).
4) State Unemployment Taxes Payable, $440 (liability for April and May
together).During June and July, the company had the following payroll
transactions.
CLASS GROUP CASES – ACCT 2301
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