Module control work # 2

Var. 1. Student ___Serdiuk

ALINA_______________________________________________________
Multiple choice

1. The main purpose of a business is

a. to provide customers with something of value
b. to create value to earn money for the owners
c. to add value and obtain profit
d. all answers are correct
e. no correct answer
2. The assets in balance sheet include
a. the expense of the equipment that a company has bought for goods production
b. amounts the business owes to bank
c. the claims of the owners
d. loaned money have not yet been fully repaid
e. all answers are correct
f. No correct answer
3. Using LIFO will produce a lower net income than using FIFO under which of the following
conditions?
a) Inventory costs are decreasing
b) Inventory costs are increasing
c) Inventory costs are not changing
d) Sales prices are decreasing
e) All answers are correct
f) No correct answer
4. For using 50000 uah. of bank credit during the accounting period a company paid 500 uah. of
interest. Which parts of balance sheet reflect this transaction
a) cash and note payable
b) note payable and revenue and expenses
c) contributed capital and note payable
d) cash and revenue and expenses
5. Which of the following statements is consistent with accrual basis accounting?
a) Revenues are recorded when cash is received
b) Expenses are recorded when cash is paid
c) Expenses are recorded in a different period than the related revenue
d) Revenues are recorded when earned and expenses are matched with the revenue
e) All answers are correct
f) No correct answer

Task 1.
Using the activity method, calculate the first 2 years of depreciation expense for a copy machine
that cost $14,000, has an estimated useful life of 5 years or 50,000 copies and has an estimated
salvage value of $4,000. The number of copies produced each year is as follows:
Year 1 12,000
Year 2 10,500
Year 3 9,100
Year 4 9,100
Year 5 8,700

Solution:
Depreciation expense = (Cost-Salvage value)*Actual activity / Total estimated life time activity
Depreciation expense (1st year) = (14,000 - 4,000)*12,000 / 50,000 = $2,400
Depreciation expense (2d year) = (14,000 - 4,000)*10,500 / 50,000 = $2,100
Task 2
Suppose the following transactions occurred during Lexar Computer Inc.'s first month of business.
1. Two friends together contributed $50,000 from their savings to start Lexar Computer Inc. In return,
the corporation issued 100 shares of common stock to each of them.
2. The company paid $20,000 cash for parts for new computers that it planned to make during the next
few months. (During the first month they used parts on $10,000).
3. The company rented office space for the month for $350 cash.
4. The company hired and paid employees for work done during the month for a total of $1,500.
5. The company sold computers for $40,000 cash. (These computers were made from the parts the
company purchased in item 2.)
6. The company paid $400 in dividends to its shareholders.
7. On the last day of the month, the company purchased $12,000 worth of office furniture and equipment
on credit. (Lexar signed a 60-day note-i.e., borrowed the money from the furniture company.)

Liabi- Shareholder’s Equity

lities
Assets
Contributed Retained earnings
Transaction capital
Cash Inventory Equipment Notes Common Revenue & Dividends
payable stock Expenses
Contribution 50 000
of money

Issue shares 25 000

of common
stock (100 25 000
for each)
Payment for (20 000) 20 000
raw
materials
Office rent (350) (350)

Employees (1500) (1500)

salary
Computers 40 000 (10 000) 40 000
sale (10 000)
COGS
Dividends (400) (400)
payment
Furniture 12 000 12 000
purchase
Total 67 750 10 000 12 000 12 000 50 000 28 150 (400)

Total Assets__89 Total Liabilities and Equity___89 750___

750___________

Balance Sheet
on May, 31
 Assets Liabilities & Shareholder’s Equity

Cash……………….. _67 750_____ Notes payable……... ___12 000____

Equipment………… ___12 000____ Common Stock……. __50 000___

Raw materials……... ___10 000_____ Retained earnings…. __27 750____

Total Assets……….. 89 750 Total Liabilities…... 89 750

Income Statement
for month ended on May, 31

Revenue

Sales………………….. ………………….. 40 000 $

Expenses

Cost of goods sold ….10 000.……$

Employees salary ...…1500……$

Office rent……………. ……350 ……$

Total expenses ……………... ………………….. ……..11 850.……….$

Net income ………………… ………………….. …...28 150 ……..…$