Work sheet

1. Complete accounting cycle; for the past several years, Jeff Horton has operated a part-time
consulting business from his home. As of April 1, 2014, Jeff decided to move to rented
quarters and to operate the business, which was to be known as Rosebud Consulting, on a
full-time basis. Rosebud Consulting entered into the following transactions during April:
Apr. 1. The following assets were received from Jeff Horton in exchange for capital stock: cash,
$20,000; accounts receivable, $14,700; supplies, $3,300; and office equipment, $12,000. There
were no liabilities received.
1. Paid three months’ rent on a lease rental contract, $6,000.
2. Paid the premiums on property and casualty insurance policies, $4,200.
4. Received cash from clients as an advance payment for services to be provided and recorded it
as unearned fees, $9,400.
5. Purchased additional office equipment on account from Smith Office Supply Co., $8,000.
6. Received cash from clients on account, $11,700.
10. Paid cash for a newspaper advertisement, $350.
12. Paid Smith Office Supply Co. for part of the debt incurred on April 5, $6,400.
12. Recorded services provided on account for the period April 1–12, $21,900.
14. Paid receptionist for two weeks’ salary, $1,650.
Record the following transactions on Page 2 of the journal.
17. Recorded cash from cash clients for fees earned during the period April 1–16, $6,600.
18. Paid cash for supplies, $725.
20. Recorded services provided on account for the period April 13–20, $16,800.
24. Recorded cash from cash clients for fees earned for the period April 17–24, $4,450.
26. Received cash from clients on account, $26,500.
27. Paid receptionist for two weeks’ salary, $1,650.
29. Paid telephone bill for April, $540.
30. Paid electricity bill for April, $760.
30. Recorded cash from cash clients for fees earned for the period April 25–30, $5,160.
30. Recorded services provided on account for the remainder of April, $2,590.
30. Paid dividends of $18,000.
Instructions

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 1. Journalize each transaction in a two-column journal
2. Post the journal to a ledger of four-column accounts.
3. Prepare an unadjusted trial balance.
4. At the end of April, the following adjustment data were assembled. Analyze and use
these data to complete parts (5) and (6). a. Insurance expired during April is $350.
b. Supplies on hand on April 30 are $1,225. C. Depreciation of office equipment for
April is $400. d. Accrued receptionist salary on April 30 is $275. e. Rent expired during
April is $2,000. f. Unearned fees on April 30 are $2,350.
5. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet)
and complete the spreadsheet.
6. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal.
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries.
10. Prepare a post-closing trial balance.

2. Classifying costs as materials, labor, or factory overhead; Indicate whether each of the following
costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or
factory overhead cost:
a. Steering wheel
b. Salary of test driver
c. Depreciation of welding equipment
d. V8 automobile engine
e. Wages of assembly line worker
f. Steel used in body
g. Tires
h. Assembly machinery lubricants

3. Classifying costs as product or period costs: classify each of the following costs as either a
product cost or a period cost:
a. Depreciation on office equipment
b. Property taxes on factory building and equipment

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c. Advertising expenses
d. Sales commissions
e. Salaries of distribution center personnel
f. Factory supervisors’ salaries
g. Factory janitorial supplies
h. Repairs and maintenance costs for sewing machines
i. Research and development costs
j. Travel costs of media relations employees
k. Chief financial officer’s salary
l. Oil used to lubricate sewing machines
m. Depreciation on sewing machines
n. Utility costs for office building
o. Salary of production quality control supervisor
p. Fabric used during production
q. Wages of sewing machine operators

4. Managerial accounting in the management process

For each of the following managers, describe how managerial accounting could be used to
satisfy strategic or operational objectives:
a. The manager of a bank.
b. A hospital administrator.
c. The chief executive officer of a food company. The food company is divided into three
divisions: Nonalcoholic Beverages, Snack Foods, and Fast Food Restaurants.
d. The manager Local NGOs.

5. Wyatt Inc. expects to maintain the same inventories at the end of the year as at the beginning
of the year. The estimated fixed costs for the year are $288,000, and the estimated variable
costs per unit are $14. It is expected that 60,000 units will be sold at a price of $20 per unit.
Maximum sales within the relevant range are 70,000 units.
Instructions
1. What is (a) the contribution margin ratio and (b) the unit contribution margin?

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2. Determine the break-even point in units.
3. Construct a cost-volume-profit chart, indicating the break-even point.
4. Construct a profit-volume chart, indicating the break-even point.
5. What is the margin of safety?

6. Capital and revenue expenditures Huffine Lines Co. incurred the following costs related to
trucks and vans used in operating its delivery service:
1. Changed the oil and greased the joints of all the trucks and vans.
2. Changed the radiator fluid on a truck that had been in service for the past four years.
3. Installed a hydraulic lift to a van.
4. Installed security systems on four of the newer trucks.
5. Overhauled the engine on one of the trucks purchased three years ago.
6. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no
longer under warranty.
7. Removed a two-way radio from one of the trucks and installed a new radio with a greater
range of communication.
8. Repaired a flat tire on one of the vans.
9. Replaced a truck’s suspension system with a new suspension system that allows for the
delivery of heavier loads.
10. Tinted the back and side windows of one of the vans to discourage theft of contents.
Classify each of the costs as a capital expenditure or revenue expenditure.
7. Costs of acquiring fixed assets: Dick Gaines owns and operates Gaines Print Co. During
February, Gaines Print Co. incurred the following costs in acquiring two printing presses.
One printing press was new, and the other was used by a business that recently filed for
bankruptcy. Costs related to new printing press:
1. Fee paid to factory representative for installation
2. Freight
3. Insurance while in transit
4. New parts to replace those damaged in unloading
5. Sales tax on purchase price
6. Special foundation
Costs related to used printing press:

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7. Fees paid to attorney to review purchase agreement
8. Freight
9. Installation
10. Repair of damage incurred in reconditioning the press
11. Replacement of worn-out parts
12. Vandalism repairs during installation
A. Indicate which costs incurred in acquiring the new printing press should be debited to the
asset account.
B. Indicate which costs incurred in acquiring the used printing press should be debited to the
asset account.

8. Intermountain Delivery Company acquired an adjacent lot to construct a new warehouse,

paying $100,000 and giving a short-term note for $700,000. Legal fees paid were $5,000,
delinquent taxes assumed were $18,500, and fees paid to remove an old building from the
land were $12,000. Materials salvaged from the demolition of the building were sold for
$4,000. A contractor was paid $950,000 to construct a new warehouse. Determine the cost of
the land to be reported on the balance sheet
9. Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value of
$6,000 and an estimated useful life of 10 years. It was placed into service on April 1 of the
current fiscal year, which ends on December 31. Determine the depreciation for the current
fiscal year and for the following fiscal year by (a) the straight-line method and (b) The
double-declining-balance method.
10. A building with a cost of $780,000 has an estimated residual value of $90,000, has an
estimated useful life of 40 years, and is depreciated by the straight-line method. (a) What is
the amount of the annual depreciation? (b) What is the book value at the end of the twenty-
fourth year of use? (c) If at the start of the twenty-fifth year it is estimated that the remaining
life is 10 years and that the residual value is $70,000, what is the depreciation expense for
each of the remaining 10 years?