Excelsior Bus230 M8A3 – Final Examination
July 13, 2019
When Transfer Backfires Case Study
July 13, 2019

1. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 27, 2015, upon delivery of planters to Turnadot’s warehouse and payment of $3,000 balance due to the supplier, which one of the following journal entries best reflects the economic impact of the transaction?

A Debit inventory $3,000; credit cash $3,000

B Debit inventory $4,000; credit the current asset ‘advances to suppliers’ $1,000; credit cash $3,000

C Debit cost of goods sold $4,000; credit cash $3,000; credit accounts payable $1,000

D Debit inventory $4,000; credit revenues $4,000

2. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On September 5, 2015, when the planters are delivered and the balance of $7,000 due from the customer is collected, which one of the following journal entries best reflects the full economic impact of the special order on Turnadot’s financial condition?

Dr. Cash 7,000, Cr. Revenues 7,000 and Dr. COGS 4,000, Cr. Inventory 4,000

Dr. Cash 7,000, Cr. Revenues 7,000 and Dr. Inventory 4,000, Cr. COGS 4,000

Dr. Cash 7,000, Dr. Advances from customers (liability) 3,000, Cr. Revenues 10,000 and Dr. COGS 4,000, Cr. Inventory 4,000

3. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

The dollar gross margin earned by Turnadot on the special order for 200 planters _______.

4. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 5, 2015, which one of the following accounting entries, related to the $10,000 special order, should be recorded in Turnadot’s financial accounting system?

Debit accounts receivable $10,000; credit revenues $10,000

Debit cash $3,000; credit revenues $3,000

Debit cash $3,000; credit a liability ‘advances from customers’ $3,000

Debit cash $3,000; debit accounts receivable $7,000; credit revenues $10,000.

5.CASH T

Debit Side Credit Side

-Balance 1/1 225,000

-Collection

from Customers 60,000 44,000 Payments to suppliers

-Stock Issued 20,000 13,000 Purchase of machinery

-5yrBankLoan 75,000 100,000 Salaries paid

-SaleOfUsedVan 10,000 4,000 Dividends paid

5,000 Interest payment

1,000 Garage rental

_____________________________

Balance 12/31 223,000

Panjim’s prepaid expense account consists only of garage rental prepayments. Its 2015 beginning and ending balance were the same. Which one of the following statements must be true?

Panjim had no garage rental expenses during 2015

Panjim’s prepaid expense account balance never varied during 2015

Panjim’s prepaid expense account balance varied during 2015

None of the above statements is true

6. CASH T

Debit Side Credit Side

-Balance 1/1 225,000

-Collection

from Customers 60,000 44,000 Payments to suppliers

-Stock Issued 20,000 13,000 Purchase of machinery

-5yrBankLoan 75,000 100,000 Salaries paid

-SaleOfUsedVan 10,000 4,000 Dividends paid

5,000 Interest payment

1,000 Garage rental

_____________________________

Balance 12/31 223,000

Panjim recorded an interest expense of $6,000 for 2015. Which one of the following line items would be included in the operating section of the Panjim’s 2015 indirect method statement of cash flows?

Add increase in interest payable…$1,000

Subtract increase in interest payable…($1,000)

Add increase in interest payable…$6,000

Subtract decrease in interest payable…($5,000)

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