1. Problem 1 (10 Points)
Jackson Browne Corporation is authorized to issue 1,000,000
shares of $1 par value common stock. During 2021, its first year
of operation, the company has the following stock transactions.
Jan. 1 Paid the state $10,000 for incorporation fees.
Jan. 15 Issued 400,000 shares of stock at $5 per share.
July 2 Issued 110,000 shares of stock for land. The land had
an asking price of $800,000. The stock is currently selling on a
national exchange at $6 per share.
Sept.5 Purchased 12,000 shares of common stock for the
treasury at $7 per share.
Dec. 6 Sold 8,000 shares of the treasury stock at $10 per
share.
Instructions
Indicate the accounts and their respective balances that are
increased and/or decreased in the above transactions for Jackson
Browne Corporation.
You must show your computations to receive full credit.
Problem 2 (12 Points)
The following items were shown on the balance sheet of ELO
Corporation on December 31, 2021:
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $6 par value, 800,000 shares
authorized; ______ shares issued and ______
outstanding $3,000,000
Additional paid-in capital
In excess of par

2. 1,500,000
Total paid-in capital 4,500,000
Retained earnings
1,850,000
Total paid-in capital and retained earnings
6,350,000
Less: Treasury stock (10,000 shares)
50,000
Total stockholders’ equity
$6,300,000
Instructions
Complete the following statements and
show your computations.
(a) The number of shares of common stock issued was
_______________.
(b) The number of shares of common stock outstanding was
____________.
(c) The total sales price of the common stock when issued was
$____________.
(d) The cost per share of the treasury stock was
$_______________.
(e) The average issue price of the common stock was
$______________.

3. (f) Assuming that 25% of the treasury stock is sold at $8 per
share, the balance in the Treasury Stock account would be
$_______________.
Problem 3 (10 Points)
Journey Company had the following transactions involving
notes payable.
October 1, 2021 Borrows $300,000 from Washington State
Bank by signing a 6-month, 4% note.
Dec. 31, 2021 prepares the adjusting entry.
April 1, 2022 Pays principal and interest to Washington State
Bank.
Instructions
Indicate the accounts and their respective balances that are
increased and/or decreased for each of the above transactions.
You must show all your calculations to receive full
credit.
Problem 4 (18 Points)
Turner Inc. is considering two alternatives to finance its
construction of a new $6 million plant.
(a) Issuance of 600,000 shares of common stock at the market
price of $10 per share.
(b) Issuance of $6 million, 4% bonds at par.
Instructions
Complete the following table.

4. You MUST show your work to receive full credit.
Issue StockIssue Bonds
Income before interest and taxes $20,000,000
$20,000,000
Interest expense from bonds
_________
_________
Income before income taxes $ $
Income tax expense (30%) _________
_________
Net income $________
$________
Outstanding shares _________
4,000,000
Earnings per share _________
_________
Problem 5 (15 Points)
The Band Company was organized on January 1. During the
first year of operations, the following expenditures and receipts
were recorded in random order in the account, Land.

5. Expenditures
1. Cost of real estate purchased as a plant site
(land $230,000 and old building $30,00) $ 260,000
2. Accrued real estate taxes paid at the time of the
purchase of the real estate. 45,000
3. Cost of demolishing building to make land suitable
for construction of a new
building. 35,000
4. Architect's fees on building plans. 30,000
5. Installation cost of fences around the building
25,000
6. Excavation costs for new building. 50,000
7. Cost of filling and grading the land.45,000 8.
Full payment to building contractor. 840,000
9. Cost of parking lots and driveways. 65,000
10. Real estate taxes paid for the current year on the land.
20,000
Total
$1,415,000
Receipts
11. Proceeds from salvage of demolished building
20,000
Total
$20,000
Instructions
Analyze the foregoing transactions using the following tabular
arrangement. Insert the number of each transaction in the Item
space and insert the amounts in the appropriate columns and
show the total for each column.
Land
I
tem LandBuildingsImprovementsOtherAccount Title

6. Problem 6 (10 points)
Bob Seger Company purchased equipment on January 1, 2021
for $120,000. It is estimated that the equipment will have a
$30,000 salvage value at the end of its 10-year useful life. It is
also estimated that the equipment will produce 90,000 units
over its 10-year life.
You must show all of your calculations.
Instructions
Answer the following independent questions.
1. Compute the amount of depreciation expense for the year
ended December 31, 2021, using the straight-line method of
depreciation.
2. If 20,000 units of product were produced in 2021, what is
the book value of the equipment at December 31, 2021? The
company uses the units-of-activity depreciation method.
Problem 7 (10 Points)
(a) Cinema Paradiso Company purchased equipment on
January 1, 2013 for $150,000 and estimated a $30,000 salvage
value at the end of the equipment's 10-year useful life. At
December 31, 2019, there was $84,000 in the Accumulated
Depreciation account for this equipment using the straight-line
method of depreciation. On March 31, 2020, the equipment was
sold for $70,000.
Indicate the
accounts that are increased and/or decreased and by
which amount to remove the equipment from the books of
Cinema Paradiso Company on March 31, 2020.
You must show all of your calculations to receive full
credit

7. (b) Assume the same facts as above, except the equipment was
sold for $50,000
Indicate which accounts are increased and /or decreased and by
which amount to record the disposition of the machine. You
must show all your work to receive full credit.
.
Problem 8 (20 Points)
The Killers Pesticide Company had a $600 balance in
Allowance for Doubtful Accounts at December 31, 2022, before
the current year's provision for uncollectible accounts. An aging
of the accounts receivable revealed the following:
Estimated Percentage
Uncollectible
Current Accounts $120,000 2%
1–30 days past due 60,000 4%
31–60 days past due 50,000 6%
61–90 days past due 30,000 15%

8. Over 90 days past due
20,000 25%
Total Accounts Receivable
$280,000
Instructions: You MUST show your work to receive full credit.
(a) Determine the desired ending balance for Allowance for
Doubtful Accounts
(b) Determine the amount to recognize as bad debt expense on
December 31, 2022.
(c) What amount that is reported as the net balance for Accounts
Receivable as of December 31, 2022 on the Balance Sheet?
Problem 9 (20 point)
Muse Company uses the periodic inventory method and had the
following inventory information available:
Units Unit CostTotal Cost
1/1 Beginning Inventory500 $5 $2,500
1/20 Purchase 700 $6 4,200
7/25 Purchase 900 $7 6,300
10/20 Purchase
600 $9
5,400
2,700$18,400
A physical count of inventory on December 31 revealed that
there were
700 units on hand.

9. Instructions
Answer the following independent questions and show
computations supporting your answers.
1. Assume that the company uses the FIFO method. The value
of the ending inventory at December 31 is $__________.
2. Assume that the company uses the Average-Cost method.
The value of the ending inventory on December 31 is
$__________.
3. Assume that the company uses the LIFO method. The value
of the ending inventory on December 31 is $__________.
4. Determine the difference in the amount of income that the
company would have reported if it had used the FIFO method
instead of the LIFO method. Would income have been greater or
less and by how much?
Problem 10 (20 Points)
Match the items below by entering the appropriate code letter in
the space provided.
A. Cumulative dividend F. Declaration date
B. Face value G. Market interest rate
C. Legal capital H. Payout ratio
D. Treasury stock I. Maturity date
E. Premium on bonds payable J. Bond certificate
K. Discount on bonds payable
--------- 1. Occurs when the contractual rate of interest is
less than the market rate of interest.

10. ------- 2. A legal document that indicates the face value of
the bonds and other data.
------3. The rate investors demand for loaning funds to a
corporation.
____ 4. The amount that must be retained in the business for
the protection of creditors.
--------- 5. The time that the final payment on a bond is due
from the bond issuer.
____ 6. The date the board of directors formally declares a
dividend.
------- 7. Amount of principal due at the maturity date of
the bond.
____ 8. Preferred stockholders have a right to receive current
and unpaid prior-year dividends before common stockholders
receive any dividends.
____ 9. Measures the percentage of earnings distributed in the
form of dividends to common stockholders.
____ 10. Corporation’s own stock that has been reacquired by
the corporation but not retired.
Problem 11 (20 Points)
Ennio Morricone Company had the following normal account
balances on selected accounts:
Sales Revenue $2,500,000
Advertising Expense 65,000

11. Sales Returns and Allowances 41,500
Cost of Goods Sold 1,100,000
Common stock 250,000
Dividends 150,000
Freight-Out 35,000
Income tax expense 30,000
Interest Expense 80,000
Salaries and Wages Expense 670,000
Utilities Expense 15,000
Depreciation Expense 120,000
Interest Revenue 40,000
Inventory 67,000
Retained earnings 535,000
Insurance Expense 20,000
Sales Discounts 18,500
Instructions
1. Use the above information to prepare a multiple-step
income statement for the year ended December 31, 2022.
Problem 12 (35 Points)
The financial statements of Spertramp Company appear below:
Supertramp COMPANY
Comparative Balance Sheet
December 31, 2022
Assets 2022 2021
Cash $ 120,200 $ 128,400
Debt investments 148,000 100,000
Accounts receivable (net) 235,600 205,600
Inventory 252,000 231,000
Property, plant and equipment (net)
1,298,0001,040,600
Total assets

12. $2,053,800$1,705,600
Liabilities and stockholders' equity
Accounts payable $ 320,000 $ 290,800
Income taxes payable 87,000 84,000
Bonds payable 440,000 400,000
Common stock 580,000 600,000
Retained earnings
626,800 330,800
Total liabilities and stockholders' equity
$2,053,800$1,075,600
Supertramp COMPANY
Income Statement
For the Year Ended December 31, 2022
Net sales (all on credit) $3,781,080
Cost of goods sold
2,117,080
Gross profit 1,664,000
Expenses
Selling and administrative expenses $1,000,000
Interest expense
44,000
Total expenses
1,044,000
Income before income taxes 620,000
Income tax expense
184,000
Net income
$ 436,000
Additional information:
a. Cash dividends of $120,000 were declared and paid on
common stock in 2022.

13. b. Weighted-average number of shares of common stock
outstanding during 2022 was 100,000 shares.
c. Net cash provided by operating activities during 2022 was
$450,000
d. Capital expenditures during 2022 were $270,000.
Instructions
Using the financial statements and additional information,
compute the following ratios for the Supertramp Company for
2022.
You Must show all your computations to receive full
credit.
1. Gross profit rate _________.
2. Return on common stockholders' equity _________.
3. Return on assets _________.
4. Accounts receivable turnover _________.
5. Average collection period _________.
6. Inventory turnover _________.
7. Days in inventory _________.
8. Times interest earned _________.
9. Asset turnover _________.

14. 10. Free cash flow _________
11. Profit margin______________
12. Payout ratio------------------------