Question

1-

The Wilson Company purchased $25,000 of merchandise from the Poole Wholesale Company. Wilson also paid $1,800 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

2-

Company A and Company B are identical in all regards except that during 2016 Company A borrowed $33,000 at an interest rate of 10%. In contrast, Company B obtained financing by acquiring $33,000 from sale of common stock. Company B agreed to pay a $3,300 cash dividend each year. Both companies are in a 30% tax bracket. Which company would show the greater retained earnings at the end of 2016, and by what amount? 3- At March 31, Cummins Co. had a balance in its cash account of $9,700. At the end of March the company determined that it had outstanding checks of $950, deposits in transit of $620, a bank service charge of $25, and an NSF check from a customer for $210. The true cash balance at March 31 is: 4- Blair Scott started a sole proprietorship by depositing $28,000 cash in a business checking account. During the accounting period the business borrowed $12,000 from a bank, earned $3,400 of net income, and Scott withdrew $4,600 cash from the business. Based on this information, at the end of the accounting period Scott's capital account contained a balance of: 5- Anchor Company purchased a manufacturing machine with a list price of $99,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $5,000. Anchor paid $7,200 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $9,400 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

Answer 1

Answer:1)

Total Inventory Value

= Purchase Value + Freight

= $25,000+ $1,800

= $26,800

date	Account title	debit	credit
	Inventory	$26,800
	Cash/Accounts payable		$26,800
	(To goods purchased from the Poole Wholesale Company)

Answer:2)

Company A would save 30% of 3,300 tax as interest can be claimed as expenditure.

So, Saving would be = 3,300*0.30 = $990.

its retained earning would be more

Company A's retained earnings would be higher by $ 990

Answer:3)

True cash balance=Balance in cash account-Service charges-NSF check from a customer

=9,700-$25-$210

=$9,465

Answer:4)

The capital account balance would be equal to:

=(Cash deposited+Net income-Drawings made)

=(28,000+3,400-4,600)

=$26,800

**The borrowings do not form part of the capital account**

Answer:5)
5)    Computation of cost to be recorded in the asset account:
	Amount($)
Price of the machine,	99,000
Less: Discount @ 2%	1,980
	97,020
Freight	5,000
Installation	7,200
Total capital expenditure to be recorded	1,09,220

Insurance cost of $ 9,400 is a recurring cost