QUESTION 1

Based on the following information, prepare journal entries for Windgate Corporation.
Mar. 7

Issued 10,000 shares of $5 par common

stock for $43,000 cash.
16 Issued 6,000 shares of $5 par common
stock for $33,000 cash.
23 Issued 4,000 shares of $12 par, 7%
preferred stock for $53,000 cash.
29 Issued 5,000 shares of $4 par common
stock for land with a fair market value of
$28,000.

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QUESTION 2
Prepare the appropriate general journal entries for the following treasury stock transactions of Aberdeen
Inc.
Oct. 15

Purchased 7,000 shares of its $15 par

common stock for $70,000 and placed the
stock in the treasury.
Sold 2,000 shares of the treasury stock for
$18,000 cash.
Sold the remaining treasury stock for
$56,000 cash.

Dec. 1
Dec. 31
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QUESTION 3
Prepare appropriate general journal entries for each of the following transactions for Mainstream
Technologies, Inc.
Mar. 25 Declared a 10% stock dividend to common
shareholders. The market value of the
common stock is $12 per share. The par
value is $10. There are 100,000 shares of
common stock currently outstanding.
Apr. 1 Issued the stock certificates for the stock
dividend.
July 31 Declared a two-for-one stock split.
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QUESTION 4
Island Cove Corporation had the following bond issue:
Date of issue/sale: May 1, 20-A
Principal: $500,000
Sale price of bonds: 104
Life of bonds: 10 years
Stated rate: 6% a year payable semiannually on October 31 and April 30
Required:
Prepare the following general journal entries.
a.
The issuance of the bonds on May 1, 20A.
b.
The first interest payment for 20-A.
c.
The adjusting entry for December 31, 20A.
d.
The reversing entry for January 1, 20-B.
a.
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b.
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c.
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d.
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QUESTION 5
The following activities took place at Amity Harbor Corporation during the past year. Indicate whether
each activity is a cash inflow (+) or cash outflow (), and whether it is an operating (O), investing (I), or
financing (F) activity.

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

Salaries paid to
employees
Payment of
dividends to our
stockholders
Payment to
purchase
productive assets
Proceeds from the
sale of productive
assets
Payment for the
purchase of
inventory
Interest received on
loans made to
outside entities
Payments to
suppliers and for
other expenses
Payments to
purchase treasury
stock
Repayment of the
principal on loans
Cash receipts from
sale of services
Proceeds from the
issuance of
common stock
Dividends received
on investment made
in the
stock of another
corporation

Inflow/
Outflow
_______

Activity
______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

_______

______

QUESTION 6
Use the following comparative income statements and balance sheets to complete the required ratio analysis.
Comparative Income Statement
For the Years Ended December 31, 20-C and 20-B
20-C
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling expenses
Administrative expenses
Interest expense
Total operating expenses
Income tax expense
Total expenses
Net income

Assets
Cash
Accounts receivable (net)
Merchandise inventory
Property, plant, and
equipment (net)
Total assets
Liabilities and
Stockholders' Equity
Accounts payable
Notes payable (due 6/30/-D)
Bonds payable (45% due
each June)
Common stock, $10 par value
Retained earnings
Total liabilities and
stockholders' equity

20-B

$965,400
515,100
$450,300

$1,028,600
590,300
$ 438,300

$142,000
150,200
29,300
$321,500
45,500
$367,000
$ 83,300

$ 173,400
182,400
34,100
$ 389,900
18,200
$ 408,100
$ 30,200

Comparative Balance Sheets

December 31, 20-C and 20-B
20-C

20-B

$ 45,100
59,800
150,900
710,500

$ 48,500
101,500
171,600
808,800

$966,300

$1,130,400

$108,200
70,000
154,000

$ 151,600
70,000
280,000

420,000
214,100
$966,300

420,000
208,800
$1,130,400

Additional information:
All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable
(net), $73,800; merchandise inventory, $153,100; total assets, $906,900; common stockholders' equity, $527,200;
and common shares outstanding, 42,000.
Number of common shares
Dividends paid

20-C

20-B

42,000
$44,400

42,000
$49,000

Required:
Prepare a liquidity analysis by calculating for 20-B and 20-C the (a) current ratio, (b) quick ratio, (c) accounts
receivable turnover, and (d) merchandise inventory turnover. Indicate whether there has been an improvement or
not from 20-B to 20-C. Round all answers to two decimal places.

a.
b.
c.

d.

Current ratio
Quick ratio
Accounts
receivable
turnover and
average
collection
period
Merchandise
inventory
turnover and
average
number of
days to sell

20-C
____
____

20-B
____
____

Improvement?
Yes or No
Yes or No

____

____

Yes or No

____

____

Yes or No

QUESTION 7
Comparative Income Statement
For the Years Ended December 31, 20-C and 20-B
20-C
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling expenses
Administrative expenses
Interest expenses
Total operating expenses
Income tax expenses
Total expenses
Net income

Assets
Cash
Accounts receivable (net)
Merchandise inventory
Property, plant, and
equipment
Total assets

20-B

$965,400
515,100
$450,300

$1,028,600
590,300
$ 438,300

$136,000
150,200
26,000
$312,200
45,500
$357,700
$ 92,600

$ 169,100
182,400
32,500
$ 384,000
18,200
$ 402,200
$ 36,100

Comparative Balance Sheet

December 31, 20-C and 20-B
20-C

Liabilities and
Stockholders' Equity
Notes payable (due June 30,
20-D)
Accounts payable
Bonds payable
Common stock, $10 par value
Retained earnings
Total liabilities and
stockholders' equity

20-B

$ 38,100
59,800
150,900
710,500

$ 43,500
101,500
171,600
808,800

$959,300

$1,125,400

$ 70,000

$ 70,000

101,200
154,000
420,000
214,100
$959,300

146,600
280,000
420,000
208,800
$1,125,400

Additional information:
All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable
(net), $73,800; merchandise inventory, $139,200; total assets, $906,900; common stockholders' equity, $527,200;
and common shares outstanding 42,000.
20-C

20-B
42,000
$44,400

Number of common shares

Dividends paid

42,000
$49,000

Prepare a profitability analysis by calculating for 20-B and 20-C the (a) net sales to assets, (b) return on total
assets, (c) return on common stockholders' equity, (d) earnings per share, and (e) book value per share. Indicate
whether there has been an improvement or not from 20-B to 20-C. Round to two decimal places.
a.

Net sales to

20-C
______

20-B
______

Improvement?
Yes or No

b.
c.

d.
e.

assets
Return on total
assets
Return on
common
stockholders'
equity
Earnings per
share
Book value per
share

______

______

Yes or No

______

______

Yes or No

______

______

Yes or No

______

______

Yes or No