HOMEWORK - SPRING 2013 - ACT 3391

1. (0.5 point) Of what value is a common set of standards in financial accounting and reporting? A common set of standards applied by all businesses and entities provides financial statements that are reasonably comparable. 2. (1.5 points) a. Who issued Accounting Research Bulletins? The Committee on Accounting Procedure b. Who issued Opinions? The Accounting Principles Board c. Who issued Statements of Financial Accounting Standards? The Financial Accounting Standards Board 3. (0.5 point each) Write the best accounting word/phrase that describes the following. Write ONLY ONE word/phrase next to each item. A word/phrase can be used more than once. DO NOT ABBREVIATE. a. The national professional organization of practicing Certified Public Accountants (CPAs). American Institute of Certified Public Accountants b. This group is comprised of representatives from CPA firms and financial statement preparers. The groups purposes is to reach consensus on how to account for new and unusual financial transactions that may create differing financial reporting practices. Emerging Issues Task Force c. The common set of financial accounting standards. Generally Accepted Accounting Principles d. This term means that a company applies the same accounting treatment to similar events from period to period.

Consistency

4. (1 point) What was the FASBs primary goal in developing the Codification? To provide in one place all the authoritative literature related to a particular topic. 5. (8 points) Lobnitz Service Companys balance sheet as of 01-01-11 is presented below: a) Paid back 10% of its long-term debt. L Long-term debt $50,000 A Cash $50,000 b) Received $25,000 for the issuance of an additional 1,000 shares of common stock. A Cash $25,000 EQ Common stock and additional paid-in-capital $25,000 c) Purchased $50,000 of office furniture (property, plant, and equipment) on a credit basis. A Property, plant, and equipment $50,000 L Accounts payable $50,000 d) Performed $200,000 of services for customers on a cash basis. A Cash $200,000 R Service revenue $200,000 e) Performed $800,000 of services for customers on a credit basis. A Accounts receivalbe $800,000 R Service revenue $800,000 f) Incurred and paid $175,000 of wage and salary expenses. EX Wage and salary expenses $175,000 A Cash $175,000 g) Paid off 100% of the outstanding accrued property taxes payable. L Accrued property taxes payable $20,000 A Cash $20,000
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h) Used up 80% of the prepaid office supplies. Office supplies expense $20,000 Prepaid office supplies $20,000 i) Performed the necessary services to earn 75% of its unearned service revenue balance. L Unearned service revenue $30,000 R Service revenue $30,000 j) Collected $900,000 of accounts receivable. A Cash $900,000 A Accounts receivable $900,000 k) Recorded $25,000 of depreciation expense. EX Depreciation expense $25,000 A Accumulated depreciation $25,000 l) Incurred and paid $20,000 of interest expense. EX Interest expense $20,000 A Cash $20,000 m) Declared and paid $15,000 of dividends on its common stock. EQ Retained earnings $15,000 A Cash $15,000 Lobnitz Service Company Income Statement For the year ended December 31, 2011 EX A Service revenue Wage and salary expenses Office supplies expense Depreciation expense Interest expense Net income $1,030,000 175,000 20,000 25,000 20,000 $ 790,000 Lobnitz Service Company Balance Sheet As of December 31, 2011 Current assets Cash Accounts receivable Prepaid office supplies Non-current assets Property, plant, and equipment at cost Accumulated depreciation TOTAL ASSETS

$1,245,000 200,000 5,000 850,000 $ 150,000 $2,150,000

Current liabilities Accounts payable $ 310,000 Unearned service revenue 10,000 Non-current liabilities Long-term debt 450,000 Stockholders equity Common stock and additional paid-in-capital 225,000 Retained earnings 1,155,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $2,150,000