ACC 301Review SheetExam #2 – Summer 2012Problem #1Gerdes Psychological Services, Inc., closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of itsannual report.GERDES PSYCHOLOGICAL SERVICES, INC.Income StatementFor the Year Ended December 31, 2007Revenue:Counseling revenue……………………………. $225,000Expenses:Advertising expense…………………………... $ 1,800Salaries expense………………………………. 94,000Office supplies expense………………………. 1,200Utilities expense………………………………. 850Malpractice insurance expense……………….. 6,000Office rent expense…………………………… 24,000Continuing education expense………………... 2,650Depreciation expense: fixtures………………... 4,500Miscellaneous expense………………………... 6,000Income taxes expense…………………………. 29,400 170,400Net income………………………………………. $ 54,600The firm’s statement of retained earnings indicates that a $6,000 cash dividend was declared and paid during 2007. Prepare the necessary closing entries on December 31, 2007.Problem #2Prepare journal entries for the following assuming the company uses a perpetual inventory method and records purchases at their net amounts.May 1 Purchased merchandise from Ronald Company for $40,000 with the terms of 1/10, n/30.May 3 Returned $2,000 of the merchandise to the Ronald Company.May 7 Purchased merchandise from the Burton Company for $65,000 with the terms of 2/10, n/60.May 8 Paid the amount owed to the Ronald Company.May 10 Returned $5,000 of the merchandise purchased from the Burton Company.May 15 Sold all of the merchandise on hand from the Ronald Company at a 25% markup, and collected 10% sales tax in addition to the sales price.May 19 Paid the amount owed to Burton Company in full.Problem #3 Given the following information for XYZ Inc, prepare a multi-step income statement in good form and prepare a statement of retained earnings for the year ended 12/31/2006.Revenue $100,000,000Cost of goods sold 60,000,000Selling, general, and administrative expense 10,000,000Research and development expense 3,000,000Interest expense 2,000,000Interest revenue 3,000,000Restructuring charges 2,000,000Extraordinary loss 1,500,000Retained earnings, 1-1-06 20,000,000Other information:1. XYZ Inc. capitalized in Other Assets $2,000,000 of research and development costs incurred in the fiscal year ending 12-31-05.2. XYZ Inc. disposed of a component of its business on 10-1-06. Relevant information for the component disposed of is as follows:Selling price of net assets of the component $10,000,000Total assets of component, 10-1-06 12,000,000Total liabilities of component, 10-1-06 5,000,000Revenues of component, 1-1-06 through 10-1-06 18,000,000Expenses of component, 1-1-06 through 10-1-06 20,000,0003. XYZ Inc. declared a $500,000 dividend on 12-1-06, and paid the dividend on 2-15-07.4. XYZ Inc.’s tax rate is 40% in every year.Problem #4Munson Inc. presents the following (certain parenthetical disclosures omitted) stockholders’ equity section at 12-31-05.Common stock, $0.05 par value $ 400,000Paid-in capital in excess of par 8,000,000Treasury stock (500,000 shares) (7,500,000)Retained earnings 6,250,000Accumulated other comprehensive income 200,000Total stockholders’ equity $7,350,000You are provided with the following additional information:1. Munson sold 30 million shares of previously unissued common stock on 5-1-06 at$22.50 per share.2. Munson bought back 25 million shares of its outstanding stock on 8-1-06 at $24 per share.3. Munson had a net income of $850 million.4. Munson declared dividends of $170 million.5. Munson holds 50,000 shares of Piniella Inc. common stock that it bought on 4-30-05 at $40 per share.6. The fair market value of Piniella Inc.’s common stock at 12-31-06 is $37 per share.7. Munson’s investment in Piniella Inc. is accounted for as an available-for-sale security. (Munson’s investment in Piniella Inc. is its only investment, and it is theonly item that affects other comprehensive income and accumulated other comprehensive income.)8. Munson is not subject to income tax.Prepare a statement of stockholders’ equity at 12-31-06. Also compute: (1) comprehensive income; (2) other comprehensive income; (3) accumulated other comprehensive income; (4) basic earnings per share; and (5) the value of Munson’s Investment account on the balance sheet at