Houston Company’s balance sheet includes the amounts shown below. Analysis of the company’s records reveals the following transactions during 2017, the company’s first year of operations:

Cash received from customers, recorded as service revenue $217,650

Purchase of supplies for cash, expensed $ 19,000

Cash paid for salaries, expensed $ 85,400

At year-end, supplies on hand total $5,300, employees have earned $8,000 but have not yet been paid, and on the last day of the fiscal year, customers paid deposits of $8,700 for future promotions (this is included in total cash received from customers, above).

Required: Determine the ending balance for service revenue, supplies expense and salary expense.

PART VI (40 points)

1. Accounts receivable increased by $33,000. Credit sales for the period were $415,000. What was the amount of cash that was collected from accounts receivable?

2. Wages payable decreased by $12,500. Cash paid for wages in the period was $222,000. What was wage expense for the period?

3. Unearned revenue increased by $13,100. Cash received for unrecorded revenue in the period was $43,700. How much unearned revenue was recorded as revenue during the period?

4. Prepaid insurance increased by $28,400. Cash paid for prepaid insurance policies during the period was $121,000. What was insurance expense for the period?

PART VII (38 Points) Harley Davidson Annual Report

You can find the Harley Davidson’s 2017 annual report at the following

Use the 2017 annual report to answer the following questions.

1. (2 points) Who is Harley Davidson’s external auditor?

2. (2 points) What kind of opinion did Harley Davidson receive?

3. (3 points) What is the gross profit percentage related to motorcycles and related products f05 2015, 2016, and 2017?

4. (2 points) What does the trend noted in Part VII question 3 imply?

5. (2 points) What depreciation method is used by Harley Davidson?

6. (2 points) What is the primary inventory method used by Harley Davidson?

7. (2 points) What is the dollar amount of trading securities invested in mutual funds in 2017?

8. (2 points) What was the total of depreciation and amortization of intangibles in 2017?

9. (2 points) What is the estimated amortization of intangibles in 2018?

10. (2 points) What is the interest rate on the Senior unsecured notes due in 2045, issued in July 2015?

11. (2 points) What is the largest item making up deferred tax liabilities?

12. (2 points) What is the pension benefit obligation at the end of 2017?

PART VIII Short answer (52 points 4 points each)

1. The Company uses the balance sheet approach to estimate bad debt expense. Credit sales for the period were $10 million. The beginning balance in the allowance for doubtful accounts was a credit balance of $44,300. During the year, $41,000 of receivables were written off. The aging schedule suggests that the ending balance in the allowance for doubtful accounts is $51,500. What was bad debt expense for the period?

2. Credit sales were $950,000. Cash flow from operating activities was $650,000. Cash sales were $350,000. Accrual expenses were $925,000. Cash flow from financing activities was $400,000. What was net income?

3. What does the current portion of long term debt represent?

4. In periods of rising prices, which inventory method (LIFO or FIFO) will provide you with a higher net income?

5. Record the journal entry to write off $4,000 of receivables that were deemed uncollectible.

6. Assume that $500 of the receivables written off in (8) were subsequently collected. Record the journal entry to record the collection of the $500.

7. What does a deferred tax liability represent?

8. What was the gain on the disposal of a piece of equipment if the equipment had a historical cost of $25,000, related accumulated depreciation of $13,500, and was sold for $15,500. In addition, in its last year, the equipment had produced 4,000 units of inventory that had been sold for $3.50 a piece.

9. What is goodwill on the balance sheet?

10. What is the criteria to determine if marketable securities are “trading” securities or “available for sale securities”?

11. Can a stock be classified as a “held to maturity” security and justify your answer.

12. How are unrealized gains and losses treated on trading securities?

13. How are unrealized gains and losses on available for sale securities treated?


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