ACCT202- AC Speed Version 5.1 FALL (A+ Guaranteed)

ACCT202- AC Speed Version 5.1 FALL


The book is: Accounting Principles, ninth edition by Weygandt, Kimmel, and Kieso

The AC Speed Company is a well-established, publicly-held corporation, operating as a wholesaler in the auto parts industry. Specifically, AC Speed purchases auto parts from manufacturers and sells them to large business customers. Most purchases and sales are on account, with trade credit terms (specified below).

You’re a Davenport University student pursuing a bachelor’s degree in business and employed at the AC Speed Company this semester as an intern. You’ve worked in various departments and on several projects so far, learning a lot about the company’s business operations. Management seems impressed with your enthusiasm and the quality of your work.


1-Jul Issued 8,200 shares of common stock for $11 per share (Refer to Chart of Accounts GL for description of common stock).

1-Jul Signed a two year 14%, $216,000 note payable with Fifth Third Bank.

1-Jul Sold 1500 speakers on account to GM for $112 each, Invoice #2301

1-Jul Purchased 2800 rearview mirrors on credit from Gentex for $45 each.

2-Jul Rented idle warehouse space to a new tenant and received $15,000 for three months rent. (July – October)

2-Jul Sold 250 rearview mirrors on account to Honda for $105 each, Invoice #2302

3-Jul Purchased 3450 speakers on credit from Bose for $72 each.

3-Jul Sold 1300 GPS units on account to Toyota for $65 each, Invoice #2303

4-Jul 60 defective speakers were returned from GM. A credit was issued to the customer.

5-Jul The 60 defective speakers were returned to Bose.

6-Jul Paid $650 for equipment repair. Check # 7000

7-Jul Reimbursed employees for entertainment expenses totaling $300. Check # 7001

8-Jul Paid June utility bill of $1850. Check # 7002

8-Jul Purchased office supplies from Staples on credit for $700.

11-Jul Paid in full for the July 1 purchase from Gentex. Check # 7003

11-Jul Received payment from GM on remaining balance for July 1st sale

12-Jul The Board of Directors declared a cash dividend of $0.50 per share for shareholders of record on July 14th, payable on July 20th.

12-Jul Purchased 3100 GPS units from Garmin for $28 each on credit.

12-Jul Received payment in full from Honda for July 2nd sale.

13-Jul Paid in full for the July 3rd purchase from Bose, Check # 7004

13-Jul Received payment in full from Toyota for July 3nd sale

15-Jul Check # 7005 was issued for payroll: $23,750 for salaries and $1,925 for wages

17-Jul Bought new Office Furniture for $15,600. Furniture use begins in August. Check # 7006

19-Jul 1550 GPS units purchased on July 12th from Garmin were found to be the wrong model. All 1550 units were returned.

19-Jul Paid $1400 bill for phone survey performed by marketing consultant, Check # 7007

20-Jul Received $122,500 from Ford for June 5th sales.

20-Jul Paid $21,000 mortgage payment to Fifth Third Bank ($6,000 principal and $15,000 interest), Check # 7008.

20-Jul Paid the dividend that was declared on July 12, Check # 7009

22-Jul Paid the remaining balance on the purchase from Garmin on July 12th. Check #7010

23-Jul General Motors declared bankruptcy. $10,000 receivable from General Motors was written off .

25-Jul Received $119,050 payment from Toyota for sale on June 11th.

26-Jul Purchased 800 shares of Treasury Stock for $15 per share, Check # 7011 (cost method)

26-Jul Sold 425 speakers to Honda for $114 each, Invoice # 2304

27-Jul Paid Gentex $40,000 for June 27 purchase, Check # 7012

27-Jul Sold 1850 Rearview mirrors to Ford for $89 each, Invoice # 2305

28-Jul Issued bonds payable at face value for $ 485,000

29-Jul Paid Bose $137,740 for balance due in June, Check # 7013

29-Jul Check #7014 was issued for payroll: $ 20,500 for salaries and $ 3,560 for wages

30-Jul Received and paid legal service invoice of $9,025, Check # 7015

31-Jul Paid the first month’s principal of $25,000 plus interest for notes issued at the beginning of the month. Check # 7016

*All purchases on account terms of 3/10, net 30

**All credit sales have terms of 3/10, net 45

July Month-end Adjustments:

( A ) AC Speed estimates bad debt expense on a monthly basis rather than waiting until year-end. The company uses the allowance method. Based on recent industry estimates, AC Speed estimates that the estimate of bad debt expense should be 1.5% of total sales.

( B ) The balance in the Prepaid Insurance account at the beginning of July represents 6 months of coverage. Record the amount of insurance expense for July. (p.102)

( C ) AC Speed has earned one month of the rent prepaid by their tenant at the beginning of July. (pp. 104-105)

( D ) The Company took a physical inventory count on July 31 and found the following inventory on hand:
Merchandise Inventory – $310,000 (p.211)

( E ) The Company took a physical count of Office Supplies on July 31 and found the following to be on hand:
Office Supplies – $2,415 (p.101)

( F ) Depreciation on the company’s fixed assets for the month of July is as follows:
1. The furniture and equipment for the warehouse purchased a few years ago cost $10,000. These assets have a 10-year life, with $1500 salvage value, and are depreciated using the straight-line method. (p.444)
2. The furniture and equipment for the office was purchased last year for $8,500. These assets have a 5 year life, an expected salvage value of $1,500, and are depreciated using double declining method.
3.The new office furniture purchased in July has a 5 year life with a $500 salvage value, and is depreciated using the straight line method

Here’s the SOLUTION

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