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your professor. No tutors or other groups.
ACG 340 Case 4: Fargo
The adjusted trial balance of Fargo Company as of July 31,
2014 is presented below. (Read that again,
think about what that means about where Fargo is in the
accounting cycle.) Notice that the total debits
and credits for each account are indicated (including the
beginning balances) rather than the usual account
balance. For example, the cash account had transactions
which resulted in a total of $67,700 debits
(including the beginning balance) and a total of $55,400
credits.
All adjusting entries have been made for the month of July
2014, except the adjustment for inventory.
Fargo’s fiscal year end is June 30.
Account Debit Credit
Cash $67,700 $55,400
Accounts Receivable 58,000 54,400
Allowance for Doubtful Accounts 700 1,100
Inventory 60,000
Prepaid Advertising 1,200 400
Office Supplies on Hand 1,700 1,300
Office Equipment 22,000 1,500
Accumulated Depreciation 400 7,600
Accounts Payable 31,900 40,000
Salaries Payable 800
Interest Payable 100
Dividends Payable 4,000 8,200
Notes Payable 3,000 30,000
Common Stock 12,600
Paid-In Capital in Excess of Par 20,000
Retained Earnings 19,900
Dividends Declared 7,200
Sales 61,000
Sales Returns 2,200
Sales Discounts 500
Purchases 42,000
Purchase Returns and Allowances 900
Purchase Discounts 400
Salaries Expense 9,200
Office Supplies Expense 1,300
Insurance Expense 700
Advertising Expense 600
Bad Debt Expense 500
Miscellaneous Expense 400
Depreciation Expense 300
Interest Expense 300
Gain on Sale of Office Equipment 200
Totals $315,800 $315,800
Using the trial balance of gross balances for Fargo and the
additional information given below, answer the following questions about the
operations of Fargo. Put answers in box when given. Each question is worth half
a point.
1. Compute the amount of interest paid in July. At June 30,
2014, $20 was payable. (Hint: Think of
converting from accrual basis to cash basis.)
2. How much of Accounts Receivable were “written off” the
month? (Hint: Run the ADA t-account)
3. What is Fargo’s Net Realizable Value of Accounts
Receivable at the end of July?
4. What was the amount of cash received on the sale of
office equipment?
5. Assuming that the office equipment has a five year
estimated life, no estimated salvage value, and no
depreciation is taken during the month of purchase or sale,
how much office equipment was acquired
during the month?
6. How old is the office equipment that was neither sold nor
acquired during the month?
7. How much cash was paid on Accounts Payable during the
month? Assume the beginning balance of
Accounts Payable in July was zero.
8. If the beginning balance in Note Payable was $20,000,
what amount of Notes Payable did Fargo issue
in in July?
9. How much of the Note Payable was paid off during July?
10. If all vendors sell to Fargo on terms 2/10, n/30, what
was the total amount of purchases discounts
which were allowed to lapse. No purchases were made in the
last 10 days of July.
11. If there was no prepaid advertising at the beginning of
the period, what was the total cash outlay for
advertising in July? (Hint: Think of converting from accrual
basis to cash basis.)
12. How much cash was used to pay salaries during the month?
Assume the balance in Salaries Payable
on July 1 was zero. (Hint: Think of converting from accrual
basis to cash basis.)
13. What was the balance of Retained Earnings at the
beginning of the fiscal year?
14. If office supplies valued at $300 were on hand at the
beginning of the month, what were the total
purchases of office supplies during the month?
15. What journal entry does Fargo make to record the
purchase of office supplies? Good journal entry
format required.
16. How much cash dividends were paid during the month?
Assume that the beginning balance in
Dividends Payable at June 30 was $1,000.
17. Of the cash dividends paid, how much related to the
current period?
18. What are net sales for July?
19. If 90% of sales are made on credit and all returns were
related to credit sales, what was the beginning
balance in Accounts Receivable on July 1? (Hint: Run the AR
t-account)
20. How much cash received on accounts receivable in July?
(Hint: Run the AR t-account)
21. Does the company use gross or net method to record
purchases? How do you know?
22. What is the beginning balance in inventory on July 1?
23. What are net purchases for July?
24. Assume that the company did a count of ending inventory
and found that they had 70,000 of
inventory remaining at the end of July. What is the cost of
goods sold for the month of July?
25. Provide the journal entry to adjust inventory at July
31. Good journal entry format is required.
26. Provide the journal entry to close revenues at July 31.
Good journal entry format is required.
27. Provide the journal entry to close expenses at July 31.
Good journal entry format is required.
28. Provide the journal entry to close dividends at July 31.
Good journal entry format is required.
29. Provide the journal entry to close income summary at
July 31. Good journal entry format is required.
30. After you have adjusted inventory and done your closing
entries for the month, what is the ending
balance in Retained Earnings on July 31?
