“EXERCISE 7-13A

Ultra Day Spa provided $120,000 of services during 2016. All
customers paid for the services with credit cards. Ultra submitted the credit
card receipts to the credit card company immediately. The credit card company
paid Ultra cash in the amount of face value less a 5 percent service charge.

a. Record the credit card sales and the subsequent collectionof
accounts receivable in a horizontal statements model. In the cash flow column,
indicate whether the item is an operating activity (OA) , investing activity
(IA), or financing activity (FA). Use NA to indicatethat anelement is not
affected by the event.

Ultra Day Spa
Horizontal
Statements Model

Balance Sheet

Income
Statement

Statement of

Assets

=

Liab.

+

Equity

Rev.

–

Exp.

=

Net Inc.

Cash Flows

Event

Cash

+

Acct. Rec.

=

+

Ret. Ear

1.

2.

b. Based on this information alone answer the following questions:

(1) What is the amount of total assets at the end
of the accounting period?

(2) What is the amount of revenue reported on the
income statement?
(3) What is the amount of cash flow from operating
activities reported on the statement of cash flows?

(4) What costs would a business incur if it
maintained its own accounts receivable?What cost does a business incur by accepting
credit cards?

EXERCISE 8-9A
City Taxi Service
purchased a new auto to use as a taxi on January 1, 2016 and 2017. In addition,
City paid sales tax and title fees of $1,200 for the vehicle. The taxi is
expected to have a five-year life and a salvage value of $4,000.

a. Using the
straight-line method, compute the depreciation expense for 2016 and 2017.

Calculation of Depreciation:
Taxi Cost $
Sales Tax & Title Fees
Total
Cost $

Depreciable Cost:
Depreciation:

2016 Depreciation: $
2017 Depreciation: $

b. Prepare the
general journal entry to record the 2016 depreciation.

Date

Account
Titles

Debit

Credit

2016

Depreciation
Expense

Accumulated Depreciation

c. Assume that
the taxi was sold on January 1, 2018, for $22,000. Prepare the journal entry
for the sale of the taxi in 2018.

Cost $
Less: Accumulated Depreciation

Book Value, 1/1/2018 $

Date

Account
Titles

Debit

Credit

2018

Cash

Accumulated
Depreciation

Loss
on Sale

Taxi

PROBLEM 8-34A
Mitre Company
acquired Midwest Transportation Co. for $1,400,000. The fair market value of
the assets acquired were as follows. No liabilities were assumed.

Equipment $510,000
Land 150,000
Building 520,000
Franchise (10-year
life) 40,000

a. Calculate the
amount of goodwill acquired.

Acquisition Price $
Less:
FV of Assets Acquired:
Equipment $
Land
Building
Franchise ()
Goodwill Acquired $ 180,000

b. Prepare the
journal entry to record the amortization of the franchise fee at the end of
year 1.

Debit Credit
Amortization Expense
Franchise
EXERCISE 7-13AUltra Day Spa provided $120,000 of services during 2016. All
customers paid for the services with credit cards. Ultra submitted the credit
card receipts to the credit card company immediately. The credit card company
paid Ultra cash in the amount of face value less a 5 percent service charge.a. Record the credit card sales and the subsequent collectionof
accounts receivable in a horizontal statements model. In the cash flow column,
indicate whether the item is an operating activity (OA) , investing activity
(IA), or financing activity (FA). Use NA to indicatethat anelement is not
affected by the event.Ultra Day SpaHorizontal
Statements ModelBalance SheetIncome
StatementStatement ofAssets=Liab.+EquityRev.-Exp.=Net Inc.Cash FlowsEventCash+Acct. Rec.=+Ret. Ear1.2.b. Based on this information alone answer the following questions: (1) What is the amount of total assets at the end
of the accounting period? (2) What is the amount of revenue reported on the
income statement? (3) What is the amount of cash flow from operating
activities reported on the statement of cash flows? (4) What costs would a business incur if it
maintained its own accounts receivable?What cost does a business incur by accepting
credit cards?EXERCISE 8-9ACity Taxi Service
purchased a new auto to use as a taxi on January 1, 2016 and 2017. In addition,
City paid sales tax and title fees of $1,200 for the vehicle. The taxi is
expected to have a five-year life and a salvage value of $4,000.a. Using the
straight-line method, compute the depreciation expense for 2016 and 2017. Calculation of Depreciation: Taxi Cost $ Sales Tax & Title Fees Total
Cost $ Depreciable Cost: Depreciation: 2016 Depreciation: $ 2017 Depreciation: $b. Prepare the
general journal entry to record the 2016 depreciation.DateAccount
TitlesDebitCredit2016Depreciation
Expense Accumulated Depreciationc. Assume that
the taxi was sold on January 1, 2018, for $22,000. Prepare the journal entry
for the sale of the taxi in 2018. Cost $ Less: Accumulated Depreciation
Book Value, 1/1/2018 $ DateAccount
TitlesDebitCredit2018CashAccumulated
Depreciation Loss
on Sale TaxiPROBLEM 8-34AMitre Company
acquired Midwest Transportation Co. for $1,400,000. The fair market value of
the assets acquired were as follows. No liabilities were assumed. Equipment $510,000 Land 150,000 Building 520,000 Franchise (10-year
life) 40,000 a. Calculate the
amount of goodwill acquired. Acquisition Price $ Less:
FV of Assets Acquired: Equipment $ Land Building Franchise () Goodwill Acquired $ 180,000b. Prepare the
journal entry to record the amortization of the franchise fee at the end of
year 1. Debit Credit Amortization Expense Franchise “