Solutions Manual for College Accounting, Chapters 1-27, 22nd Edition. James Heintz, Robert Parry by digitaldownload87

College Accounting, Chapters 1-27, 22e James Heintz, Robert Parry (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file. CHAPTER 1

REVIEW QUESTIONS

Introduction to Accounting

1. a. profitability and current financial condition b. detailed current information to measure business’s performance c. soundness of business to be able to pay its debt, profitability, debt outstanding, and assets to secure debt d. to determine taxes due and regulations being met—profitability, cash flows, overall financial condition 2. service business 3. partnership 4. manufacturing 5. merchandising 6. sole proprietorship and partnership 7. generally accepted accounting principles (GAAP) 8. The following actions are taken by FASB when developing an accounting standard. Indicate the proper sequence of events by placing a 1 through 5 in the space provided. Step 5 3 4 1 2

The Accounting Standards Update is issued which amends the FASB Accounting Standards Codification. Public hearings are held. An exposure draft is issued. The issue is placed on FASB’s agenda. A Preliminary Views document is issued.

9. corporation 10. Yes, a public accounting firm may provide audit and tax services to the same company if preapproved by the company’s audit committee. 11. Certified Public Accountant (CPA) 12. forensic accounting 13. d a c b f e

Analyzing Recording Classifying Summarizing Reporting Interpreting

Chapter 2

Analyzing Transactions: The Accounting Equation

CHAPTER 2 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

accounting equation business entity asset liability account payable owner’s equity business entity Owner’s Equity Liabilities Owner’s Equity

11. 12. 13. 14. 15. 16. 17. 18. 19.

expense net income net loss fiscal year drawing income statement statement of owner’s equity balance sheet liquidity

EXERCISES Exercise 1 (a)

$24,000

(b)

$17,000

(c)

$40,000

Exercise 2 (a)

$90,000

(c)

$60,000

(e)

$50,000

(b)

$35,000

(d)

$55,000

(f)

$10,000

(b)

$2,880 net income

Exercise 3 Net income = $7,000 Exercise 4 Owner’s equity = $13,120 Exercise 5 (a)

$16,000

Chapter 2

Exercise 6

ASSETS (a) Bal. (b)

15,000 15,000 (4,000) 4,000 15,000 9,000 24,000 (2,000) 22,000

Bal. (c) Bal. (d) Bal.

LIABILITIES

OWNER’S EQUITY

15,000 15,000

15,000 9,000 9,000 (2,000) 7,000

15,000 +

15,000

Exercise 7 ASSETS = LIABILITIES + (Items Owned) (Amts. Owed)

OWNER’S EQUITY (Owner’s Investment) (Earnings)

Cash

Accounts Payable

Glen Ross, Glen Ross, Capital – Drawing +

Bal.

28,000

8,000

(a)

4,000

(b)

(1,200)

1,200

Rent Exp.

(c)

(200)

200

Utilities Exp.

(d)

(600)

Bal.

30,000

Revenues

–

Expenses

Description

20,000 4,000

Service Fees

600 8,000

20,000

−

600

4,000

−

1,400

30,000

Chapter 2

Analyzing Transactions: The Accounting Equation

Exercise 8 1. ASSETS (Items Owned)

= LIABILITIES + OWNER’S EQUITY (Amts. Owed) (Owner’s Investment) (Earnings)

(a)

Office Accounts Cash + Equipment = Payable 10,000

(b)

5,500

J. Moore, J. Moore, + Capital – Drawing + Revenues – Expenses 10,000

Description

5,500

(c)

900

(d)

(6,000)

(e)

1,500

(f)

(800)

800

Rent Exp.

(g)

(75)

Phone. Exp.

(h)

(100)

(i)

(500)

Bal.

4,925 + 16,425

900

Service Fees

1,500

Service Fees

6,000

(100) 500 11,500 =

5,400

+ 10,000 −

500

2,400

−

875

16,425

Total assets.................................................................

$ 16,425

Total liabilities...........................................................

$ 5,400

Owner’s equity...........................................................

$ 11,025

Owner’s equity in excess of original investment.......

$ 1,025

Total revenues............................................................

$ 2,400

Total expenses............................................................

Net income.................................................................

$ 1,525

875

Chapter 2

Exercise 9

Judith Moore Enterprises Income Statement For Month Ended July 31, 20-Revenue: Service fees

$2,400

Expenses: Rent expense

$800

Phone expense

Total expenses

875

Net income

$1,525

Exercise 10

Judith Moore Enterprises Statement of Owner’s Equity For Month Ended July 31, 20-Judith Moore, capital, July 1, 20--

$10,000

Investment in July

10,000$10,000-

Total investment Net income for July Less withdrawals for July Increase in capital Judith Moore, capital, July 31, 20--

$1,525

500 1,025 $11,025

Chapter 2

Analyzing Transactions: The Accounting Equation

Exercise 11

Judith Moore Enterprises Balance Sheet July 31, 20-ASSETS

LIABILITIES

Cash

$ 4,925

Office equipment

11,500

Accounts payable

$ 5,400

OWNER’S EQUITY

Total assets

$16,425

Judith Moore, capital

11,025

Total liabilities and owner’s equity

$16,425

Chapter 2

PROBLEMS Problem 12 ASSETS 1. 2. 3. 4.

LIABILITIES

$18,800 $23,400 $21,900 Net income for January = $2,100 Net loss for February = $300

OWNER’S EQUITY

$4,700 $7,200 $6,000

$14,100 $16,200 $15,900

Problem 13 1.

Cash (a)

ASSETS

= LIABILITIES +

(Items Owned)

(Amts. Owed)

Office Equip.

(Owner’s Investment)

(Earnings)

Prepaid Accounts J. Moore, J. Moore, Insur. = Payable + Capital – Drawing + Revenues – Expenses

12,000

(b)

OWNER’S EQUITY

Description

12,000 7,500

7,500

(c)

(800)

800

(d)

700

(e)

(600)

600

Rent Exp.

(f)

(150)

150

Wages Exp.

(g)

(200)

(h)

(3,000)

(i)

(100)

Bal.

7,850 +

700

Cons. Fees

200 (3,000) 100 8,300 + 16,350

200

= =

4,500

+ 12,000

–

100

700

–

750

16,350

Chapter 2

Analyzing Transactions: The Accounting Equation

Problem 13 (Concluded) 2. Total assets ..................................................................................... Total liabilities ............................................................................... Owner’s equity ............................................................................... Change in owner’s equity from original investment ...................... Total revenues ................................................................................ Total expenses................................................................................ Net income (loss) ...........................................................................

$ 16,350 $ 4,500 $ 11,850 $ (150) $ 700 $ 750 $ (50)

Problem 14

Susan Cole Consulting Services Income Statement For Month Ended October 31, 20— Revenue: Consulting fees

$700)

Expenses: Rent expense

$600

Wages expense

150

Total expenses Net income (loss)

750) $ (50)

Chapter 2

Problem 15

Susan Cole Consulting Services Statement of Owner’s Equity For Month Ended October 31, 20-Susan Cole, capital, October 1, 20--

$12,000)

Investment in October

12,000)

Total investment

$12,000)

Less: Net loss for October

$ 50

Withdrawals for October

100

Decrease in capital

(150)

Susan Cole, capital, October 31, 20--

$11,850)

Problem 16

Susan Cole Consulting Services Balance Sheet October 31, 20-ASSETS

Cash

LIABILITIES

$ 7,850

Prepaid insurance

200

Office equipment

8,300

Total assets

$16,350

Accounts payable

$ 4,500

OWNER’S EQUITY

Susan Cole, capital

11,850

Total liabilities and owner’s equity

$16,350

Chapter 2

Analyzing Transactions: The Accounting Equation

Problem 17 1.

Cash

ASSETS

= LIABILITIES +

(Items Owned)

(Amts. Owed)

OWNER’S EQUITY

(Owner’s Investment)

(Earnings)

Accounts Office Accounts S. Cassady, S. Cassady, + Receivable. + Supplies = Payable + Capital – Drawing + Revenues – Expenses

(a)

10,000

(b)

(200)

200

(c)

(400)

800

(d)

300

(e)

(600)

(f)

(100)

(g)

200

(h)

(200)

(i)

200

(200)

Bal.

9,200 +

200

Description

10,000

400 300

Typing Fees

600

Rent Exp.

100 400

600

Typing Fees

(200)

10,400

+ 1,000

200

+ 10,000 –

100

900

–

600

10,400

Chapter 2

Problem 17 (Concluded) 2.

Stuart Cassady Typing Service Income Statement For Month Ended April 30, 20-Revenue: Typing fees

$900

Expense: Rent expense

600

Net income

$300

Stuart Cassady Typing Service Statement of Owner’s Equity For Month Ended April 30, 20-Stuart Cassady, capital, April 1, 20--

$10,000

Investment in April

10,000-

Total investment

$10,000-

Net income for April

$300

Less withdrawals for April

100

Increase in owner’s equity

200

Stuart Cassady, capital, April 30, 20--

$10,200

Stuart Cassady Typing Service Balance Sheet April 30, 20-ASSETS

Cash Accounts receivable Office supplies

Total assets

LIABILITIES

$ 9,200

Accounts payable

200

200 1,000

$10,400

OWNER’S EQUITY

Stuart Cassady, capital

10,200

Total liabilities and owner’s equity

$10,400

Chapter 3

The Double-Entry Framework

CHAPTER 3 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6.

T account debit credit footing balance debit

7. 8. 9. 10. 11. 12.

credit credit debit credit double-entry accounting trial balance

EXERCISES Exercise 1 Assets debit credit

Liabilities debit credit

Owner’s Capital debit credit

Owner’s Drawing debit credit

Expenses debit credit

Revenues debit credit

Expenses (+) (−)

Revenues (−) (+)

Exercise 2 (a) Debit (b) Credit (c) Credit

(d) Credit (e) Debit (f) Debit

Exercise 3 Assets (+) (−)

Liabilities (−) (+)

Owner’s Capital (−) (+)

Owner’s Drawing (+) (−)

Exercise 4 Cash

Jacque Hamon, Capital

(a) 3,000

Cash

(a) 3,000

Accounts Payable

(e) 200

(e)

200

Cash (b) 1,000

Professional Fees (b) 1,000

(f)

Cash 300

Professional Fees (f) 300

Office Equipment (c) 500

Accounts Payable (c) 500

Cash (g) 1,000

Notes Payable (g) 1,000

Cash (d)

(d)

Utilities Expense 75

Cash (h)

(h)

Phone Expense 50

Chapter 3

Exercise 5 Assets Debit +

Credit –

Liabilities Debit –

Credit +

Cash

Accounts Payable

(a)12,000 (c) 75 (d) 5,000 (e) 3,000

(e) 3,000 (b) 8,000

Office Equipment

Notes Payable

(b) 8,000

Owner’s Equity Debit –

Credit +

C. Sung, Capital (a)12,000

(d) 5,000

Prepaid Insurance (c)

Exercise 6 1. and 2. Assets Debit +

Credit –

Cash Bal. 9,000 (b) (a)

Liabilities

Owner’s Equity

Debit Credit – +

Debit –

Accounts Payable 100

Credit +

F. Baar, Capital

Bal. 2,500

Bal. 9,000

500 (c) 1,200

Office Furnishings Bal. 2,500

Drawing

Expenses

Debit Credit + –

Debit +

Credit –

Rent Expense (c) 1,200

Revenues Debit –

Credit +

Counseling Fees (a)

500

Magazine Expense (b)

100

Chapter 3

The Double-Entry Framework

Exercise 7 1. and 2. Assets Debit +

Credit – Cash

Owner’s Equity

Credit +

Debit –

Accounts Payable

(a) 20,000 (b) (f)

Liabilities Debit –

500

(i) 2,000 (d) 4,000

1,200 (c) 6,000

Bal.2,000

Credit + B. Estavez, Capital (a) 20,000

21,200 (d) 5,000

(e)

800

(g)

700

(h)

200

(i) 2,000 15,200

Bal. 6,000 Accounts Receivable (f)

600

Drawing

Expenses

Debit

Credit

Debit

Credit

Debit

Credit

–

B. Estavez, Drawing Office Supplies (b)

Revenues

(h) 200

(g)

Rent Expense 700

Accounting Fees (f) 1,800

500

Office Furniture (c) 6,000

Computer Equipment (d) 9,000

Computer Software (e) 800

Chapter 3

Exercise 8

Blanca Estavez CPA Trial Balance January 31, 20-ACCOUNT

Cash

DEBIT BALANCE

CREDIT BALANCE

6 0 0 0 00

Accounts Receivable

6 0 0 00

Office Supplies

5 0 0 00

Office Furniture

6 0 0 0 00

Computer Equipment

9 0 0 0 00

Computer Software

8 0 0 00

Accounts Payable

2 0 0 0 00

B. Estavez, Capital

20 0 0 0 00

B. Estavez, Drawing

2 0 0 00

Accounting Fees Rent Expense

1 8 0 0 00 7 0 0 00 23 8 0 0 00

23 8 0 0 00

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Chapter 3

The Double-Entry Framework

PROBLEMS Problem 9 1. and 2. Assets Debit +

Credit –

Liabilities Debit –

Credit +

Cash

Accounts Payable

(a)10,000 (c) 1,500

(j) 2,500 (b) 5,000

(g) 2,000 (d)

350

(k)

200

8,000 Bal. 5,500

250

(e)

12,250

(f)

300

(h)

600

Owner’s Equity

+ Debit

Credit +

– J. Abdul, Capital

(a) 10,000

(i) 1,000 (j) 2,500 6,450

Bal. 5,800 Accounts Receivable (g)

500 (k)

Drawing 250

Bal. 250

Expenses

Credit

Debit

Credit

Debit

Credit

–

J. Abdul, Drawing Office Supplies (d)

Revenues

Debit

(i) 1,000

Wages Expense (h)

600

Promotion Fees (g)

2,500

350 Phone Expense

Office Furniture

(f)

300

(b) 5,000 Postage Expense (e)

200

Computer Equipment (c) 4,500

Chapter 3

Problem 9 (Concluded) 3.

J. A. Productions Trial Balance January 31, 20-DEBIT BALANCE

ACCOUNT

Cash

CREDIT BALANCE

5 8 0 0 00

Accounts Receivable

2 5 0 00

Office Supplies

3 5 0 00

Office Furniture

5 0 0 0 00

Computer Equipment

4 5 0 0 00

Accounts Payable

5 5 0 0 00

Jali Abdul, Capital

10 0 0 0 00

Jali Abdul, Drawing

1 0 0 0 00

Promotion Fees

2 5 0 0 00

Wages Expense

6 0 0 00

Phone Expense

3 0 0 00

Postage Expense

2 0 0 00 18 0 0 0 00

18 0 0 0 00

Problem 10 (a)

Total revenue for the month

$2,500

(b)

Total expenses for the month

$1,100

(c)

Net income for the month

$1,400

(d)

Abdul’s original investment in the business

$10,000

(e)

+ Net income for the month

$1,400

– Owner’s drawing

$1,000

Increase in capital

400

= Owner’s equity at the end of the month

$10,400

End-of-month accounting equation: Assets $15,900

Liabilities $5,500

Owner’s Equity $10,400

Chapter 3

The Double-Entry Framework

Problem 11

(a)

J. A. Productions Income Statement For Month Ended January 31, 20-Revenue: Promotion fees

$2,500

Expenses: Wages expense

$600

Phone expense

300

Postage expense

200 1,100

Total expenses Net income

$1,400

(b)

J. A. Productions Statement of Owner’s Equity For Month Ended January 31, 20-Jali Abdul, capital January 1, 20--

$10,000

Investments during January

10,000

Total investment

$10,000

Net income for January

$1,400

Less withdrawals for January

1,000

Increase in capital Jali Abdul, capital, January 31, 20--

400 $10,400

Chapter 3

Problem 11 (Concluded)

(c)

J. A. Productions Balance Sheet January 31, 20-Assets Cash

Liabilities $ 5,800

Accounts receivable

250

Office supplies

350

Office furniture

5,000

Computer equipment

4,500

Total assets

$15,900

Accounts payable

$ 5,500

Owner’s Equity Jali Abdul, capital

10,400

Total liabilities & owner’s equity

$15,900

Chapter 4

Journalizing and Posting Transactions

CHAPTER 4 REVIEW QUESTIONS 1. source document 2. chart of accounts 3. owner’s equity accounts 4. 5 5. journal (general journal) 6. book of original entry 7. compound entries

8. journalizing 9. one-half inch 10. general ledger 11. general ledger 12. posting 13. daily 14. cross-reference

15. trial balance 16. slide 17. transposition 18. ruling 19. correcting

EXERCISES Exercise 1 2. .. 3. 4.

Account

(+)

Cash Revenue Rent Expense Cash Office Equipment Accounts Payable

  

(–)

Account 5. . 6.

  

Accounts Payable Cash Phone Expense Cash Accounts Payable Cash

(+)

(–)  



8. 9.

  

10.

Account

(+)

J. A. Abbott, Drawing Cash Wages Expense Cash Accounts Receivable Revenue or Fees



(–) 

   

Chapter 4

Exercise 2 GENERAL JOURNAL DATE 1 2

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

May

1 Cash

101

Susan Poe, Capital

5 0 0 0 00

311

5 0 0 0 00

Owner’s original investment

4 5 6

5 Office Furniture Accounts Payable

182

3 0 0 0 00

202

3 0 0 0 00

Purchased office furniture on account

9 Rent Expense

521

Cash

101

4 5 0 00

4 5 0 00 10

Paid office rent

11 12

12 13 14

10 Cash

101

Referral Fees

5 0 0 00

401

15 16

15 Accounts Payable

Cash

202

1 0 0 00

101

19 20

20 Cash

101

1 2 5 00

1 7 5 00

Accounts Receivable

122

Referral Fees

401

3 0 0 00 23

Referral fees earned in cash and on account

24 25

25 26

25 Wages Expense

511

Cash

101

4 0 0 00

28 29

28 Susan Poe, Drawing Cash

312

1 0 0 00

101

32 33

35 36

1 0 0 00 31

Owner’s withdrawal

4 0 0 00 27

Paid part-time worker

1 0 0 00 18

Payment for furniture on account

5 0 0 00 14

Received cash for referral services

29 Cash

101

Accounts Receivable Received cash on account

122

1 5 0 00

1 5 0 00 35 36

Chapter 4

Journalizing and Posting Transactions

Exercise 3 GENERAL LEDGER ACCOUNT: Cash DATE

ACCOUNT NO. ITEM

POST. REF.

DEBIT

CREDIT

101

BALANCE DEBIT

CREDIT

20--

4 0 0 00

4 6 7 5 00

1 0 0 00

4 5 7 5 00

29 9

May

5 0 0 0 00

5 0 0 0 00 4 5 0 00

5 0 0 00

4 5 5 0 00 5 0 5 0 00

1 0 0 00 1 2 5 00

4 9 5 0 00 5 0 7 5 00

1 5 0 00

4 7 2 5 00

ACCOUNT: Accounts Receivable DATE

ITEM

POST. REF.

ACCOUNT NO. DEBIT

CREDIT

122

BALANCE DEBIT

CREDIT

20--

May

1 7 5 00

1 7 5 00 1 5 0 00

2 5 00

ACCOUNT: Office Furniture DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

182

BALANCE DEBIT

CREDIT

20--

May

3 0 0 0 00

ACCOUNT: Accounts Payable DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

20--

May

3 0 0 0 00 1 0 0 00

202

BALANCE DEBIT

CREDIT

3 0 0 0 00 2 9 0 0 00

Chapter 4

Exercise 3 (Concluded) GENERAL LEDGER ACCOUNT: Susan Poe, Capital DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

BALANCE DEBIT

CREDIT

20--

May

5 0 0 0 00

ACCOUNT: Susan Poe, Drawing DATE

ITEM

POST. REF.

ACCOUNT NO. DEBIT

CREDIT

311

312

BALANCE DEBIT

CREDIT

20--

May

1 0 0 00

ACCOUNT: Referral Fees DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

May

5 0 0 00

3 0 0 00

8 0 0 00

ACCOUNT: Wages Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

511

BALANCE DEBIT

CREDIT

20--

May

4 0 0 00

ACCOUNT: Rent Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

521

BALANCE DEBIT

CREDIT

20--

May

4 5 0 00

Chapter 4

Journalizing and Posting Transactions

Exercise 4 Poe’s Connections Trial Balance May 31, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

4 7 2 5 00

Accounts Receivable

122

2 5 00

Office Furniture

182

3 0 0 0 00

Accounts Payable

202

2 9 0 0 00

Susan Poe, Capital

311

5 0 0 0 00

Susan Poe, Drawing

312

Referral Fees

401

Wages Expense

511

4 0 0 00

Rent Expense

521

4 5 0 00

ACCOUNT TITLE

CREDIT BALANCE

1 0 0 00 8 0 0 00

8 7 0 0 00

Chapter 4

PROBLEMS Problem 5 1.

GENERAL JOURNAL

DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

101

30 0 0 0 00

CREDIT

20--

May

1 Cash Della Jordan, Capital

311

30 0 0 0 00

Owner’s original investment

4 5

3 Stereo Equipment

181

7 0 0 0 00

Cash

101

3 0 0 0 00

Accounts Payable

202

4 0 0 0 00

Purchased equipment from Big Al’s

9 10 11

4 CDs

183

Cash

2 5 0 0 00

101

2 5 0 0 00 11

Purchased CDs

13 14 15

4 Lighting Equipment Cash

184

2 0 0 0 00

101

5 Office Furniture Accounts Payable

182

5 0 0 00

202

7 Van

185

Cash

101

Purchased van

9 5 0 0 00 17 0

25 26

18 Cash

8 0 0 00

3 0 0 0 00

122

Disc Jockey Fees

401

3 8 0 0 00 28

Disc jockey fees earned in cash and on account

32 33 34

9 5 0 0 00 23 3 24

101

Accounts Receivable

5 0 0 00 19

Purchased office furniture on account

2 0 0 0 00 15

Purchased lighting equipment

20 Wages Expense

511

Cash

101

Paid part-time associates

6 0 0 00

6 0 0 00 32 33 34

Chapter 4

Journalizing and Posting Transactions

Problem 5 (Continued) GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

May 21 Accounts Payable

202

Cash

101

1 5 0 0 00 0

Made payment for equipment on account

1 5 0 0 00

2 3

25 Gas Expense

538

Cash

101

4 0 00

Purchased gas for van

27 Phone Expense

525

Cash

101

8 0 00 0

Paid phone bill

14 15

28 Cash

101

Accounts Receivable

1 5 0 0 00

122

Received cash on account

15 16

29 Wages Expense

511

Cash

101

1 1 0 0 00

Paid part-time associates

19 20

30 Rent Expense

521

Cash

101

5 0 0 00

26 27

Paid rent

23 24

30 Accounts Payable Cash

202

1 2 0 0 00

101

30 31

1 2 0 0 00 26

Made payment for equipment on account

28 29

5 0 0 00 22

24 25

1 1 0 0 00 18

1 5 0 0 00 14

8 0 00 10 11

12 13

30 Della Jordan, Drawing Cash Owner’s withdrawal

312 101

1 0 0 0 00

1 0 0 0 00 30 31

Chapter 4

Problem 5 (Continued) 2.

GENERAL LEDGER

ACCOUNT: Cash

ACCOUNT NO. POST. REF.

DEBIT

30 0 0 0 00

3 0 0 0 00

27 0 0 0 00

2 5 0 0 00

24 5 0 0 00

2 0 0 0 00

22 5 0 0 00

9 5 0 0 00

13 0 0 0 00

6 0 0 00

13 2 0 0 00

1 5 0 0 00

11 7 0 0 00

4 0 00

11 6 6 0 00

8 0 00

11 5 8 0 00

1 1 0 0 00

11 9 8 0 00

5 0 0 00

11 4 8 0 00

1 2 0 0 00

10 2 8 0 00

1 0 0 0 00

9 2 8 0 00

DATE

ITEM

CREDIT

101

BALANCE DEBIT

CREDIT

20--

May

30 0 0 0 00

8 0 0 00

13 8 0 0 00

1 5 0 0 00

13 0 8 0 00

ACCOUNT: Accounts Receivable DATE

ITEM

POST. REF.

ACCOUNT NO. DEBIT

CREDIT

122

BALANCE DEBIT

CREDIT

20--

May

3 0 0 0 00

3 0 0 0 00 1 5 0 0 00

1 5 0 0 00

ACCOUNT: Stereo Equipment DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

181

BALANCE DEBIT

CREDIT

20--

May

7 0 0 0 00

Chapter 4

Journalizing and Posting Transactions

Problem 5 (Continued) ACCOUNT: Office Furniture DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

182

BALANCE DEBIT

CREDIT

20--

May

5 0 0 00

ACCOUNT: CDs DATE

ACCOUNT NO. ITEM

POST. REF.

DEBIT

CREDIT

183

BALANCE DEBIT

CREDIT

20--

May

2 5 0 0 00

ACCOUNT: Lighting Equipment DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

184

BALANCE DEBIT

CREDIT

20--

May

2 0 0 0 00

ACCOUNT: Van DATE

ACCOUNT NO. ITEM

POST. REF.

DEBIT

CREDIT

185

BALANCE DEBIT

CREDIT

20--

May

9 5 0 0 00

ACCOUNT: Accounts Payable DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

20--

May

4 0 0 0 00

5 0 0 00

4 5 0 0 00

1 5 0 0 00

3 0 0 0 00

1 2 0 0 00

1 8 0 0 00

Chapter 4

Problem 5 (Continued) ACCOUNT: Della Jordan, Capital DATE

ITEM

POST. REF.

ACCOUNT NO. DEBIT

CREDIT

311

BALANCE DEBIT

CREDIT

20--

May

30 0 0 0 00

ACCOUNT: Della Jordan, Drawing DATE

ITEM

POST. REF.

ACCOUNT NO. DEBIT

CREDIT

312

BALANCE DEBIT

CREDIT

20--

May

1 0 0 0 00

ACCOUNT: Disc Jockey Fees DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

May

3 8 0 0 00

ACCOUNT: Wages Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

511

BALANCE DEBIT

CREDIT

20--

May

6 0 0 00

1 1 0 0 00

1 7 0 0 00

ACCOUNT: Rent Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

521

BALANCE DEBIT

CREDIT

20--

May

5 0 0 00

Chapter 4

Journalizing and Posting Transactions

Problem 5 (Concluded) ACCOUNT: Phone Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

525

BALANCE

CREDIT

DEBIT

CREDIT

20--

May

8 0 00

ACCOUNT: Gas Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

538

BALANCE

CREDIT

DEBIT

CREDIT

20--

May

4 0 00

3. D. J. Parties Trial Balance May 31, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

9 2 8 0 00

Accounts Receivable

122

1 5 0 0 00

Stereo Equipment

181

7 0 0 0 00

Office Furniture

182

5 0 0 00

CDs

183

2 5 0 0 00

Lighting Equipment

184

2 0 0 0 00

Van

185

9 5 0 0 00

Accounts Payable

202

1 8 0 0 00

Della Jordan, Capital

311

30 0 0 0 00

Della Jordan, Drawing

312

Disc Jockey Fees

401

Wages Expense

511

1 7 0 0 00

Rent Expense

521

5 0 0 00

Phone Expense

525

8 0 00

Gas Expense

538

4 0 00

ACCOUNT TITLE

CREDIT BALANCE

1 0 0 0 00 3 8 0 0 00

35 6 0 0 00

Chapter 4

Problem 6 D. J. Parties Income Statement For Month Ended May 31, 20-Revenue: Disc jockey fees

$3,800

Expenses: Wages expense

$1,700

Rent expense

500

Phone expense

Gas expense

Total expenses

2,320

Net income

$1,480

D. J. Parties Statement of Owner’s Equity For Month Ended May 31, 20-Della Jordan, capital, May 1, 20--

$00,000

Investments during May

30,000

Total investment

$30,000

Net income for May

$1,480

Less withdrawals

1,000

Increase in capital Della Jordan, capital, May 31, 20--

480 $30,480

Chapter 4

Journalizing and Posting Transactions

Problem 6 (Concluded) D. J. Parties Balance Sheet May 31, 20-Assets

Liabilities

Cash

$09,280

Accounts receivable

1,500

Stereo equipment

7,000

Office furniture

500

CDs

2,500

Lighting equipment

2,000

Van

9,500

Total assets

$32,280

Accounts payable

$01,800

Owner’s Equity Della Jordan, capital

30,480

Total liabilities and owner’s equity

$32,280

Problem 7 1. GENERAL JOURNAL DATE 1

2 3

20--

Jan.

Student Initials

DEBIT

CREDIT 1

5 0 0 00

Cash Paid R. J. Hammond Withdrawal by owner

5 0 0 00 Student Initials

2 Accounts Payable

Cash

2 3

2 3 0 00

POST. REF.

DESCRIPTION

1 Wages Expense R. J. Hammond, Drawing

PAGE

3 2 0 00

4 Student Initials

2 3 0 00

3 2 0 00

Payment on account

7 8

Chapter 4

Problem 7 (Concluded) 2. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Jan. 15 Office Supplies 2 Office Equipment

8 0 0 00 8 0 0 00

To correct an error in which a payment for office

supplies was debited to Office Equipment

Chapter 5

Adjusting Entries and the Work Sheet

CHAPTER 5 REVIEW QUESTIONS 1. earned 2 incurred 3. revenues expenses 4. Supplies Expense 5. Insurance Expense 6. Wages Payable 7. useful life

8. depreciation 9. depreciable cost 10. contra-asset account 11. Accumulated Depreciation 12. book value 13. work sheet 14. Trial Balance 15. Balance Sheet

16. Income Statement 17. Balance Sheet 18. net income 19. accrual 20. cash 21. modified cash 22. service

EXERCISES Exercise 1 1. 2. 3. 4. 5.

$900 $200 $0 $700 debit Supplies Expense, $700 credit Supplies, $700

Exercise 2 1. 2. 3. 4.

$5,000 $500 $4,500 debit Depreciation Expense—Office Equipment, $500 credit Accumulated Depreciation—Office Equipment, $500

Exercise 3 1. GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Adjusting Entry

1 2

PAGE

20--

Dec.

31 Supplies Expense

524

Supplies

141

4 9 7 0 00 4 9 7 0 00

Chapter 5

Exercise 3 (Concluded) 2. GENERAL LEDGER ACCOUNT: Supplies DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

141

BALANCE

CREDIT

DEBIT

CREDIT

20--

Jan.



1 Balance

Feb. 12

Dec. 31 Adjusting

1 2 2 5 00 4 5 4 5 00

5 7 7 0 00 4 9 7 0 00

8 0 0 00

ACCOUNT: Supplies Expense DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

524

BALANCE

CREDIT

DEBIT

CREDIT

20--

Dec. 31 Adjusting

4 9 7 0 00

Exercise 4 1. GENERAL JOURNAL DATE

PAGE POST. REF.

DESCRIPTION

DEBIT

CREDIT

Adjusting Entry

20--

541

Dec. 31 Depreciation Expense—Automobiles Accumulated Depreciation—Automobiles

37 5 0 0 00

185.1

37 5 0 0 00

3 4

2. GENERAL LEDGER ACCOUNT: Automobiles DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

75 0 0 0 00

CREDIT

185

BALANCE DEBIT

CREDIT

20--

Jan.

75 0 0 0 00

Chapter 5

Adjusting Entries and the Work Sheet

Exercise 4 (Concluded) ACCOUNT: Accumulated Depreciation—Automobiles DATE

ITEM

POST. REF.

DEBIT

ACCOUNT NO.

185.1

BALANCE

CREDIT

DEBIT

CREDIT

20--

Dec. 31 Adjusting

37 5 0 0 00

ACCOUNT: Depreciation Expense—Automobiles DATE

ITEM

POST. REF.

DEBIT

37 5 0 0 00

ACCOUNT NO.

541

BALANCE

CREDIT

DEBIT

CREDIT

20--

Dec. 31 Adjusting

37 5 0 0 00

Exercise 5 1.

GENERAL JOURNAL DATE

PAGE POST. REF.

DESCRIPTION

DEBIT

CREDIT

Adjusting Entries

20--

June 30 Insurance Expense

535

Prepaid Insurance

5 0 00

145

5 0 00 3

30 Wages Expense

511

Wages Payable

1 2 0 00

219

1 2 0 00 6

GENERAL LEDGER

ACCOUNT: Prepaid Insurance DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

145

BALANCE DEBIT

CREDIT

20--

June

30 Adjusting

6 0 0 00

6 0 0 00 5 0 00

5 5 0 00

Chapter 5

Exercise 5 (Concluded) ACCOUNT: Wages Payable DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

219

BALANCE DEBIT

CREDIT

20--

June 30 Adjusting

1 2 0 00

ACCOUNT: Wages Expense DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

511

BALANCE DEBIT

CREDIT

20--

June 14

5 0 0 00

1 0 0 0 00

30 Adjusting

1 2 0 00

1 1 2 0 00

ACCOUNT: Insurance Expense DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

535

BALANCE DEBIT

CREDIT

20--

June 30 Adjusting

Exercise 6 1. 2. 3. 4. 5.

Rent Expense debit Cash credit Office Equipment Expense debit Cash credit Cash ($300) Revenue ($300) NO ENTRY for $200 NO ENTRY Office Equipment Expense debit Cash credit

5 0 00

Exercise 7 1. 2. 3. 4. 5.

Electricity Expense debit Cash credit Office Equipment (asset) debit Accounts Payable credit Cash debit ($500) Revenue credit ($500) NO ENTRY for $200 NO ENTRY Accounts Payable debit Cash credit

Chapter 5

Adjusting Entries and the Work Sheet

Exercise 8 1. 2. 3. 4. 5.

Supplies debit Accounts Payable credit Cash debit, Accounts Receivable debit Revenue credit (for $650) Wages Expense debit Wages Payable credit Accounts Payable debit Cash credit Depreciation Expense debit Accumulated Depreciation credit (contra-asset account)

Net Income

Miscellaneous Expense

150

1,000

500

1,870

350

5,600

8,800

2,500

8,000

6,000

800 2,150

300

1,000

500

350

9,000

DEBIT

44,570

2,150

(d)

(b)

(a)

(c)

CREDIT

800

1,000

500

350

300

DEBIT

44,570

32,170

10,200

300

400

1,000

500

CREDIT

ADJUSTED TRIAL BALANCE

42,770

(b)

Depr. Exp.—Computer Equip.

(c)

(d)

(a)

42,770

32,170

10,200

400

CREDIT

ADJUSTMENTS

Kim Ho Employment Counseling Services Work Sheet For Year Ended December 31, 20--

Depr. Exp.—Office Equip.

Utilities Expense

1,870

5,600

Rent Expense

Supplies Expense

8,500

2,500

8,000

Wages Expense

Counseling Fees

Kim Ho, Capital Kim Ho, Drawing

Wages Payable

Accounts Payable

Accum. Depr.—Comp. Equip.

Computer Equipment

Accum. Depr.—Office Equip.

500 6,000

Office Equipment

9,000

DEBIT

TRIAL BALANCE

Office Supplies

Cash

ACCOUNT TITLE

1., 2., and 3.

Problem 9

PROBLEMS

25,650

12,400

10,200

300

400

1,000

500

CREDIT

13,250 32,170

25,650

2,500

8,000

6,000

150

9,000

DEBIT

32,170

CREDIT

BALANCE SHEET

13,250

18,920

800

1,000

500

1,870

350

5,600

8,800

DEBIT

INCOME STATEMENT

40 Chapter 5

Net Income

Depr. Expense—Del. Equip.

Oil and Gas Expense

Repair Expense

Insurance Expense

Phone Expense

15,220

190

180

750

Rent Expense

Supplies Expense

420

1,475

Advertising Expense

Wages Expense

Delivery Fees

Juan Garcia, Drawing

Juan Garcia, Capital

Wages Payable

Accounts Payable

1,200

6,300

Accum. Depr.—Del. Equip.

1,500

Delivery Equipment

725

Supplies

Prepaid Insurance

850

1,545

DEBIT

15,220

5,240

9,000

980

CREDIT

TRIAL BALANCE

Accounts Receivable

Cash

ACCOUNT TITLE

1. and 2.

Problem 10

(c)

(b)

(a)

(d)

350

200

275

215

1,040

DEBIT

(d)

(c)

(b)

(a)

1,040

215

350

200

275

CREDIT

ADJUSTMENTS

15,785

350

190

200

180

275

750

420

1,690

1,200

6,300

1,300

450

850

1,545

DEBIT

15,785

5,240

9,000

215

980

350

CREDIT

ADJUSTED TRIAL BALANCE

Juan’s Speedy Delivery Service Work Sheet For Month Ended September 30, 20--

11,645

5,240

10,545

9,000

215

980

350

CREDIT

5,240

11,645

1,200

6,300

1,300

450

850

1,545

DEBIT

1,100

5,240

CREDIT

BALANCE SHEET

1,100

4,140

350

190

200

180

275

750

420

1,690

DEBIT

INCOME STATEMENT

Chapter 5 41 Adjusting Entries and the Work Sheet

42 Chapter 5

Problem 11 Green’s Landscaping Service Work Sheet For Month Ended July 31, 20-TRIAL BALANCE ACCOUNT TITLE Cash

DEBIT

ADJUSTMENTS

CREDIT

DEBIT

ADJUSTED TRIAL BALANCE

CREDIT

DEBIT

CREDIT

INCOME STATEMENT DEBIT

CREDIT

BALANCE SHEET DEBIT

1,825

Accounts Receivable

720

Supplies

600

(a)

250

350

Prepaid Insurance

850

(b)

225

625

6,550

Tractor

6,550

Accum. Depr.—Tractor Accounts Payable George Green, Capital George Green, Drawing

460

460 520

(d)

320

8,250

1,200

Landscaping Fees Wages Expense

Wages Payable

6,100

Advertising Expense

250

Rent Expense

775

8,250

1,200

1,540

Supplies Expense

1,200 6,100

(d)

(a)

320

250

6,100

1,860

250

775

250

Phone Expense

140

Utilities Expense

220

Insurance Expense Depr. Expense—Tractor Miscellaneous Expense

(b)

225

(c)

460

200

200 14,870

14,870

1,255

Net Income

1,255

15,650

4,380

6,100

11,270

1,720 6,100

Note: Shaded areas indicate where corrections were made.

CREDIT

9,550 1,720

6,100

11,270

Chapter 5

Adjusting Entries and the Work Sheet

Problem 12 1. Cash Basis GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

1 Rent Expense

5 0 0 00

Cash

5 0 0 00

3 4 5

2 Office Supplies Expense

2 5 0 00

Cash

2 5 0 00

6 7

3 NO ENTRY

8 9 10

4 Cash

4 0 0 00

Consulting Fees

4 0 0 00 10

11 12 13

5 Phone Expense

4 8 00

Cash

6 Insurance Expense

2 0 0 00

Cash

7 Office Equipment Expense

1 0 0 00

Cash

8 Cash Consulting Fees

23 24

1 0 0 00 19

20 21

2 0 0 00 16

17 18

4 8 00 13

14 15

1 5 0 00

1 5 0 00 22 23

9 NO ENTRY

Chapter 5

Problem 12 (Continued) 2. Modified Cash Basis GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

1 Rent Expense

5 0 0 00

Cash

5 0 0 00

2 Office Supplies

Cash

2 5 0 00

6 7 8

3 Office Equipment

1 0 0 0 00

Accounts Payable

1 0 0 0 00

9 10 11

4 Cash

4 0 0 00

Consulting Fees

4 0 0 00 11

12 13 14

5 Phone Expense

4 8 00

Cash

6 Prepaid Insurance

2 0 0 00

Cash

7 Accounts Payable

1 0 0 00

Cash

8 Cash

1 5 0 00

Consulting Fees

1 5 0 00 23

24 25

1 0 0 00 20

21 22

2 0 0 00 17

18 19

4 8 00 14

15 16

9 Depreciation Expense—Office Equipment Accumulated Depreciation—Office Equipment

5 0 00

5 0 00 26

Chapter 5

Adjusting Entries and the Work Sheet

Problem 12 (Concluded) 3. Accrual Basis GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

1 Rent Expense

5 0 0 00

Cash

5 0 0 00

2 Office Supplies

Cash

2 5 0 00

6 7 8

3 Office Equipment

1 0 0 0 00

Accounts Payable

1 0 0 0 00

9 10

4 Cash

Accounts Receivable

Consulting Fees

4 0 0 00

1 5 0 00

5 5 0 00 12

13 14 15

5 Phone Expense

4 8 00

Cash

4 8 00 15

16 17 18

6 Prepaid Insurance

2 0 0 00

Cash

7 Accounts Payable

1 0 0 00

Cash

8 Cash

1 5 0 00

Accounts Receivable

1 5 0 00 24

25 26

1 0 0 00 21

22 23

2 0 0 00 18

19 20

9 Depreciation Expense—Office Equipment Accumulated Depreciation—Office Equipment

5 0 00

5 0 00 27

Chapter 5

CHAPTER 5 APPENDIX Apx. Exercise 1

Year

Depreciable Cost

1 2 3 4

$42,000 42,000 42,000 42,000



STRAIGHT-LINE DEPRECIATION Accumulated Depreciation Depreciation Rate = Expense (End of Year) 25.00% 25.00% 25.00% 25.00%

$10,500 10,500 10,500 10,500

Book Value (End of Year)

$10,500 21,000 31,500 42,000

$37,500 27,000 16,500 6,000

SUM-OF-THE-YEARS’-DIGITS DEPRECIATION Accumulated Depreciable Depreciation Depreciation Cost Expense (End of Year)  Rate =

Book Value (End of Year)

Apx. Exercise 2

Year 1 2 3 4

$42,000 42,000 42,000 42,000

4/10 3/10 2/10 1/10

$16,800 12,600 8,400 4,200

$16,800 29,400 37,800 42,000

$31,200 18,600 10,200 6,000

Apx. Exercise 3

Year 1 2 3 4

DOUBLE-DECLINING-BALANCE DEPRECIATION Book Value Accumulated (Beginning Depreciation Depreciation of Year) Rate = Expense (End of Year)  $48,000 24,000 12,000 6,000

50.00% 50.00% 50.00% 0.00%

$24,000 12,000 6,000 0

$24,000 36,000 42,000 42,000

Book Value (End of Year) $24,000 12,000 6,000 6,000

Apx. Exercise 4

Year 1 2 3 4 5 6

MODIFIED ACCELERATED COST RECOVERY SYSTEM Accumulated Depreciation Depreciation Cost Rate Expense (End of Year)  = $48,000 20.00% $ 9,600 $ 9,600 48,000 32.00% 15,360 24,960 48,000 19.20% 9,216 34,176 48,000 11.52% 5,530 39,706 48,000 11.52% 5,530 45,236 48,000 5.76% 2,764 48,000

Book Value (End of Year) $38,400 23,040 13,824 8,294 2,764 0

Chapter 6

Financial Statements and the Closing Process

CHAPTER 6 REVIEW QUESTIONS 1.

2. 3. 4.

income statement statement of owner’s equity balance sheet revenue expense net income withdrawals (drawing) current liabilities

5. 6. 7. 8. 9. 10. 11. 12. 13.

dollar capital increase report account classified current operating cycle current

14. permanent 15. zero 16. temporary 17. income summary or expense and revenue summary 18. “Closing” 19. post-closing 20. accounting cycle

EXERCISES Exercise 1 $1,588 Exercise 2 (a) (b)

$588 $6,268

Exercise 3 Delivery Fees Wages Expense Rent Expense Supplies Expense Insurance Expense Depreciation Expense Owner’s Drawing

Chapter 6

PROBLEMS Problem 4 GENERAL JOURNAL DATE

POST. REF.

DESCRIPTION

DEBIT

CREDIT

Adjusting Entries

1 20-2

PAGE

Apr.

30 Supplies Expense

524

Supplies

3 2 6 00

141

3 2 6 00

30 Insurance Expense

535

Prepaid Insurance

2 0 0 00

145

2 0 0 00 7 0

30 Depreciation Expense—Repair Equipment

542

Accumulated Depreciation—Repair Equipment

5 6 7

4 0 0 00

188.1

4 0 0 00

9 10

30 Wages Expense

511

Wages Payable

1 0 0 00

219

1 0 0 00 12

Problems 4 and 8 GENERAL LEDGER Cash

ACCOUNT

DATE

ACCOUNT NO.

ITEM

20--

Apr.

30 Balance

POST. REF.

DEBIT

BALANCE

CREDIT DEBIT

✓

DATE

ITEM

20--

Apr. 30 Balance 30 Adjusting

CREDIT

4 8 0 0 00

Supplies

ACCOUNT

ACCOUNT NO. POST. REF.

DEBIT

141

BALANCE

CREDIT DEBIT

✓ J2

101

CREDIT

8 2 6 00 3 2 6 00

5 0 0 00

Chapter 6

Financial Statements and the Closing Process

Problems 4 and 8 (Continued) Prepaid Insurance

ACCOUNT

DATE

ITEM

20--

Apr.

✓

30 Adjusting

ITEM

20--

30 Balance

DEBIT

DATE

ITEM

20--

1 3 0 0 00 2 0 0 00

DEBIT

1 1 0 0 00

POST. REF.

✓

30 Adjusting

DEBIT

ITEM

20--

30 Balance

CREDIT

2 6 0 0 00

DEBIT

ACCOUNT NO.

DEBIT

CREDIT

4 0 0 00 4 0 0 00

8 0 0 00

ACCOUNT NO. POST. REF.

✓

188.1

BALANCE

CREDIT

Accounts Payable

DATE

188

BALANCE

CREDIT

✓

30 Balance

ACCOUNT

CREDIT

ACCOUNT NO. POST. REF.

145

BALANCE

CREDIT

Accumulated Depreciation—Repair Equipment

ACCOUNT

Apr.

DEBIT

Repair Equipment

DATE

Apr.

POST. REF.

30 Balance

ACCOUNT

Apr.

ACCOUNT NO.

DEBIT

202

BALANCE

CREDIT DEBIT

CREDIT

1 3 0 0 00

Chapter 6

Problems 4 and 8 (Continued) Wages Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

219

BALANCE

CREDIT DEBIT

CREDIT

20--

Apr. 30 Adjusting

1 0 0 00

Jean Collins, Capital

ACCOUNT

DATE

ITEM

20--

POST. REF.

ACCOUNT NO.

DEBIT

311

BALANCE

CREDIT DEBIT

CREDIT

1 Balance

✓

1 0 0 0 00

6 0 0 0 00

30 Closing

1 1 0 0 00

7 1 0 0 00

30 Closing

Apr.

5 0 0 0 00

3 0 0 00

6 8 0 0 00

Jean Collins, Drawing

ACCOUNT

DATE

ITEM

20--

Apr.

POST. REF.

30 Balance

✓

30 Closing

ACCOUNT NO.

DEBIT

BALANCE

CREDIT DEBIT

DATE

ITEM

CREDIT

3 0 0 00 3 0 0 00

Income Summary

ACCOUNT

ACCOUNT NO. POST. REF.

312

DEBIT

313

BALANCE

CREDIT DEBIT

CREDIT

20--

Apr. 30 Closing

30 Closing

1 7 3 9 00

30 Closing

1 1 0 0 00

2 8 3 9 00

2 8 3 9 00 1 1 0 0 00

Chapter 6

Financial Statements and the Closing Process

Problems 4 and 8 (Continued) Repair Fees

ACCOUNT

DATE

ITEM

20--

Apr.

✓

30 Closing

DEBIT

ITEM

DEBIT

20--

30 Balance

✓

30 Adjusting

30 Closing

2 8 3 9 00 2 8 3 9 00

DEBIT

DATE

ITEM

DEBIT

20--

30 Balance

✓

30 Closing

2 7 5 00 1 0 0 00

3 7 5 00 3 7 5 00

DEBIT

DATE

ITEM

DEBIT

CREDIT

4 0 0 00 4 0 0 00

ACCOUNT NO. POST. REF.

521

BALANCE

CREDIT

Supplies Expense

ACCOUNT

CREDIT

ACCOUNT NO. POST. REF.

511

BALANCE

CREDIT

Rent Expense

ACCOUNT

CREDIT

ACCOUNT NO. POST. REF.

401

BALANCE

CREDIT

Wages Expense

DATE

Apr.

POST. REF.

30 Balance

ACCOUNT

Apr.

ACCOUNT NO.

DEBIT

524

BALANCE

CREDIT DEBIT

CREDIT

20--

Apr. 30 Adjusting 30 Closing

J2 J2

3 2 6 00

3 2 6 00 3 2 6 00

Chapter 6

Problems 4 and 8 (Concluded) Phone Expense

ACCOUNT

DATE

ITEM

ACCOUNT NO. POST. REF.

20--

Apr.

30 Balance

✓

30 Closing

DEBIT

BALANCE

CREDIT DEBIT

DATE

ITEM

CREDIT

3 8 00 3 8 00

Insurance Expense

ACCOUNT

ACCOUNT NO.

POST. REF.

525

DEBIT

535

BALANCE

CREDIT DEBIT

CREDIT

20--

Apr. 30 Adjusting 30 Closing

2 0 0 00

2 0 0 00 2 0 0 00

Depreciation Expense—Repair Equipment

ACCOUNT

DATE

ITEM

POST. REF.

DEBIT

ACCOUNT NO.

542

BALANCE

CREDIT DEBIT

CREDIT

20--

Apr. 30 Adjusting 30 Closing

J2 J2

4 0 0 00

4 0 0 00 4 0 0 00

Chapter 6

Financial Statements and the Closing Process

Problem 5 Collins Cycle Service Income Statement For Month Ended April 30, 20-Revenue: Repair fees

$2,839

Expenses: Wages expense

$375

Rent expense

400

Supplies expense

326

Phone expense

Insurance expense

200

Depreciation expense—repair equipment

400

Total expenses

1,739

Net income

$1,100

Problem 6 Collins Cycle Service Statement of Owner’s Equity For Month Ended April 30, 20-Jean Collins, capital, April 1, 20--

$5,000

Investments during April

1,000

Total investment

$6,000

Net income for April Less withdrawals for April Net increase in capital Jean Collins, capital, April 30, 20--

$1,100 300 800 $6,800

Chapter 6

Problem 7 Collins Cycle Service Balance Sheet April 30, 20-Assets Current assets: Cash

$4,800

Supplies

500

Prepaid insurance

1,100

Total current assets

$6,400

Property, plant, and equipment: Repair equipment

$2,600

Less accumulated depreciation

800

Total assets

1,800 $8,200

Liabilities Current liabilities: Accounts payable

$1,300

Wages payable

100

Total liabilities

$1,400 Owner’s Equity

Jean Collins, capital

6,800

Total liabilities and owner’s equity

$8,200

Chapter 6

Financial Statements and the Closing Process

Problem 8 See the general ledger on pages 48-52 for the postings. GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

Closing Entries

14 15

PAGE

30 Repair Fees

Income Summary

CREDIT

401

2 8 3 9 00

313

2 8 3 9 00 16

17 18

30 Income Summary

313

1 7 3 9 00

Wages Expense

511

3 7 5 00 19

Rent Expense

521

4 0 0 00 20

Supplies Expense

524

3 2 6 00 21

Phone Expense

525

3 8 00 22

Insurance Expense

535

2 0 0 00 23

Depreciation Expense—Repair Equipment

542

4 0 0 00 24

25 26 27

30 Income Summary

Jean Collins, Capital

313

1 1 0 0 00

311

1 1 0 0 00 27

28 29 30

30 Jean Collins, Capital

Jean Collins, Drawing

311 312

3 0 0 00

3 0 0 00 30

Chapter 6

Problem 9 Collins Cycle Service Post-Closing Trial Balance April 30, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

4 8 0 0 00

Supplies

141

5 0 0 00

Prepaid Insurance

145

1 1 0 0 00

Repair Equipment

188

2 6 0 0 00

Accumulated Depreciation—Repair Equipment

188.1

8 0 0 00

Accounts Payable

202

1 3 0 0 00

Wages Payable

219

1 0 0 00

Jean Collins, Capital

311

6 8 0 0 00

ACCOUNT TITLE

9 0 0 0 00

CREDIT BALANCE

9 0 0 0 00

Chapter 6

Financial Statements and the Closing Process

CHAPTER 6 APPENDIX Apx. Exercise 1 CASH (a) (d) (f) (j)

5,000 1,000 600 900

500 200 700 200 64 70 90 400

(b) (c) (e) (g) (h) (i) (k) (l)

500 200 700 200 64 70 90 400

(b) (c) (e) (g) (h) (i) (k) (l)

Apx. Exercise 2 CASH (a) (d) (f) (j)

5,000 1,000 600 900 7,500

2,224

Bal.

5,726

Cash balance is $5,276. Apx. Problem 3 CASH (a) (d) (f) (j)

(F) (F) (O) (O)

5,000 1,000 600 900 7,500

500 200 700 200 64 70 90 400

(O) (O) (I) (F) (O) (O) (O) (F)

(b) (c) (e) (g) (h) (i) (k) (l)

2,224

Bal.

5,726

Chapter 6

Apx. Problem 4 Lee’s Quick Sail Statement of Cash Flows For Month Ended August 31, 20-Cash flows from operating activities: Cash received from customers for mailing services Cash paid for rent

$1,500) $ (500)

Cash paid for month’s supplies

(200)

Cash paid for electricity

(64)

Cash paid for gas

(70)

Cash paid for wages

(90)

Total cash paid for operating activities

(924)

Net cash provided by operating activities

$ 576)

Cash flows from investing activities: Cash paid for office equipment

$ (700)

Net cash used for investing activities

(700)

Cash flows from financing activities: Cash investment by owner

$6,000)

Cash withdrawal by owner

(400)

Payment made on loan

(200)

Net cash provided by financing activities Net increase in cash

5,400) $5,276)

Chapter 7

Accounting for Cash

CHAPTER 7 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9.

signature card deposit ticket ABA number endorsement blank restrictive personal identification number (or PIN) check drawee

10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

payee drawer stub (or check register) bank statement canceled checks bank reconciliation outstanding checks deposits in transit service charges not sufficient funds (NSF)

20. 21. 22. 23. 24. 25. 26. 27.

electronic funds transfer (EFT) petty cash fund petty cash voucher petty cash payments record replenished cash register revenue (or overage) expense (or shortage)

EXERCISES Exercise 1

Exercise 2

Student’s Signature

Chapter 7

Exercise 2 (Concluded)

Student’s Signature

Exercise 3 1. c 2. a 3. b 4. d 5. b 6. a 7. b

Chapter 7

Accounting for Cash

Exercise 4 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

Jan. 28

Cash Accounts Payable

2 8 00 2 8 00

Error in checkbook

4 5

Cash

1 4 2 00

Notes Receivable

1 4 2 00

Bank collected note

Gail Bennett, Drawing

3 0 00

Cash

3 0 00 10

Unrecorded ATM withdrawal

12 13

Miscellaneous Expense

1 1 00

Cash

1 1 00 14

Bank service charge

16 17 18 19

6 7

8 9

Accounts Receivable Cash

3 7 0 00

3 7 0 00 18

NSF check

Chapter 7

Exercise 5 GENERAL JOURNAL DATE

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20-1

Mar.

Petty Cash Cash

1 0 0 00 1 0 0 00

Establish petty cash fund

2 3

Phone Expense

3 50

Automobile Expense

1 1 00

Postage Expense

4 50

B. Crenshaw, Drawing

3 5 00

Charitable Contributions Expense

2 5 00

Miscellaneous Expense

3 00

Cash

8 2 00 11

Replenish petty cash

Exercise 6 GENERAL JOURNAL DATE

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20-1

Aug.

Cash Service Fees

2 1 8 00 2 1 8 00

Record service fees

4 5

Cash

3 0 2 00

Cash Short and Over

Service Fees

2 00

3 0 0 00

Record service fees and cash overage

9 10

Cash

Cash Short and Over

Service Fees

2 8 8 00

4 00

2 9 2 00 12

Record service fees and cash shortage

14 15

Cash

3 1 1 50

Cash Short and Over

Service Fees

2 00 17 3 0 9 50 18

Record service fees and cash overage

Chapter 7

Accounting for Cash

PROBLEMS Problem 7 1. Mini Donut House Bank Reconciliation March 31, 20-Bank statement balance, March 31 Add deposits in transit

$3 1 9 9 00 $ 3 0 2 00 2 0 6 00

5 0 8 00 $3 7 0 7 00

Deduct outstanding checks: No. 148

$ 2 0 1 00

No. 151

3 0 0 00

No. 155

5 0 1 00

1 0 0 2 00

Adjusted bank balance

$2 7 0 5 00

Book balance, March 31

$2 9 2 3 00

Add error on Check No. 144

9 00 $2 9 3 2 00

Deduct: Unrecorded ATM withdrawal NSF check Bank service charge Adjusted book balance

6 0 00 1 5 3 00 1 4 00

2 2 7 00 $2 7 0 5 00

Chapter 7

Problem 7 (Concluded) 2. GENERAL JOURNAL DATE

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20-1

Mar. 31

Cash Accounts Payable

9 00 9 00

Error in checkbook

4 5

Paolo Goes, Drawing

6 0 00

Cash

6 0 00

Unrecorded ATM withdrawal

Accounts Receivable

1 5 3 00

Cash

1 5 3 00 10

NSF check

12 13 14 15

6 7

8 9

Miscellaneous Expense Cash

1 4 00

1 4 00 14

Bank service charge

Chapter 7

Accounting for Cash

Problem 8 2. and 3. PETTY CASH PAYMENTS FOR MONTH OF APRIL 20--

PAGE 1

DISTRIBUTION OF PAYMENTS Day

Description

Vou. No.

Total Truck Postage Amount Expense Expense

Charit. Contrib. Expense

Phone Expense

Office Supplies

Advert. Expense

Account

Amount

Rec’d in fund, $200 1

Postage due

5.28

Wash. Baseball Lg.

25.00

Phone calls

6.25

Office supplies

22.00

Newspaper adv.

32.00

Oil change

33.00

Postage stamps

20.00

Girl Scouts

25.00

Balance

Replenish fund 168.53

168.53

Total

5.28 25.00 6.25 22.00 32.00 33.00 20.00 25.00 33.00

25.28

50.00

6.25

22.00

32.00

$ 31.47

$200.00

1. and 4. GENERAL JOURNAL DATE

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20-1

Apr.

Petty Cash Cash

2 0 0 00 2 0 0 00

Establish petty cash fund

2 3

Truck Expense

3 3 00

Postage Expense

2 5 28

Charitable Contributions Expense

5 0 00

Phone Expense

6 25

Office Supplies

2 2 00

Advertising Expense

3 2 00

11 12

Cash

1 6 8 53 11

Replenish petty cash

Chapter 7

Problem 9 GENERAL JOURNAL DATE

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20-1

Apr.

Cash

1 9 8 00

Cash Short and Over

Service Fees

1 50

1 9 6 50

Record service fees and cash overage

5 6

Cash

Cash Short and Over

Service Fees

1 8 6 50

5 50

1 9 2 00

Record service fees and cash shortage

10 11

Cash

1 9 3 50

Service Fees

1 9 3 50 12

Record service fees

14 15

Cash

2 0 6 00

Cash Short and Over

Service Fees

1 50 17 2 0 4 50 18

Record service fees and cash overage

20 21

Cash

Cash Short and Over

Service Fees

2 0 1 50

1 50

2 0 3 00 23

Record service fees and cash shortage

Chapter 8

Payroll Accounting: Employee Earnings and Deductions

CHAPTER 8 REVIEW QUESTIONS 1. 2. 3.

4. 5. 6. 7. 8. 9.

employee independent contractor Calculate total earnings. Determine the amounts of deductions. Subtract deductions from total earnings to compute net pay. salary wages time cards gross wages net pay 1. Federal, state, and city income tax withholding 2. Employee FICA tax withholding (Social Security and Medicare taxes) 3. Voluntary deductions

10. 11. 12.

13. 14. 15. 16.

4 W-4 1. Total earnings 2. Marital status 3. Number of withholding allowances claimed 4. Length of the pay period payroll register direct deposit (or EFT) employee earnings record 1. Payroll processing centers 2. Electronic systems

EXERCISES Exercise 1 $2,500 per month × 12 months = $30,000 per year $30,000 per year/52 weeks = $576.92 per week $576.92 per week/40 hours = $14.42 per hour $14.42 × 1.5 = $21.63 = Overtime rate

Exercise 2 Regular rate: Monday–Friday (37 hours × $12.50) Time and a half: Friday (4 hours × $18.75) Double time: Saturday (6 hours × $25) Gross pay

$462.50 75.00 150.00 $687.50

Chapter 8

Exercise 3 Gross pay Deductions: Federal income tax Social Security tax Medicare tax State income tax City income tax Pension plan Health insurance Total deductions Net pay

$683.00 $14.00 42.35 9.90 13.66 6.83 25.00 8.50 120.24 $562.76

Exercise 4 GENERAL JOURNAL DATE 1

20-July

DESCRIPTION

Wages and Salaries Expense

PAGE 1 POST. REF.

DEBIT

CREDIT 1

6 8 3 00

Employee Federal Income Tax Payable

1 4 00

Social Security Tax Payable

4 2 35

Medicare Tax Payable

9 90

State Income Tax Payable

1 3 66

City Income Tax Payable

6 83

Pension Plan Contributions Payable

2 5 00

Health Insurance Premiums Payable

8 50

Cash

5 6 2 76

Payroll for week ended July 31

Chapter 8

Payroll Accounting: Employee Earnings and Deductions

Exercise 5 1.

Total earnings = $7,226 Federal income tax = $695

2. GENERAL JOURNAL DATE 1

20-May

DESCRIPTION

Wages and Salaries Expense

PAGE POST. REF.

DEBIT

CREDIT 1

7 2 2 6 00

Employee Federal Income Tax Payable

6 9 5 00

Social Security Tax Payable

4 4 8 01

Medicare Tax Payable

1 0 4 78

Pension Plan Contributions Payable

1 3 4 00

Health Insurance Premiums Payable

2 6 0 00

United Way Contributions Payable

1 9 0 00

Cash

5 3 9 4 21

Payroll for week ended May 14

Chapter 8

Problem 6 (See pages 71-72 for the conclusion of Problem 6.) 1. PAYROLL REGISTER EARNINGS

NAME

EMP. NO. MARIT. NO. ALLOW. STATUS

REGULAR

OVERTIME

TOTAL

TAXABLE EARNINGS CUMULATIVE TOTAL

UNEMPLOY. COMP.

SOCIAL SECURITY

Alito, Samuel

480 00

90 00

570 00

1,095 00

570 00

Breyer, Susan

400 00

150 00

550 00

1,230 00

550 00

Ginsberg, Ruth

440 00

49 50

489 50

989 50

489 50

Kagan, Ellen

440 00

132 00

572 00

1,197 00

572 00

Kennedy, Tony

520 00

58 50

578 50

1,308 50

578 50

Roberts, John

680 00

0 00

680 00

1,530 00

680 00

Scalia, Anton

342 00

0 00

342 00

767 00

342 00

Sotomayor, Sonja

440 00

115 50

555 50

1,190 50

555 50

Thomas, Clarence

400 00

300 00

700 00

1,315 00

700 00

4,142 00

895 50

5,037 50

10,622 50

5,037 50

10 11 12 13 14

Chapter 8

Payroll Accounting: Employee Earnings and Deductions

Problem 6 (Continued)

FOR PERIOD ENDED

JANUARY 15, 20-DEDUCTIONS

FEDERAL INC. TAX

SOC. SEC. TAX

18 00

35 34

8 26

19 95

5 70

24 00

34 10

7 98

19 25

9 00

30 35

7 09

48 00

35 46

18 00

MEDICARE STATE TAX INC. TAX

CITY EARN. TAX

HEALTH INS.

CREDIT UNION

NET PAY

5 00 114 00 U.S. Sav. Bds. 18 25

224 50

345 50 531

5 50

5 00 110 00

205 83

344 17 532

17 13

4 90

97 90

166 37

323 13 533

8 30

20 02

5 72

15 00

5 00 114 40

251 90

320 10 534

35 87

8 39

20 25

5 78

15 00

5 00 115 70 U.S. Sav. Bds. 18 25

242 24

336 26 535

14 00

42 16

9 86

23 80

6 80

5 00 136 00

237 62

442 38 536

15 00

21 20

4 96

11 97

3 42

15 00

5 00

68 40

144 95

197 05 537

8 00

34 44

8 05

19 44

5 56

15 00

5 00 111 10

206 59

348 91 538

79 00

43 40

10 15

24 50

7 00

5 00 140 00 U.S. Sav. Bds. 18 25

327 30

372 70 539

73 04 176 31

50 38

60 00

40 00 1,00 50 7

OTHER

CK. NO.

TOTAL

233 00 312 32

LIFE INS.

54 75 2,007 30 3,030 20

11 12 13 14

Chapter 8

Problem 6 (Concluded) 2. GENERAL JOURNAL DATE

PAGE POST. REF.

DESCRIPTION

DEBIT

CREDIT

20-1

Jan. 17

Wages and Salaries Expense

5 0 3 7 50

Employee Federal Income Tax Payable

2 3 3 00

Social Security Tax Payable

3 1 2 32

Medicare Tax Payable

7 3 04

State Income Tax Payable

1 7 6 31

City Earnings Tax Payable

5 0 38

Life Insurance Premiums Payable

6 0 00

Health Insurance Premiums Payable

4 0 00

Credit Union Payable

1 0 0 7 50

U.S. Savings Bonds Payable

Cash

5 4 75 10 3 0 3 0 20 11

Payroll for period ended Jan. 15

Problem 7 EMPLOYEE EARNINGS RECORD EARNINGS 20 -PERIOD ENDED

UNEMPLOY. COMP.

SOCIAL SECURITY

300 00

0 00

18 60

0 00

380 00

680 00

380 00

7 00

23 56

150 00

550 00

1,230 00

550 00

24 00

34 10

OVERTIME

Jan. 1

300 00

0 00

380 00

400 00

DEDUCTIONS FEDERAL SOCIAL INCOME SECURITY TAX TAX

CUMULATIVE TOTAL

REGULAR

GENDER

TAXABLE EARNINGS

TOTAL

DEPARTMENT

OCCUPATION

SOCIAL SECURITY NO.

MARITAL STATUS

ALLOWANCES

Sanitation

Janitor

336-56-7534

Chapter 8

Payroll Accounting: Employee Earnings and Deductions

Problem 7 (Concluded) FOR PERIOD ENDED

JANUARY 15, 20-DEDUCTIONS

MEDICARE TAX

STATE INCOME TAX

CITY EARNINGS TAX LIFE INSUR.

4 35

10 50

3 00

5 00

5 51

13 30

3 80

7 98

19 25

5 50

HEALTH INSUR.

CREDIT UNION

CK. NO.

TOTAL

NET PAY

40 00

81 45

218 55 321

5 00

56 00

114 17

265 83 422

5 00

110 00

205 83

344 17 532

DATE OF

OTHER

EMP.

PAY RATE

BIRTH

DATE HIRED

$10.00 hr.

7/6/69

6/22/--

NAME/ADDRESS

NO.

Susan Breyer

422 Long Plain Rd. Leverett, MA 01054

Chapter 9

Payroll Accounting: Employer Taxes and Reports

CHAPTER 9 REVIEW QUESTIONS 1.

1. Social Security tax 2. Medicare tax 3. FUTA tax 4. SUTA tax $118,500 payroll register self-employed self-employment tax $7,000

2. 3. 4. 5. 6.

7. 8.

9. 10. 11. 12.

Payroll Taxes Expense 1. Social Security tax 2. Medicare tax 3. Federal income tax 940 Wage and Tax Statement, Form W-2 Form I-9 Workers’ compensation insurance

EXERCISES Exercise 1 FUTA tax = 0.6% × $16,800 = $100.80 SUTA tax = 5.4% × $16,800 = $907.20 Exercise 2 1. and 2.

GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20--

Dec. 31

Wages and Salaries Expense

4 7 0 0 00

Employee Federal Income Tax Payable

4 2 0 00

Social Security Tax Payable

2 2 3 20

Medicare Tax Payable

6 8 15

Health Insurance Premiums Payable

8 0 00

Credit Union Payable

2 0 0 00

Cash

3 7 0 8 65

Payroll for week ended Dec. 31

9 10

Payroll Taxes Expense

3 0 9 35

Social Security Tax Payable

Medicare Tax Payable

FUTA Tax Payable

1 80 13

SUTA Tax Payable

1 6 20 14

15 16

Employer payroll taxes for week ended Dec. 31

2 2 3 20 11 6 8 15 12

15 16

Chapter 9

Exercise 3 Salary of employee .............................................................................. Social Security tax ($45,000 × 0.062).................................................. Medicare tax ($45,000 × 0.0145) ......................................................... FUTA tax ($7,000 × 0.006) ................................................................. SUTA tax ($7,000 × 0.054) ................................................................. Total cost of employee .........................................................................

$45,000.00 2,790.00 652.50 42.00 378.00 $48,862.50

Exercise 4 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Employee Federal Income Tax Payable

7 7 8 0 00

Social Security Tax Payable

12 4 0 0 00

Medicare Tax Payable

2 9 0 0 00

Oct. 15

Cash

23 0 8 0 00

Deposit of employee federal income tax and

Social Security and Medicare taxes

7 8

FUTA Tax Payable

5 4 0 00

Cash

5 4 0 00

Paid FUTA tax

11 12

SUTA Tax Payable

4 3 2 0 00

Cash

4 3 2 0 00 13

Paid SUTA tax

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

Workers’ Compensation Insurance Expense Workers’ Compensation Insurance Payable Adjustment for insurance premium

PAGE 1 POST. REF.

DEBIT

CREDIT 1

3 7 00 3 7 00

Chapter 9

Payroll Accounting: Employer Taxes and Reports

PROBLEMS Problem 6 1. PAYROLL REGISTER EARNINGS

NAME

NO. MARIT. ALLOW. STATUS

REGULAR

OVERTIME

TAXABLE EARNINGS

TOTAL

CUMULATIVE TOTAL

UNEMPLOY. COMP.

SOCIAL SECURITY

Coolie, Betty

350

7,150 00

200 00

350 00

Covar, Mike

200

6,800 00

200 00

Hagen, Frank

375

6,200 00

375 00

Gutierrez, Bob

1,540

47,300 00

0 00

1,540 00

Moten, Alice

1,500

50,500 00

0 00

1,500 00

Rice, Darlene

3,300

121,400 00

0 00

400 00

7,265

239,350 00

775 00

4,365 00

2. Social Security tax = $4,365 × 0.062 = Medicare tax = $7,265 × 0.0145 = FUTA tax = $775 × 0.006 = SUTA tax = $775 × 0.054 =

$270.63 105.34 4.65 41.85 $422.47

3. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20--

Aug. 31

Payroll Taxes Expense

4 2 2 47

Social Security Tax Payable

2 7 0 63

Medicare Tax Payable

1 0 5 34

FUTA Tax Payable

4 65

SUTA Tax Payable

4 1 85

Employer payroll taxes for the period ending

Aug. 31, 20--

Chapter 9

Problem 7 1. GENERAL JOURNAL

PAGE POST. REF.

DEBIT

Employee Federal Income Tax Payable

211

3 3 7 5 00

Social Security Tax Payable

212

4 7 4 0 00

Medicare Tax Payable

213

1 1 1 0 00

DATE 1

DESCRIPTION

20--

Mar. 15

Cash

101

CREDIT

9 2 2 5 00

Deposit of employee federal income tax and

Social Security and Medicare taxes

7 8

Wages and Salaries Expense

511

39 0 0 0 00

Employee Federal Income Tax Payable

211

3 6 9 0 00

Social Security Tax Payable

212

2 4 1 8 00 10

Medicare Tax Payable

213

5 6 5 50 11

Savings Bond Deductions Payable

218

1 2 0 0 00 12

Cash

101

31 1 2 6 50 13

To record March payroll

15 16

Savings Bond Deductions Payable Cash

218

2 4 0 0 00

101

2 4 0 0 00 17

Purchased U.S. savings bonds for employees

19 20

Payroll Taxes Expense

530

3 7 0 3 50

Social Security Tax Payable

212

2 4 1 8 00 21

Medicare Tax Payable

213

5 6 5 50 22

FUTA Tax Payable

221

7 2 00 23

SUTA Tax Payable

222

6 4 8 00 24

Employer’s payroll tax expense for March

Chapter 9

Payroll Accounting: Employer Taxes and Reports

Problem 7 (Continued) GENERAL JOURNAL

PAGE POST. REF.

DEBIT

Employee Federal Income Tax Payable

211

3 6 9 0 00

Social Security Tax Payable

212

4 8 3 6 00

Medicare Tax Payable

213

1 1 3 1 00

DATE

DESCRIPTION

20--

Apr. 15

Cash

CREDIT

9 6 5 7 00

Deposit of employee federal income tax and

Social Security and Medicare taxes

SUTA Tax Payable

222

Cash

3 3 1 8 00

101

3 3 1 8 00

Paid SUTA tax

8 9 10

FUTA Tax Payable

221

Cash

3 9 2 00

101

Paid FUTA tax

3 9 2 00 13 14

Bal.

3/15 4/15

Cash 62,500.00 3/15 3/31 3/31 4/15 4/30 4/30

Social Security Tax Payable 4,740.00 Bal. 4,836.00 3/31 3/31

101 9,225.00 31,126.50 2,400.00 9,657.00 3,318.00 392.00

Employee Federal Income Tax Payable 211 3/15 3,375.00 Bal. 3,375.00 4/15 3,690.00 3/31 3,690.00

212 4,740.00 2,418.00 2,418.00

Medicare Tax Payable 1,110.00 Bal. 1,131.00 3/31 3/31

3/15 4/15

213 1,110.00 565.50 565.50

Chapter 9

Problem 7 (Concluded) Savings Bond Deductions Payable 218 2,400.00 Bal. 1,200.00 3/31 1,200.00

3/31

4/30

3/31

SUTA Tax Payable 3,318.00 Bal. 3/31

222 2,670.00 648.00

Payroll Taxes Expense 3,703.50

530

4/30

3/31

FUTA Tax Payable 392.00 Bal. 3/31

221 320.00 72.00

Wages and Salaries Expense 39,000.00

511

Problem 8 1., 2., and 3. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE 1 POST. REF.

DEBIT

CREDIT

20--

Jan.

Workers’ Compensation Insurance Expense Cash

2 2 0 5 00 2 2 0 5 00

Paid insurance premium ($630,000 × 0.0035 = $2,205)

4 5

Dec. 31

Workers’ Compensation Insurance Expense

9 8 00

Workers’ Compensation Insurance Payable

9 8 00

Adjustment for insurance premium

($658,000 × 0.0035 = $2,303; $2,303 − $2,205 = $98)

9 10 11

Insurance Refund Receivable Workers’ Compensation Insurance Expense

8 0 50

8 0 50 11

Adjustment for insurance premium

($607,000 × 0.0035 = $2,124.50;

$2,205 − $2,124.50 = $80.50)

Chapter 10

Accounting for Sales and Cash Receipts

CHAPTER 10 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

merchandising sale sales ticket (or cash register receipt) purchase order sales invoice sales return sales allowances credit memo revenue Accounts Receivable

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Sales Tax Payable revenue cash discount revenue accounts receivable check mark accounts receivable Accounts Receivable schedule of accounts receivable Accounts Receivable

EXERCISES Exercise 1

Custom Builders, Inc.

Chapter 10

Exercise 2

Custom Builders, Inc. 2001 Hillside Drive Bloomington, IN 47401-2287

Chapter 10

Accounting for Sales and Cash Receipts

Exercise 3 GENERAL JOURNAL DATE

PAGE POST. REF.

DESCRIPTION

(a) Accounts Receivable/R. B. Jones

1 2

Sales

Sales Tax Payable

Sale No. 28

DEBIT

CREDIT

2 4 1 50

2 3 0 00

1 1 50

3 4

(b) Sales Returns and Allowances

Sales Tax Payable

3 0 00

1 50

Accounts Receivable/R. B. Jones

3 1 50

Returned merchandise

2 1 0 00

Accounts Receivable/R. B. Jones

2 1 0 00 12

Received payment on account

(d) Cash

3 1 5 00

Sales

Sales Tax Payable

Cash sales

3 0 0 00 16 1 5 00 17 18

(e) Sales Returns and Allowances

Sales Tax Payable

1 5 00

0 75

Cash

1 5 75 22

Returned merchandise

Exercise 4 Sales

$5,010

Less: Sales returns and allowances Sales discounts Net sales

$565 97

662 $4,348

Chapter 10

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Feb.

2 Accounts Receivable/Dresson Homes

Sales

Sales Tax Payable

Sale No. 255

9 8 95 9 4 24

4 71

3 4

5 6

12 Accounts Receivable/R. Acuff

Sales

Sales Tax Payable

Sale No. 256

1 0 5 00

23 Accounts Receivable/C. Rupert Sales

Sales Tax Payable

Sale No. 257

1 1 4 83

5 47 13 14 15

24 Accounts Receivable/M. Staple

Sales

Sales Tax Payable

Sale No. 258

3 5 55

3 3 86 17 1 69 18 19

25 Accounts Receivable/A. Burtin

Sales

Sales Tax Payable

Sale No. 259

5 00

1 0 9 36 12

1 0 0 00

10 11

2 5 57

2 4 35 22 1 22 23 24 25

Chapter 10

Accounting for Sales and Cash Receipts

Exercise 6 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Mar.

2 Cash

9 8 95

Accounts Receivable/Dresson Homes

9 8 95

Received cash on account

4 5

12 Cash

1 0 5 00

Accounts Receivable/R. Acuff

Received cash on account

1 0 5 00

6 7

8 9

15 Cash

4 2 5 00

Sales

4 0 4 76 10

Sales Tax Payable

2 0 24 11

Made cash sale

13 14

18 Cash

2 5 0 0 00

Sales

2 3 8 0 95 15

Sales Tax Payable

1 1 9 05 16

Made cash sale

18 19

23 Cash

1 1 4 83

Accounts Receivable/C. Rupert

Received cash on account

1 1 4 83 20 21

22 23

24 Cash

3 5 55

Accounts Receivable/M. Staple

Received cash on account

3 5 55 24 25

26 27

25 Cash

2 5 57

Accounts Receivable/A. Burtin

2 5 57 28

Received cash on account

30 31

31 Cash

22 0 0 0 00

Sales

20 9 5 2 38 32

Sales Tax Payable

1 0 4 7 62 33

Made cash sales

Chapter 10

Exercise 6 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Mar. 31 Cash Bank Credit Card Expense

27 4 4 0 00

5 6 0 00

Sales

26 6 6 6 67

Sales Tax Payable

1 3 3 3 33

Made credit card sales

Chapter 10

Accounting for Sales and Cash Receipts

PROBLEMS Problem 7 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

July

1 Accounts Receivable/B. A. Smith

Sales

Sales Tax Payable

Sale No. 33

1 4 5 75 1 3 7 50

8 25

3 4

5 6 7 8

3 Sales Returns and Allowances Sales Tax Payable

1 5 00

0 90

Accounts Receivable/B. A. Smith

1 5 90

Returned merchandise—Credit Memo #11

10 11

5 Accounts Receivable/L. L. Unis

Sales

Sales Tax Payable

Sale No. 34

2 3 1 08

1 3 08 13 14 15

7 Cash

3 4 4 97

Sales

Sales Tax Payable

1 9 53 18 19

10 Accounts Receivable/W. P. Clark

Sales

Sales Tax Payable

Sale No. 35

2 2 0 48

1 2 48 23 24 25

11 Cash

1 2 9 85

Accounts Receivable/B. A. Smith

Received cash on account

31 32 33

1 2 9 85 27 28

29 30

2 0 8 00 22

25 26

3 2 5 44 17

Made cash sales

2 1 8 00 12

15 16

13 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/W. P. Clark Returned merchandise—Credit Memo #12

2 2 00

1 32

2 3 32 32 33

Chapter 10

Problem 7 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

July

14 Cash

4 3 5 87

Sales

Sales Tax Payable

4 1 1 20

2 4 67

Made cash sales

5 6

16 Accounts Receivable/B. A. Smith

Sales

Sales Tax Payable

Sale No. 36

2 9 9 45

17 Cash

2 3 1 08

Accounts Receivable/L. L. Unis

Received cash on account 21 Cash

3 1 0 05

Sales

Sales Tax Payable

2 9 2 50 16 1 7 55 17

Made cash sales

24 Accounts Receivable/L. L. Unis

Sales

Sales Tax Payable

Sale No. 37

2 3 7 97

2 2 4 50 21 1 3 47 22 23

28 Cash

3 1 8 53

Sales

Sales Tax Payable

3 0 0 50 26 1 8 03 27

Made cash sales

29 30

1 6 95

2 3 1 08 12

2 8 2 50

10 11

31 Cash

1 9 7 16

Accounts Receivable/W. P. Clark

Received cash on account

1 9 7 16 31 32

Chapter 10

Accounting for Sales and Cash Receipts

Problem 8 1.

GENERAL JOURNAL

DATE 1

DESCRIPTION

20--

May

3 Accounts Receivable/T. A. Pigdon

PAGE POST. REF.

DEBIT

122/✓

2 6 2 35

CREDIT 1

Sales

401

2 4 7 50

Sales Tax Payable

231

1 4 85

Sale No. 51

5 6

4 Accounts Receivable/J. R. Feyton

122/✓

5 8 30

Sales

401

5 5 00

Sales Tax Payable

231

3 30

Sale No. 52

10 11

6 Accounts Receivable/P. C. McMurdy

122/✓

1 0 4 94

Sales

401

9 9 00 12

Sales Tax Payable

231

5 94 13

Sale No. 53

15 16

10 Accounts Receivable/J. T. Messer

122/✓

1 8 5 50

Sales

401

1 7 5 00 17

Sales Tax Payable

231

1 0 50 18

Sale No. 54

20 21

12 Accounts Receivable/A. F. Schlitz

122/✓

3 7 6 30

Sales

401

3 5 5 00 22

Sales Tax Payable

231

2 1 30 23

Sale No. 55

25 26

13 Accounts Receivable/J. R. Feyton

122/✓

2 2 7 90

Sales

401

2 1 5 00 27

Sales Tax Payable

231

1 2 90 28

Sale No. 56

30 31

20 Accounts Receivable/P. C. McMurdy

122/✓

4 2 4 00

Sales

401

4 0 0 00 32

Sales Tax Payable

231

2 4 00 33

Sale No. 57

Chapter 10

Problem 8 (Continued) GENERAL JOURNAL DATE 1

DESCRIPTION

20--

May 28 Accounts Receivable/J. T. Messer

PAGE

POST. REF.

DEBIT

122/✓

2 7 0 30

CREDIT 1

Sales

401

2 5 5 00

Sales Tax Payable

231

1 5 30

Sale No. 58

2. GENERAL LEDGER Accounts Receivable

ACCOUNT

DATE

ITEM

POST. REF.

20--

ACCOUNT NO.

DEBIT

BALANCE

CREDIT

DEBIT

CREDIT

1 Balance

✓

2 6 2 35

1 0 9 6 35

5 8 30

1 1 5 4 65

1 0 4 94

1 2 5 9 59

1 8 5 50

1 4 4 5 09

3 7 6 30

1 8 2 1 39

2 2 7 90

2 0 4 9 29

4 2 4 00

2 4 7 3 29

2 7 0 30

2 7 4 3 59

May

8 3 4 00

Sales Tax Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO.

POST. REF.

122

DEBIT

231

BALANCE

CREDIT

DEBIT

CREDIT

20--

May

1 4 85

3 30

1 8 15

5 94

2 4 09

1 0 50

3 4 59

2 1 30

5 5 89

1 2 90

6 8 79

2 4 00

9 2 79

1 5 30

1 0 8 09

Chapter 10

Accounting for Sales and Cash Receipts

Problem 8 (Continued) Sales

ACCOUNT

DATE

ACCOUNT NO. POST. REF.

ITEM

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

2 4 7 50

3 0 2 50

5 5 00 9 90 00 0 1 7 5 00

3 5 5 00

9 3 1 50

2 1 5 00

1 1 4 6 50

4 0 0 00

1 5 4 6 50

2 5 5 00

1 8 0 1 50

May

4 0 1 50 5 7 6 50

ACCOUNTS RECEIVABLE LEDGER NAME J. R. Feyton ADDRESS 6022 Columbia, St. Louis, MO 63139-1906 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

5 8 30

2 2 7 90

2 8 6 20

May

NAME P. C. McMurdy ADDRESS 1214 N. 2nd St., E. St. Louis, IL 62201-2679 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

May

1 Balance

✓

1 0 4 94

2 2 9 94

4 2 4 00

6 5 3 94

1 2 5 00

Chapter 10

Problem 8 (Concluded) NAME J. T. Messer ADDRESS P.O. Box 249, Chesterfield, MO 63017-3901 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

1 Balance

✓

1 8 5 50

3 6 2 50

2 7 0 30

6 3 2 80

May

1 7 7 00

NAME T. A. Pigdon ADDRESS 1070 Purcell, University City, MO 63130-1546 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

May

1 Balance

✓

2 8 0 00 2 6 2 35

5 4 2 35

NAME A. F. Schlitz ADDRESS 800 Lindbergh Blvd., St. Louis, MO 63166-1546 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

May

1 Balance

✓

2 5 2 00 3 7 6 30

6 2 8 30

3. Leather All Schedule of Accounts Receivable May 31, 20-J. R. Feyton

$2 2 8 6 20

P. C. McMurdy

6 5 3 94

J. T. Messer

6 3 2 80

T. A. Pigdon

5 4 2 35

A. F. Schlitz

6 2 8 30 $2 7 4 3 59

Chapter 10

Accounting for Sales and Cash Receipts

Problem 9 1.

GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

101

3 0 0 00

CREDIT

20--

June

1 Cash

Sales

401

2 8 5 71

Sales Tax Payable

231

1 4 29

Made cash sales

5 6 7

5 Cash

101

Accounts Receivable/L. Strous

1 2 5 60

122/✓

1 2 5 60

Received cash on account

9 10

10 Cash

101

Accounts Receivable/D. Manning

Received cash on account

2 6 3 25

122/✓

2 6 3 25 11 12

13 14 15 16

12 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Q. Striker

401.1

2 1 5 00

231

1 0 75

122/✓

2 2 5 75 16

Returned merchandise

18 19

18 Cash

101

Accounts Receivable/D. Warding

Received cash on account

5 8 25

122/✓

5 8 25 20 21

22 23

20 Cash

101

1 0 0 0 00

Sales

401

9 5 2 38 24

Sales Tax Payable

231

4 7 62 25

Made cash sales

27 28

21 Cash

101

Accounts Receivable/L. Clese

Received cash on account

122/✓

2 9 99

2 9 99 29 30

Chapter 10

Problem 9 (Continued) GENERAL JOURNAL

POST. REF.

DEBIT

June 24 Sales Returns and Allowances

401.1

1 1 6 25

Sales Tax Payable

231

5 81

DATE 1

PAGE

DESCRIPTION

CREDIT

20--

122/✓

Accounts Receivable/R. Popielarz

1 2 2 06

Returned merchandise

27 Cash

4 2 6 00

101

Accounts Receivable/L. LeCount

Received cash on account

122/✓

4 2 6 00

7 8

30 Cash

Bank Credit Card Expense

101

8 5 3 0 00

513

8 0 00

Sales

401

8 2 0 0 00 12

Sales Tax Payable

231

4 1 0 00 13

Credit card sales

GENERAL LEDGER Cash

ACCOUNT

DATE

ACCOUNT NO.

ITEM

20--

June

POST. REF.

DEBIT

CREDIT

101

BALANCE DEBIT

1 Balance

✓

3 0 0 00

13 5 0 0 25

1 2 5 60

13 6 2 5 85

13 8 8 9 10

2 6 3 25 4 5 8 25

1 0 0 0 00

14 9 4 7 35

2 9 99

14 9 7 7 34

4 2 6 00

15 4 0 3 34

8 5 3 0 00

23 9 3 3 34

CREDIT

13 2 0 0 25

13 9 4 7 35

Chapter 10

Accounting for Sales and Cash Receipts

Problem 9 (Continued) Accounts Receivable

ACCOUNT

DATE

ITEM

POST. REF.

20--

ACCOUNT NO.

DEBIT

CREDIT

BALANCE DEBIT

CREDIT

1 Balance

✓

1 2 5 60

1 1 2 5 30

2 6 3 25

8 6 2 05

2 2 5 75

6 3 6 30

5 8 25

5 7 8 05

2 9 99

5 4 8 06

1 2 2 06

4 2 6 00

27 7

4 2 6 00

⎯⎯⎯

June

1 2 5 0 90

⎯

DATE

ITEM

20--

ACCOUNT NO.

POST. REF.

1 Balance

✓

June

DEBIT

CREDIT

DATE

CREDIT

1 2 5 00 1 4 29

1 3 9 29 1 2 8 54

1 0 75 4 7 62

1 7 6 16

5 81

1 7 0 35 4 1 0 00

5 8 0 35

ACCOUNT NO.

ITEM

POST. REF.

231

BALANCE DEBIT

Sales

ACCOUNT

⎯

Sales Tax Payable

ACCOUNT

122

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

June

2 8 5 71

9 5 2 38

1 2 3 8 09

8 2 0 0 00

9 4 3 8 09

Sales Returns and Allowances

ACCOUNT

DATE

ITEM

POST. REF.

DEBIT

ACCOUNT NO.

CREDIT

401.1

BALANCE DEBIT

CREDIT

20--

June 12

2 1 5 00

1 1 6 25 0 6

3 3 1 25

Chapter 10

Problem 9 (Continued) Bank Credit Card Expense

ACCOUNT

DATE

POST. REF.

ITEM

ACCOUNT NO.

DEBIT

513

BALANCE

CREDIT

DEBIT

CREDIT

20--

June 30

8 0 00

ACCOUNTS RECEIVABLE LEDGER NAME L. Clese ADDRESS 875 Glenway Drive, Glendale, MO 63122-4112 DATE

ITEM

20--

POST. REF.

1 Balance

✓

June

DEBIT

CREDIT

BALANCE

2 9 99 2 9 99

⎯⎯⎯ -

⎯

NAME L. LeCount ADDRESS 1439 East Broad Street, Columbus, OH 43205-9892 DATE

ITEM

20--

POST. REF.

1 Balance

✓

June

DEBIT

CREDIT

BALANCE

4 2 6 00 4 2 6 00

⎯⎯⎯ -

⎯

NAME D. Manning ADDRESS 2101 Cumberland Road, Noblesville, IN 47870-2435 DATE

ITEM

20--

June

POST. REF.

1 Balance

✓

DEBIT

CREDIT

BALANCE

2 6 3 25 2 6 3 25

⎯⎯⎯ -

⎯

Chapter 10

Accounting for Sales and Cash Receipts

Problem 9 (Concluded) NAME R. Popielarz ADDRESS 3001 Hillcrest Drive, Dallas, PA 18612-6854 DATE

ITEM

20--

POST. REF.

1 Balance

✓

June

DEBIT

CREDIT

BALANCE

1 2 2 06 1 2 2 06 6 3 2

⎯⎯⎯ -

⎯

NAME Q. Striker ADDRESS 4113 Main Street, Beech Grove, IN 46107-9643 DATE

ITEM

20--

POST. REF.

1 Balance

✓

June

DEBIT

CREDIT

BALANCE

2 2 5 75 2 2 5 75

⎯⎯⎯ -

⎯

NAME L. Strous ADDRESS 2215 N. State Road 135, Greenwood, IN 46142-6432 DATE

ITEM

20--

June

POST. REF.

1 Balance

✓

DEBIT

CREDIT

BALANCE

1 2 5 60 1 2 5 60

⎯⎯⎯ -

⎯

NAME D. Warding ADDRESS 1100 W. Main Street, Carmel, IN 46032-2364 DATE

ITEM

20--

June

POST. REF.

1 Balance

✓

DEBIT

CREDIT

BALANCE

5 8 25 5 8 25

⎯⎯⎯ -

⎯

Chapter 11

Accounting for Purchases and Cash Payments

CHAPTER 11 REVIEW QUESTIONS 1. purchases 2. purchase requisition 3. purchase order 4. receiving report 5. purchase invoice 6. 2% cash discount 7. trade discount

8. Purchases Purchases Returns and Allowances Purchases Discounts Freight-In 9. buyer 10. seller 11. cost of merchandise sold

12. gross profit 13. accounts payable ledger 14. check mark 15. Purchases Returns and Allowances 16. accounts payable 17. Accounts Payable 18. schedule of accounts payable

EXERCISES Exercise 1

502

100

Chapter 11

Exercise 2

1476 S. Spurr Drive

Exercise 3 1. Quantity shipped for the third item should be 3, not 4. 2. The prices for the third and fourth items are reversed. Power mowers are $180.75 each, and rototillers should be $291.50 each. 3. Spade shovels are $7.45, not $7.95 each. (Note: Extension is correct.) 4. Extension for the sixth item is incorrect, $9.30 × 6 = $55.80, not $57.00. 5. Correct invoice total should be $2,748.25 as follows: Quantity 15 25 3 5 24 6 12

Unit Price $ 20.35 4.65 180.75 291.50 7.45 9.30 7.70

Total $ 305.25 116.25 542.25 1,457.50 178.80 55.80 92.40 $2,748.25

Chapter 11

Accounting for Purchases and Cash Payments

101

Exercise 4 $800 × 0.9 = $720 Exercise 5 1.

$1,200 × 0.97 = $1,164

$1,200 × 0.02 = $24

Exercise 6 INCOME STATEMENT Sales

$257,800

Less: Sales returns and allowances

Sales discounts

1,900 400

2,300

Net sales

$255,500

Cost of goods sold: Merchandise inventory, Aug. 1, 20--

$ 38,000

Purchases Less: Purchases returns & allowances Purchases discounts

$200,000 $10,200 4,000

14,200

Net purchases

$185,800

Add freight-in

2,000

Cost of goods purchased Goods available for sale Less merchandise inv., Aug. 31, 20-Cost of goods sold Gross profit

187,800 $225,800 32,000 193,800 $ 61,700

102

Chapter 11

Exercise 7 1. and 2. GENERAL JOURNAL DATE

DESCRIPTION

20-1 2

Nov. 5 Purchases

PAGE POST. REF.

DEBIT

CREDIT

17 2 1 5 90

Accounts Payable

17 2 1 5 90

15 Accounts Payable

Cash

Purchases Discounts

17 2 1 5 90

16 8 7 1 58

3 4 4 32

7 8 9

Dec. 5 Accounts Payable Cash

17 2 1 5 90

Gross invoice: 20 @ $63.95 = 10 @ $900.00 = 5 @ $1,995.00 = Gross invoice Less trade discount Balance Less cash discount Net invoice price

$ 1,279.00 9,000.00 9,975.00 $20,254.00 3,038.10 $17,215.90 344.32 $16,871.58

Chapter 11

Accounting for Purchases and Cash Payments

103

PROBLEMS Problem 8 1. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Nov.

2 Purchases Accounts Payable/Ford Distributors

501

4 1 4 5 00

202/✓

4 1 4 5 00

Invoice No. 611

4 5

5 Purchases Accounts Payable/Mueller Wholesaler

501

2 1 6 5 00

202/✓

2 1 6 5 00

Invoice No. 216

8 9

15 Purchases Accounts Payable/Grant White & Co.

501

2 8 9 5 00

202/✓

2 8 9 5 00 10

Invoice No. 399

12 13

19 Purchases Accounts Payable/Bailey & Hinds, Inc.

501

1 8 4 5 00

202/✓

22 Purchases Accounts Payable/Ford Distributors

501

3 2 2 5 00

202/✓

28 Purchases Accounts Payable/Jackson Company

25 26 27

501

2 1 7 5 00

202/✓

2 1 7 5 00 22

Invoice No. 661

23 24

3 2 2 5 00 18

Invoice No. 914

1 8 4 5 00 14

Invoice No. 106

30 Purchases Accounts Payable/Mueller Wholesaler Invoice No. 716

501 202/✓

3 5 0 0 00

3 5 0 0 00 26 27

104

Chapter 11

Problem 8 (Continued) 2. GENERAL LEDGER Accounts Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

20--

Nov.

4 1 4 5 00

2 1 6 5 00

6 3 1 0 00

2 8 9 5 00

9 2 0 5 00

1 8 4 5 00

11 0 5 0 00

3 2 2 5 00

14 2 7 5 00

2 1 7 5 00

16 4 5 0 00

3 5 0 0 00

19 9 5 0 00

ACCOUNT

Purchases

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

501

BALANCE DEBIT

CREDIT

20--

4 1 4 5 00

2 1 6 5 00

6 3 1 0 00

2 8 9 5 00

9 2 0 5 00

1 8 4 5 00

11 0 5 0 00

3 2 2 5 00

14 2 7 5 00

2 1 7 5 00

16 4 5 0 00

3 5 0 0 00

19 9 5 0 00

Nov.

ACCOUNTS PAYABLE LEDGER NAME Bailey & Hinds, Inc. ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Nov. 19

1 8 4 5 00

Chapter 11

Accounting for Purchases and Cash Payments

105

Problem 8 (Concluded) NAME Ford Distributors ADDRESS DATE 20--

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

4 1 4 5 00

3 2 2 5 00

7 3 7 0 00

Nov.

NAME Grant White & Co. ADDRESS DATE

ITEM

20--

POST. REF.

DEBIT

Nov. 15

CREDIT

2 8 9 5 00

BALANCE

2 8 9 5 00

NAME Jackson Company ADDRESS DATE

ITEM

20--

POST. REF.

DEBIT

Nov. 28

CREDIT

2 1 7 5 00

BALANCE

2 1 7 5 00

NAME Mueller Wholesaler ADDRESS DATE

ITEM

20--

Nov.

POST. REF.

DEBIT

CREDIT

BALANCE

2 1 6 5 00

3 5 0 0 00

5 6 6 5 00

106

Chapter 11

Problem 9 1.

GENERAL JOURNAL DATE 1

2 3

DESCRIPTION

PAGE POST. REF.

DEBIT

501

4 9 8 64

CREDIT

20--

Feb.

3 Purchases Accounts Payable/Ringer’s

202/✓

4 9 8 64

Invoice No. 611

4 5 6 7

4 Purchases Accounts Payable/Klein Brothers

501

7 8 0 11

202/✓

7 8 0 11

Invoice No. 112

8 9 10 11

11 Purchases Accounts Payable/Corleon’s

501

2 3 0 0 00

202/✓

2 3 0 0 00 10

Invoice No. 432

12 13 14 15

15 Accounts Payable/Ringer’s Purchases Returns and Allowances Returned merchandise

202/✓ 501.1

3 0 00

3 0 00 14 15

Chapter 11

Accounting for Purchases and Cash Payments

107

Problem 9 (Continued) 2. GENERAL LEDGER Accounts Payable

ACCOUNT

DATE

ITEM

20--

POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

1 Balance

✓

4 9 8 64

3 6 2 4 14

7 8 0 11

4 4 0 4 25

2 3 0 0 00

6 7 0 4 25

Feb.

ACCOUNT

Purchases

DATE

ITEM

20--

3 1 2 5 50

6 6 7 4 25

3 0 00

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

✓

4 9 8 64

2 9 9 8 64

7 8 0 11

3 7 7 8 75

2 3 0 0 00

6 0 7 8 75

2 5 0 0 00

Purchases Returns and Allowances

ACCOUNT

DATE

ITEM

20--

POST. REF.

1 Balance

✓

501

BALANCE DEBIT

1 Balance

Feb.

ACCOUNT NO.

DEBIT

ACCOUNT NO.

CREDIT

501.1

BALANCE DEBIT

CREDIT

2 0 0 00 3 0 00

2 3 0 00

108

Chapter 11

Problem 9 (Concluded) ACCOUNTS PAYABLE LEDGER NAME Corleon’s ADDRESS 1894 Winthrop Ave., White Plains, NY 10606-6915 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

1 Balance

✓

Feb.

1 6 2 5 50 2 3 0 0 00

3 9 2 5 50

NAME Klein Brothers ADDRESS 1728 Camino Real, San Antonio, TX 78238-4420 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Feb.

1 Balance

✓

6 2 5 00 7 8 0 11

1 4 0 5 11

NAME Ringer’s ADDRESS 1500 North Street, Bakersfield, CA 93301-4747 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Feb.

1 Balance

✓

8 7 5 00 4 9 8 64 3 0 00

1 3 7 3 64 1 3 4 3 64

3. Tom’s Sporting Goods Schedule of Accounts Payable February 28, 20-Corleon’s

$3 9 2 5 50

Klein Brothers

1 4 0 5 11

Ringer’s

1 3 4 3 64 $6 6 7 4 25

Chapter 11

Accounting for Purchases and Cash Payments

109

Problem 10 1. GENERAL JOURNAL POST. REF.

DEBIT

1 Rent Expense

521

9 0 0 00

Cash

101

DATE 1

2 3

PAGE

DESCRIPTION

CREDIT

20--

Aug.

9 0 0 00

Check No. 47

4 5

3 Accounts Payable/Blue Suede Shoes Company

202/✓

6 4 0 00

Cash

101

6 2 7 20

Purchases Discounts

501.2

1 2 80

Check No. 48

9 10

9 Accounts Payable/Style-Rite

202/✓

8 0 0 00

Cash

101

7 7 6 00 11

Purchases Discounts

501.2

2 4 00 12

Check No. 49

14 Utilities Expense

533

Cash

101

1 2 5 28

1 2 5 28 16

Check No. 50

18 19 20 21

20 Purchases

501

Cash

101

5 2 5 00

24 25

Check No. 51

21 22

22 Accounts Payable/West Coast Shoes Cash

202/✓

6 2 5 00

101

28 29 30

6 2 5 00 24

Check No. 52

26 27

5 2 5 00 20

22 23

27 C. Bultman, Drawing

Cash Check No. 53

312 101

2 0 0 0 00

2 0 0 0 00 28 29 30

110

Chapter 11

Problem 10 (Continued) 2. GENERAL LEDGER Cash

ACCOUNT

DATE

ACCOUNT NO.

ITEM

POST. REF.

20--

CREDIT

BALANCE DEBIT

CREDIT

1 Balance

✓

9 0 0 00

6 2 7 20

24 1 0 0 00 23 4 71 2 80

7 7 6 00

22 6 9 6 80

1 2 5 28

22 5 7 1 52

22 0 4 6 52

27 7

5 2 5 00 6 2 5 59 00 9 2 0 0 0 06 00

Aug.

25 0 0 0 00

21 4 2 1 52 19 4 2 1 52

Accounts Payable

ACCOUNT

DATE

ITEM

20--

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

1 Balance

✓

6 4 0 00

8 0 0 00

2 7 2 6 00 1 9 2 6 6 00

6 2 5 00

1 3 0 1 00

Aug.

3 3 6 6 00

C. Bultman, Drawing

ACCOUNT

DATE

ITEM

20--

POST. REF.

1 Balance

✓

Aug.

ACCOUNT

Purchases

DATE

ITEM

20--

Aug.

DEBIT

101

ACCOUNT NO.

DEBIT

CREDIT

BALANCE DEBIT

CREDIT

14 0 0 0 00 16 0 0 0 00

2 0 0 0 00

ACCOUNT NO. POST. REF.

1 Balance

✓

312

DEBIT

CREDIT

501

BALANCE DEBIT

CREDIT

54 2 6 5 43 5 2 5 00

54 7 9 0 43

Chapter 11

Accounting for Purchases and Cash Payments

111

Problem 10 (Continued) Purchases Discounts

ACCOUNT

DATE

POST. REF.

ITEM

20--

Aug.

ACCOUNT NO.

DEBIT

CREDIT

BALANCE DEBIT

✓

1 2 80

3 3 8 00

2 4 00

3 6 2 00

3 2 5 20

Rent Expense

DATE

ACCOUNT NO. POST. REF.

ITEM

20--

1 Balance

✓

DEBIT

CREDIT

DATE

CREDIT

7 2 0 0 00 8 1 0 0 00

9 0 0 00

ACCOUNT NO. POST. REF.

ITEM

20--

1 Balance

✓

521

BALANCE DEBIT

Utilities Expense

ACCOUNT

Aug.

CREDIT

1 Balance

ACCOUNT

Aug.

501.2

DEBIT

CREDIT

533

BALANCE DEBIT

CREDIT

8 2 2 87 9 4 8 15

1 2 5 28 0 5 8 0

ACCOUNTS PAYABLE LEDGER NAME Blue Suede Shoes Company ADDRESS 2805 South Meridian, Indianapolis, IN 46225-3460 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Aug.

1 Balance

✓

6 4 0 00 6 4 0 00

NAME Style-Rite ADDRESS 6500 9th Street, New Orleans, LA 70115-1122 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Aug.

1 Balance

✓

1 2 0 0 00 8 0 0 00

4 0 0 00

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112

Chapter 11

Problem 10 (Concluded) NAME West Coast Shoes ADDRESS 705 Rialto Avenue, Fresno, CA 93705-7845 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Aug.

1 Balance

✓

1 5 2 6 00 9 0 1 00

6 2 5 00 0

Bultman Shoes Schedule of Accounts Payable August 31, 20-Style-Rite West Coast Shoes

4 0 0 00 9 0 1 00

$1 3 0 1 00

Chapter 11

Accounting for Purchases and Cash Payments

113

Problem 11 GENERAL JOURNAL DATE 1

2 3

20--

July

DESCRIPTION

5 Rent Expense

PAGE POST. REF.

DEBIT

CREDIT 1

6 0 0 00

Cash

6 0 0 00

Check No. 222

4 5 6 7

12 Purchases

3 2 5 0 00

Cash

3 2 5 0 00

Check No. 223

8 9

18 Accounts Payable/Martinez Guitar Company

Cash

Purchases Discounts

Check No. 224

4 5 0 0 00

4 4 1 0 00 10 9 0 00 11 12

13 14 15 16

25 Notes Payable/First National Bank

2 0 0 0 00

Cash

2 0 0 0 00 15

Check No. 225

31 A. Demis, Drawing

Cash

Check No. 226

5 5 0 0 00

5 5 0 0 00 19 20

114

Chapter 11

CHAPTER 11 APPENDIX Apx. Exercise 1. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

2 Purchases

Apr.

Accounts Payable

2 0 0 0 00 2 0 0 0 00

5 Purchases

1 8 0 0 00

Accounts Payable

1 8 0 0 00

11 Accounts Payable

2 0 0 0 00

Cash

Purchases Discounts

1 9 6 0 00

4 0 00

25 Accounts Payable

Cash

1 8 0 0 00

1 8 0 0 00 12

2. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

2 Purchases

1 9 6 0 00

Accounts Payable

1 9 6 0 00

3 4 5

5 Purchases

1 7 8 2 00

Accounts Payable

1 7 8 2 00

11 Accounts Payable

Cash

1 9 6 0 00

9 10 11 12 13

25 Accounts Payable Purchases Discounts Lost Cash

1 7 8 2 00

1 8 00

1 8 0 0 00 12 13

Chapter 12

Special Journals

115

CHAPTER 12 REVIEW QUESTIONS 1. 2. 3.

4. 5. 6. 7. 8. 9.

special journal general journal date sale number customer dollar amounts sales general daily Cash cash receipts daily

10. 11. 12. 13. 14. 15. 16. 17.

18.

purchases journal general journal Accounts Payable Credit accounts payable ledger daily cash payments journal Cash date check number account debited (if applicable) dollar amounts daily

EXERCISES Exercise 1

Journal Transaction

Sales

a. Made payment to supplier on account. b. Sold old delivery equipment for cash. c. Sold merchandise on account. d. Purchased merchandise for cash. e. Returned merchandise to supplier for credit. f. Invested additional funds in the business. g. Purchased merchandise on account.

Cash Receipts

Cash Purchases Payments General X

X X X X X X

Exercise 2 1. and 2. SALES JOURNAL

DATE 1

20--

SALE NO.

TO WHOM SOLD

Feb. 2

255

Dresson Homes

256

4 5 6

POST. REF.

PAGE

ACCOUNTS RECEIVABLE DEBIT

SALES CREDIT

SALES TAX PAYABLE CREDIT

9 8 95

9 4 24

4 71 1

Ray Acuff

1 0 5 00

1 0 0 00

5 00 2

257

Clydette Rupert

1 1 4 83

1 0 9 36

5 47 3

258

Marty Staple

3 5 55

3 3 86

1 69 4

259

Angel Burtin

2 5 57

2 4 35

1 22 5

3 7 9 90

3 6 1 81

1 8 09 6 7

116

Chapter 12

Exercise 3 1. and 2. CASH RECEIPTS JOURNAL

DATE 20-1

Mar.

ACCOUNT CREDITED

POST. REF.

GENERAL CREDIT

2 Dresson Homes

ACCOUNTS RECEIVABLE CREDIT

PAGE

SALES CREDIT

SALES TAX PAYABLE CREDIT

CASH DEBIT

9 8 95

1 0 5 00

12 Ray Acuff

4 0 4 76

2 0 24

4 2 5 00

2 3 8 0 95

1 1 9 05

2 5 0 0 00

23 Clydette Rupert

1 1 4 83

24 Marty Staple

3 5 55

25 Angel Burtin

2 5 57

20 9 5 2 38

1 0 4 7 62 22 0 0 0 00

26 6 6 6 67

1 3 3 3 33 28 0 0 0 00

3 7 9 90 50 4 0 4 76

2 5 2 0 24 53 3 0 4 90 10

Exercise 4 PURCHASES JOURNAL

INVOICE NO.

DATE 20--

PAGE

POST. REF.

FROM WHOM PURCHASED

PURCHASES DEBIT ACCTS. PAY. CREDIT

611

Ringer’s

4 9 8 64

112

Klein Brothers

7 8 0 11

432

Corleon’s

2 3 0 0 00

3 5 7 8 75

Feb.

GENERAL JOURNAL DATE

DESCRIPTION

20-1 2 3

Feb. 15 Accounts Payable/Ringer’s Purchases Returns and Allowances

PAGE POST. REF.

DEBIT

CREDIT

3 0 00

Returned merchandise

2 3

Chapter 12

Special Journals

117

Exercise 5 1. and 2. CASH PAYMENTS JOURNAL DATE

CK. NO.

POST. REF.

ACCOUNT DEBITED

GENERAL DEBIT

PAGE

ACCOUNTS PURCHASES PAYABLE PURCHASES DISCOUNTS DEBIT DEBIT CREDIT

CASH CREDIT

20-1

5 222 Rent Expense

July

6 0 0 00

3 2 5 0 00

4 4 1 0 00

12 223

18 224 Martinez Guitar Company

25 225 Notes Payable

2 0 0 0 00

31 226 A. Demis, Drawing

5 5 0 0 00

9 0 00 15 7 6 0 00

3 2 5 0 00 4 5 0 0 00

8 1 0 0 00

4 5 0 0 00

9 0 00

3 2 5 0 00

Debit total:

$ 8,100 4,500 3,250 $15,850

Credit total:

$ 90 15,760 $15,850

PROBLEMS Problem 6 1. and 2. GENERAL JOURNAL DATE 20-1 2 3 4

July

DESCRIPTION

3 Sales Returns and Allowances Sales Tax Payable

PAGE POST. REF.

DEBIT

CREDIT

1 5 00

0 90

Accounts Receivable/B. A. Smith

1 5 90

Accepted returned merchandise, Credit Memo #11

5 6 7 8 9 10

13 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/W. P. Clark

2 2 00

1 32

2 3 32

Accepted returned merchandise, Credit Memo #12

9 10

118

Chapter 12

Problem 6 (Concluded) SALES JOURNAL SALE NO.

DATE 20--

POST. REF.

TO WHOM SOLD

PAGE

ACCOUNTS RECEIVABLE DEBIT

SALES TAX PAYABLE CREDIT

SALES CREDIT

B. A. Smith

1 4 5 75

1 3 7 50

8 25

L. L. Unis

2 3 1 08

2 1 8 00

1 3 08

W. P. Clark

2 2 0 48

2 0 8 00

1 2 48

B. A. Smith

2 9 9 45

2 8 2 50

1 6 95

L. L. Unis

2 3 7 97

2 2 4 50

1 3 47

1 1 3 4 73

1 0 7 0 50

6 4 23

July

CASH RECEIPTS JOURNAL

1 2

DATE 20-7 July

ACCOUNT CREDITED

POST. REF.

GENERAL CREDIT

ACCOUNTS RECEIVABLE CREDIT

PAGE

SALES CREDIT 3 2 5 44

B. A. Smith

SALES TAX PAYABLE CREDIT 1 9 53

1 2 9 85

CASH DEBIT 3 4 4 97

1 2 9 85

3 4 3 5 87

2 3 1 08

2 9 2 50

1 7 55

3 1 0 05

3 0 0 50

1 8 03

3 1 8 53

7 9 78

3 1 9 7 16 8 2 1 9 8 6 7 51

7 8

4 1 1 20

L. L. Unis

W. P. Clark

2 4 67

2 3 1 08

1 9 7 16 2 5 5 8 09 7

1 3 2 9 64

7 8

Chapter 12

Special Journals

119

Problem 7 1. and 3.

SALES JOURNAL SALE NO.

DATE

TO WHOM SOLD

POST. REF.

PAGE

ACCOUNTS RECEIVABLE DEBIT

SALES CREDIT

SALES TAX PAYABLE CREDIT

20--

T. A. Pigdon

✓

2 6 2 35

2 4 7 50

1 4 85

J. R. Feyton

✓

5 8 30

5 5 00

3 30

P. C. McMurdy

✓

1 0 4 94

9 9 00

5 94

J. T. Messer

✓

1 8 5 50

1 7 5 00

1 0 50

A. F. Schlitz

✓

3 7 6 30

3 5 5 00

2 1 30

J. R. Feyton

✓

2 2 7 90

2 1 5 00

1 2 90

P. C. McMurdy

✓

4 2 4 00

4 0 0 00

2 4 00

J. T. Messer

✓

2 7 0 30

2 5 5 00

1 5 30

1 9 0 9 59

1 8 0 1 50

1 0 8 09

( 122 )

(4 01 )

May

Debit total: Credit total:

(231 )

$ 1,909.59 $ 1,801.50 108.09 $1,909.59

3. GENERAL LEDGER Accounts Receivable

ACCOUNT

DATE

ITEM

POST. REF.

ACCOUNT NO.

DEBIT

CREDIT

122

BALANCE DEBIT

CREDIT

20--

May

✓

Balance

8 3 4 00 1 9 0 9 59

2 7 4 3 59

Sales Tax Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

231

BALANCE DEBIT

CREDIT

20--

May

ACCOUNT

DATE

1 0 8 09

Sales

ACCOUNT NO.

ITEM

POST. REF.

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

May 31

1 8 0 1 50

120

Chapter 12

Problem 7 (Concluded) 2. NAME J. R. Feyton

ACCOUNTS RECEIVABLE LEDGER

ADDRESS 6022 Columbia, St. Louis, MO 63139-1906 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

5 8 30

2 2 7 90

2 8 6 20

May

NAME P. C. McMurdy ADDRESS 1214 N. 2nd St., E. St. Louis, IL 62201-2679 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

✓

1 Balance

May

6 s

1 2 5 00

1 0 4 94

2 2 9 94

4 2 4 00

6 5 3 94

NAME J. T. Messer ADDRESS P.O. Box 249, Chesterfield, MO 63017-3901 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

1 Balance

✓

1 8 5 50

3 6 2 50

2 7 0 30

6 3 2 80

May

1 7 7 00

NAME T. A. Pigdon ADDRESS 1070 Purcell, University City, MO 63130-1546 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

May

1 Balance

✓

2 8 0 00 2 6 2 35

5 4 2 35

NAME A. F. Schlitz ADDRESS 800 Lindbergh Blvd., St. Louis, MO 63166-1546 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

May

1 Balance

✓

2 5 2 00 3 7 6 30

6 2 8 30

Chapter 12

Special Journals

121

Problem 8 1. GENERAL JOURNAL POST. REF.

DEBIT

June 12 Sales Returns and Allowances

401.1

2 1 5 00

Sales Tax Payable

231

1 0 75

DATE 1

PAGE 5

DESCRIPTION

CREDIT

20--

122/✓

Accounts Receivable/Q. Striker

2 2 5 75

Accepted returned merchandise

24 Sales Returns and Allowances

Sales Tax Payable

1 1 6 25

231

5 81

122/✓

Accounts Receivable/R. Popielarz

401.1

1 2 2 06

Accepted returned merchandise

CASH RECEIPTS JOURNAL DATE

ACCOUNT CREDITED

20--

June

POST. REF.

GENERAL CREDIT

ACCOUNTS REC. CREDIT

✓

SALES CREDIT 2 8 5 71

PAGE 18 SALES TAX PAYABLE CREDIT

BANK CR. CARD EXP. DEBIT

1 4 29

CASH DEBIT 3 0 0 00

L. Strous

✓

1 2 5 60

D. Manning

✓

2 6 3 25

D. Warding

✓

5 8 25

1 0 0 0 00

L. Clese

✓

2 9 99

L. LeCount

✓

4 2 6 00

✓

9 5 2 38

✓ 9 0 3 09

( 122 )

4 7 62

8 2 0 0 00

4 1 0 00

8 0 00 8 5 3 0 00

9 4 3 8 09

4 7 1 91

8 0 00 10 7 3 3 09

( 401 )

( 231 )

( 513 )

( 1 0 1 )

Debit total: $ 80.00 10,733.09 $10,813.09

Credit total:

903.09 9,438.09 471.91 $10,813.09

122

Chapter 12

Problem 8 (Continued) 2. and 3.

GENERAL LEDGER

Cash

ACCOUNT

DATE

ACCOUNT NO.

ITEM

POST. REF.

DEBIT

CREDIT

101

BALANCE DEBIT

CREDIT

20--

June

✓

1 Balance 30

CR18

13 2 0 0 25 10 7 3 3 09

23 9 3 3 34

Accounts Receivable

ACCOUNT

DATE

ITEM

POST. REF.

ACCOUNT NO.

DEBIT

CREDIT

122

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

2 2 5 75

1 0 2 5 15

1 2 2 06

9 0 3 09

CR18

9 0 3 09

⎯⎯⎯

June

1 2 5 0 90

Sales Tax Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO.

POST. REF.

DEBIT

CREDIT

231

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

1 0 75

1 1 4 25

5 81

1 0 8 44

CR18

June

ACCOUNT

DATE

1 2 5 00

4 7 1 91

5 8 0 35

Sales

ACCOUNT NO.

ITEM

POST. REF.

DEBIT

CREDIT

401

BALANCE DEBIT

CREDIT

20--

June 30

ACCOUNT

DATE

9 4 3 8 09

CR18

9 4 3 8 09

Sales Returns and Allowances ITEM

POST. REF.

DEBIT

ACCOUNT NO.

CREDIT

401.1

BALANCE DEBIT

CREDIT

20--

June 12 24

2 1 5 00

1 1 6 25

3 3 1 25

Chapter 12

Special Journals

123

Problem 8 (Continued) Bank Credit Card Expense

ACCOUNT

DATE

POST. REF.

ITEM

ACCOUNT NO.

DEBIT

513

BALANCE

CREDIT

DEBIT

CREDIT

20--

June 30

CR18

8 0 00

ACCOUNTS RECEIVABLE LEDGER NAME L. Clese ADDRESS 875 Glenway Drive, Glendale, MO 63122-4112 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

✓

1 Balance

June

2 9 99 2 9 99

CR18

⎯⎯⎯

NAME L. LeCount ADDRESS 1439 East Broad Street, Columbus, OH 43205-9892 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

✓

1 Balance

June

4 2 6 00 4 2 6 00

CR18

⎯⎯⎯

NAME D. Manning ADDRESS 2101 Cumberland Road, Noblesville, IN 47870-2435 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

June

1 Balance 10

✓ CR18

2 6 3 25 2 6 3 25 4

⎯⎯⎯

124

Chapter 12

Problem 8 (Concluded) NAME R. Popielarz ADDRESS 3001 Hillcrest Drive, Dallas, PA 18612-6854 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

1 Balance

✓

June

1 2 2 06 1 2 2 06

⎯⎯⎯

NAME Q. Striker ADDRESS 4113 Main Street, Beech Grove, IN 46107-9643 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

1 Balance

✓

June

2 2 5 75 2 2 5 75

⎯⎯⎯

NAME L. Strous ADDRESS 2215 N. State Road 135, Greenwood, IN 46142-6432 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

✓

June 1 Balance 5

1 2 5 60 1 2 5 60

CR18

⎯⎯⎯

NAME D. Warding ADDRESS 1100 W. Main Street, Carmel, IN 46032-2364 DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

June

1 Balance 18

✓ CR18

5 8 25 5 8 25 8

⎯⎯⎯

Chapter 12

Special Journals

125

Problem 9 1. PURCHASES JOURNAL

INVOICE NO.

DATE 20--

PAGE

POST. REF.

FROM WHOM PURCHASED

PURCHASES DEBIT ACCTS. PAY. CREDIT

611

Ford Distributors

✓

4 1 4 5 00

216

Mueller Wholesaler

✓

2 1 6 5 00

399

Grant White & Co.

✓

2 8 9 5 00

106

Bailey & Hinds, Inc.

✓

1 8 4 5 00

914

Ford Distributors

✓

3 2 2 5 00

661

Jackson Company

✓

2 1 7 5 00

716

Mueller Wholesaler

✓

3 5 0 0 00

19 9 5 0 00

( 2 02)

Nov.

(501)

9 10

2. GENERAL LEDGER ACCOUNT

Accounts Payable

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

20--

Nov. 30

ACCOUNT

19 9 5 0 00

Purchases

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

19 9 5 0 00

CREDIT

501

BALANCE DEBIT

CREDIT

20--

Nov. 30

19 9 5 0 00

126

Chapter 12

Problem 9 (Continued) ACCOUNTS PAYABLE LEDGER NAME Bailey & Hinds, Inc. ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Nov. 19

1 8 4 5 00

1 8 4 5 00 4

NAME Ford Distributors ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

4 1 4 5 00

3 2 2 5 00

7 3 7 0 00

Nov.

NAME Grant White & Co. ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Nov. 15

2 8 9 5 00

NAME Jackson Company ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Nov. 28

2 1 7 5 00

Chapter 12

Special Journals

127

Problem 9 (Concluded) NAME Mueller Wholesaler ADDRESS DATE

POST. REF.

ITEM

DEBIT

CREDIT

BALANCE

20--

2 1 6 5 00

3 5 0 0 00

5 6 6 5 00

Nov.

Problem 10 1. and 2. CASH PAYMENTS JOURNAL CK. NO.

PAGE

ACCOUNTS PURCHASES PAYABLE PURCHASES DISCOUNTS DEBIT DEBIT CREDIT

POST. REF.

GENERAL DEBIT

1 47 Rent Expense

521

9 0 0 00

3 48 Blue Suede Shoes Company

✓

6 4 0 00

9 49 Style-Rite

✓

8 0 0 00

14 50 Utilities Expense

533

20 51

✓

22 52 West Coast Shoes

✓

27 53 C. Bultman, Drawing

312

DATE

ACCOUNT DEBITED

CASH CREDIT

20-1

Aug.

9 0 0 00

6 2 7 20

7 7 6 00

1 2 5 28

5 2 5 00

6 2 5 00

2 0 0 0 00

5 5 7 8 48

(101 )

1 2 5 28 5 2 5 00 6 2 5 00 2 0 0 0 00

3 0 2 5 28

2 0 6 5 00

(✓)

(202 )

5 2 5 00 (501 )

( 5 0 1 .2)

Debit total:

$ 3,025.28 2,065.00 525.00 $5,615.28

Credit total:

36.80 5,578.48 $5,615.28

GENERAL LEDGER Cash

ACCOUNT

DATE

ACCOUNT NO.

ITEM

POST. REF.

DEBIT

CREDIT

101

BALANCE DEBIT

CREDIT

20--

Aug.

1 31

Balance

✓ CP9

25 0 0 0 00 5 5 7 8 48

19 4 2 1 52

128

Chapter 12

Problem 10 (Continued) Accounts Payable

ACCOUNT

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

202

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

CP9

Aug.

3 3 6 6 00 2 0 6 5 00

1 3 0 1 00

C. Bultman, Drawing

ACCOUNT

DATE

ITEM

POST. REF.

ACCOUNT NO.

DEBIT

CREDIT

312

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

CP9

Aug.

ACCOUNT

Purchases

DATE

ITEM

14 0 0 0 00 2 0 0 0 00

16 0 0 0 00

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

501

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

CP9

Aug.

54 2 6 5 43 5 2 5 00

54 7 9 0 43

Purchases Discounts

ACCOUNT

DATE

ITEM

POST. REF.

ACCOUNT NO.

DEBIT

CREDIT

501.2

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

CP9

Aug.

3 2 5 20 3 6 80

3 6 2 00

Rent Expense

ACCOUNT

DATE

ITEM

ACCOUNT NO. POST. REF.

DEBIT

CREDIT

521

BALANCE DEBIT

CREDIT

20--

Aug.

1 Balance

✓

CP9

7 2 0 0 00 9 0 0 00

8 1 0 0 00

Chapter 12

Special Journals

129

Problem 10 (Concluded) Utilities Expense

ACCOUNT

DATE

ACCOUNT NO. POST. REF.

ITEM

DEBIT

CREDIT

533

BALANCE DEBIT

CREDIT

20--

1 Balance

✓

CP9

Aug.

8 2 2 87 1 2 5 28

9 4 8 15

ACCOUNTS PAYABLE LEDGER NAME Blue Suede Shoes Company ADDRESS DATE

ITEM

POST. REF.

DEBIT

CREDIT

BALANCE

20--

Aug.

✓

Balance

6 4 0 00

CP9

6 4 0 00

POST. REF.

DEBIT

⎯⎯⎯

NAME Style-Rite ADDRESS DATE

ITEM

CREDIT

BALANCE

20--

Aug.

✓

Balance

1 2 0 0 00

CP9

8 0 0 00

POST. REF.

DEBIT

4 0 0 00

NAME West Coast Shoes ADDRESS DATE

ITEM

CREDIT

BALANCE

20--

Aug.

1 22

Balance

✓ CP9

1 5 2 6 00

6 2 5 00

9 0 1 00

Chapter 13

Accounting for Merchandise Inventory

131

CHAPTER 13 REVIEW QUESTIONS 1. understated 2. understated 3. periodic system perpetual system 4. perpetual 5. physical inventory 6. natural business year 7. inventory sheet

8. free on board 9. destination 10. specific identification weighted-average LIFO FIFO 11. FIFO 12. LIFO 13. FIFO

14. LIFO 15. replacement cost 16. gains losses 17. inventory 18. Loss on Write-Down of Inventory 19. gross profit 20. retail

EXERCISES Exercise 1 1. Periodic Inventory System GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

Purchases Accounts Payable

2 5 0 0 00

3 4

Purchases

3 0 0 0 00

Cash

3 0 0 0 00

6 7

Accounts Receivable

5 0 0 00

Sales

5 0 0 00

9 10 11

Cash Sales

4 0 0 00

4 0 0 00 11

132

Chapter 13

Exercise 1 (Concluded) 2. Perpetual Inventory System GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

Merchandise Inventory Accounts Payable

2 5 0 0 00

3 4

Merchandise Inventory

3 0 0 0 00

Cash

3 0 0 0 00

6 7

Accounts Receivable

5 0 0 00

Sales

5 0 0 00

9 10

Cost of Goods Sold

3 0 0 00

Merchandise Inventory

3 0 0 00 11

12 13

Cash

4 0 0 00

Sales

4 0 0 00

15 16 17

13 14 15

Cost of Goods Sold Merchandise Inventory

2 5 0 00

2 5 0 00 17

Chapter 13

Accounting for Merchandise Inventory

133

Exercise 2 Cost of goods sold and sales: Year

Model

2011 2011 2009 2008 2008 2010

Mercury Grand Marquis Ford Focus Ford Mustang Honda Accord Porsche 911 Porsche Boxster

Cost

Selling Price

$ 12,000 12,400 13,200 10,200 42,500 32,500 $122,800

$ 13,450 13,992 14,450 12,900 49,900 34,200 $138,892

Cost of ending inventory: Year

Model

Cost

2011 2008 2007 2009 1993

Ford Explorer Jeep Wrangler Honda CR-V BMW M5 BMW 325i

$21,500 11,400 10,500 39,500 4,200 $87,100

Gross profit: Sales Cost of goods sold Gross profit

$138,892 122,800 $ 16,092

Exercise 3 Item

Cost

Market Value

LCM

1 2 3 4

$ 20,000 45,000 18,000 88,000 $171,000

$ 18,000 48,000 16,000 90,000 $172,000

$ 18,000 45,000 16,000 88,000 $ 167,000

a. LCM based on total inventory = $171,000 b. LCM based on each item = $167,000 Exercise 4 Net purchases/goods available for sale Less net sales for period Inventory, December 31, at retail Ratio of cost to retail prices of merchandise available for sale ($140,000/$200,000) Inventory, December 31, at estimated cost

Cost $140,000

Retail $ 200,000 160,000 $ 40,000 × 70% $ 28,000

134

Chapter 13

PROBLEMS Problem 5 FIFO Inventory Method Date 20-1/ 20-2

Cost of Goods Sold Unit Units Price Total

Cost of Ending Inventory Unit Units Price Total

Beg. inv.

$120

$ 6,000

$120

1st purchase

130

10,400

130

2nd purchase

100

150

15,000

150

3rd purchase

160

8,000

160

3,200

Total Alternative calculation given goods available for sale and CGS or EI.

280 COG available Less cost of EI CGS

$39,400 20 $42,600 COG available (3,200) Less CGS $39,400 Cost of EI

$ 3,200 $ 42,600 (39,400) $ 3,200

Gross profit, FIFO: Net sales Cost of goods sold Gross profit

$54,000 39,400 $14,600

LIFO Inventory Method Date 20-1/ 20-2

Cost of Goods Sold Unit Units Price Total Beg. inv.

$120

$ 3,600

1st purchase

130

2nd purchase

100

3rd purchase

Total Alternative calculation given goods available for sale and CGS or EI.

280 COG available Less cost of EI CGS

Cost of Ending Inventory Unit Units Price Total 20

$120

$ 2,400

10,400

130

150

15,000

150

160

11,200

160

$40,200 20 $42,600 COG available (2,400) Less CGS $40,200 Cost of EI

$ 2,400 $ 42,600 (40,200) $ 2,400

Gross profit, LIFO: Net sales Cost of goods sold Gross profit

$54,000 40,200 $13,800

Chapter 13

Accounting for Merchandise Inventory

135

Problem 5 (Concluded) Weighted-Average Method Cost of Goods Available for Sale ÷ Units Available for Sale

= $42,600/300 = $142 weighted-average cost per unit

Cost of goods sold = 280 units @ $142 = $39,760 Ending inventory = 20 units @ $142 = $2,840 Gross profit, weighted-average: Net sales Cost of goods sold Gross profit

$54,000 39,760 $14,240

Problem 6 Estimated inventory at May 27: Inventory, January 1 Net purchases, January 1–May 27 Cost of goods available for sale Estimated cost of goods sold: Net sales Normal gross profit ($230,000 × 30%) Estimated cost of goods sold Estimated inventory at May 27

$120,000 140,000 $260,000

$230,000 69,000 161,000 $ 99,000

Problem 7 Inventory, June 1 Net purchases, June Merchandise available for sale Less net sales for June Inventory, June 30, at retail Ratio of cost-to-retail prices of merchandise available for sale ($600,000/$1,000,000) Estimated inventory, at cost, June 30

Cost $200,000 400,000 $600,000

Retail $ 300,000 700,000 $1,000,000 780,000 $ 220,000 × 60% $ 132,000

136

Chapter 13 Appendix

CHAPTER 13 APPENDIX APPENDIX EXERCISES Apx. Exercise 1

Date

Units

Purchases Cost/ Unit Total

Units

Cost of Goods Sold Cost/ Cum. Unit CGS CGS

9/1 (BI)

9/10

9/15

600

$6.50

200

$6.30

6.20

$1,260 310 $1,570

$3,900

9/30

300

$6.50

$1,950

$3,520 Cost of Goods Sold during September

Layer

Inventory on Hand Cost/ Layer Units Unit Cost

(1)

100

$6.00

$ 600

(2)

100

6.20

620

(3)

200

6.30

1,260

(1)

100

$6.00

$ 600

(2)

6.20

310

(1)

100

$6.00

$ 600

(2)

6.20

310

(4)

600

6.50

3,900

(1)

100

$6.00

$ 600

(2)

6.20

310

(4)

300

6.50

1,950

Total

$2,480

$ 910

$4,810

$2,860

$3,520*

BI: Beginning Inventory * $1,570 1,950 $3,520

Chapter 13 Appendix

Perpetual Inventory Method: LIFO and Moving-Average Methods

137

Apx. Exercise 2 Purchases

Date

Cost/ Unit

Units

Cost of Goods Sold

Total

Units

Cost/ Unit

CGS

Cum. CGS

Inventory on Hand and Average Cost per Unit Cost of Cost of Units Purchase Inventory on or (Sale) on Hand Hand

9/1 (BI) 9/10 9/15

250 600

$6.50

$6.20

$1,550

$3,900

9/30

300

6.44

1,932

Cost of Goods Sold during September

3,482

Average Cost/ Unit

$2,480

400

$6.2000

$(1,550)

930

150

6.2000

3,900

4,830

750

6.4400

(1,932)

2,898

450

6.4400

$3,482

BI: Beginning Inventory

Apx. Exercise 3 Purchases Date

Units

Cost/ Unit

Cost of Goods Sold Total

Units

Cost/ Unit

CGS

Inventory on Hand Cum. CGS

10/1(BI)

10/8

10/20

300

$3.80

250

$3.50

$875

150

3.20

480

3.00

150

200

$3.80

$760 $2,265

Cost of Goods Sold during October

Units

Cost/ Unit

Layer Cost

(1)

100

$3.00

$ 300

(2)

150

3.20

480

(3)

250

3.50

875

$1,655

(1)

$3.00

$ 150

(1)

$3.00

$ 150

(4)

300

3.80

1,140

(1)

$3.00

$ 150

(4)

100

3.80

380

Total

$1,505

$1,140

10/31

Layer

$1,290

$ 530

$2,265

BI: Beginning Inventory

138

Chapter 13 Appendix

Apx. Exercise 4

Purchases

Date

Units

Cost/ Unit

Cost of Goods Sold

Total

Units

Cost/ Unit

CGS

Cum. CGS

Inventory on Hand and Average Cost per Unit Cost of Cost of Units Average Purchase Inventory on Cost/ or (Sale) on Hand Hand Unit

10/1 (BI) 10/8 10/20

450 300

$3.80

$3.31

$1,489.50

$1,655.00

500

$3.3100

$(1,489.50)

165.50

3.3100

1,140

1,305.50

350

3.7300

(746)

559.50

150

3.7300

Inventory on Hand Cost/ Layer Units Unit Cost

Total

$1,140

10/31

200

3.73

746.00

Cost of Goods Sold during October

2,235.50 $2,235.50

BI: Beginning Inventory

APPENDIX PROBLEMS Apx. Problem 5

Date

Units

Purchases Cost/ Unit Total

Units

Cost of Goods Sold Cost/ Cum. Unit CGS CGS

2/1 (BI)

2/3

400

$7.10

$2,840

2/5

250

$7.10

$1,775

$1,775 2/11

700

$7.20

2/13

$5,040

500

$7.20

$3,600

$5,375

Layer (1)

$6.70

$ 201

(2)

6.90

483

(1)

$6.70

$ 201

(2)

6.90

483

(3)

400

7.10

2,840

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

700

7.20

5,040

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

$ 684

$3,524

$1,749

$6,789

$3,189

BI: Beginning Inventory

Chapter 13 Appendix

Perpetual Inventory Method: LIFO and Moving-Average Methods

139

Apx. Problem 5 (Concluded)

Date

Units

2/16

300

2/18

500

Purchases Cost/ Unit Total $7.50

$7.70

Units

Cost of Goods Sold Cost/ Cum. Unit CGS CGS

$2,250

$3,850

2/24

$8.00

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

(5)

300

7.50

2,250

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

(5)

300

7.50

2,250

(6)

500

7.70

3,850

(1)

$6.70

$ 201

100

7.50

750

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

(5)

200

7.50

1,500

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

(5)

150

7.50

1,125

(1)

$6.70

$ 201

(2)

6.90

483

(3)

150

7.10

1,065

(4)

200

7.20

1,440

(5)

150

7.50

1,125

(7)

300

8.00

2,400

$7.50

$ 375

$2,400

Cost of Goods Sold during February

$6.70

$3,850

300

$7.70

$10,350 2/28

(1)

500

$ 9,975 2/25

Layer

Inventory on Hand Cost/ Layer Units Unit Cost

Total

$5,439

$9,289

$4,689

$4,314

$6,714

$10,350

300

8.00

BI: Beginning Inventory

Cost of Goods Sold during February

2/28

2,400

3,850

500

250

Units

2/25

7.70

2,250

5,040

$2,840

Total

600

500

2/18

7.50

7.20

$7.10

Cost/ Unit

Purchases

2/24

300

700

400

Units

2/16

2/13

2/11

2/5

2/3

2/1 (BI)

Date

Apx. Problem 6

7.4576

7.1600

$7.0480

Cost/ Unit

372.88

4,474.56

3,580.00

$1,762.00

CGS

Cost of Goods Sold

$10,189.44

10,189.44

9,816.56

5,342.00

$ 1,762.00

Cum. CGS

2,400.00

(372.88)

(4,474.56)

3,850.00

2,250.00

(3,580.00)

5,040.00

(1,762.00)

$ 2,840.00

Cost of Purchase or (Sale)

6,874.56

4,474.56

4,847.44

9,322.00

5,472.00

3,222.00

6,802.00

1,762.00

3,524.00

$ 684.00

Cost of Inventory on Hand

900

600

650

1,250

750

450

950

250

500

100

Units on Hand

7.6384

7.4576

7.2960

7.1600

7.0480

$6.8400

Average Cost/ Unit

Inventory on Hand and Average Cost per Unit

140 Chapter 13 Appendix

Chapter 13 Appendix

Perpetual Inventory Method: LIFO and Moving-Average Methods

141

Apx. Problem 7

Date

Purchases Cost/ Units Unit Total

Units

Cost of Goods Sold Cost/ Cum. Unit CGS CGS

7/1 (BI)

7/5

400

$6.20

$2,480

7/7

300

$6.20

$1,860

$1,860 7/12

300

$6.40

$1,920

7/15

200

$6.40

$1,280

$3,140 7/18

7/20

100

600

$6.50

$6.80

$ 650

$4,080

Layer

Inventory on Hand Cost/ Layer Units Unit Cost

(1)

$5.90

$ 295

(2)

6.10

305

(1)

$5.90

$ 295

(2)

6.10

305

(3)

400

6.20

2,480

(1)

$5.90

$ 295

(2)

6.10

305

(3)

100

6.20

620

(1)

$5.90

$ 295

(2)

6.10

305

(3)

100

6.20

620

(4)

300

6.40

1,920

(1)

$5.90

$ 295

(2)

6.10

305

(3)

100

6.20

620

(4)

100

6.40

640

(1)

$5.90

$ 295

(2)

6.10

305

(3)

100

6.20

620

(4)

100

6.40

640

(5)

100

6.50

650

(1)

$5.90

$ 295

(2)

6.10

305

(3)

100

6.20

620

(4)

100

6.40

640

(5)

100

6.50

650

(6)

600

6.80

4,080

Total

$ 600

$3,080

$1,220

$3,140

$1,860

$2,510

$6,590

142

Chapter 13 Appendix

Apx. Problem 7 (Concluded)

Date

Units

Purchases Cost/ Unit Total

7/24

7/27

Units

Cost of Goods Sold Cost/ Cum. Unit CGS CGS

600

$6.80

$4,080

(1)

$5.90

$ 295

100

6.50

650

(2)

6.10

305

100

6.40

640

(3)

100

6.20

620

100

$6.20

$ 620

(1)

$5.90

$ 295

(2)

6.10

305

(1)

$5.90

$ 295

(2)

6.10

305

(7)

100

6.90

690

$8,510

$9,130 7/31

100

$6.90

$ 690

Cost of Goods Sold during July

Layer

Inventory on Hand Cost/ Layer Units Unit Cost

Total

$1,220

$ 600

$1,290

$9,130

BI: Beginning Inventory

100

6.90

BI: Beginning Inventory

Cost of Goods Sold during July

7/31

690

100

4,080

200

7/27

6.80

650

1,920

300

800

600

7/20

6.50

6.40

$2,480

7/24

100

300

7/18

7/15

7/12

7/7

$6.20

6.6212

6.3040

$6.1600

662.12

5,296.96

1,260.80

$1,848.00

CGS

$9,067.88

9,067.88

8,405.76

3,108.80

$1,848.00

690.00

(662.12)

(5,296.96)

4,080.00

650.00

(1,260.80)

1,920.00

(1,848.00)

$ 2,480.00

Cost of Purchase or (Sale)

Cost of Inventory on Hand

1,352.12

662.12

1,324.24

6,621.20

2,541.20

1,891.20

3,152.00

1,232.00

3,080.00

400

Units

Cum. CGS

200

100

200

1,000

400

300

500

200

500

100

Units on Hand

6.7606

6.6212

6.3530

6.3040

6.1600

$6.0000

Average Cost/ Unit

Inventory on Hand and Average Cost Per Unit

7/5

Total

Cost/ Unit

Cost of Goods Sold

$ 600.00

Units

Cost/ Unit

Purchases

7/1 (BI)

Date

Apx. Problem 8

Chapter 13 Appendix Perpetual Inventory Method: LIFO and Moving-Average Methods 143

Chapter 14

Adjustments and the Work Sheet for a Merchandising Business

145

CHAPTER 14 REVIEW QUESTIONS 1. 2.

work sheet physical count or physical inventory credit income summary income summary net purchases goods (or merchandise) available for sale

3. 4. 5. 6.

7. 8. 9. 10. 11. 12. 13.

cost of goods sold Adjusted Trial Balance Income Statement purchases unearned revenue current liability revenue contra-cost or contrapurchases

14. 15. 16. 17. 18. 19.

trial balance Income Statement Balance Sheet income work sheet Merchandise Inventory Cost of Goods Sold and Cash or Accounts Receivable

EXERCISES Exercise 1 GENERAL JOURNAL DATE

POST. REF.

DESCRIPTION

DEBIT

CREDIT

Adjusting Entries

1 2

PAGE

20--

Dec. 31

Income Summary

60 3 0 0 00

Merchandise Inventory

60 3 0 0 00

4 5

3 4

Merchandise Inventory

54 8 0 0 00

Income Summary

54 8 0 0 00

6 7

Exercise 2 Cost of goods sold: Merchandise inventory, beginning

$ 33,000

Purchases

$86,000

Less: Purchases ret. and allow.

$4,500

Purchases discounts

2,500

7,000

Net purchases

$79,000

Add freight-in

1,000

Cost of goods purchased Goods available for sale Less merchandise inventory, ending Cost of goods sold

80,000 $113,000 41,000 $72,000

146

Chapter 14

Exercise 3 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Feb. 22

Cash Unearned Ticket Revenue

50 0 0 0 00 50 0 0 0 00

Adjusting Entry

4 5

Dec. 31

Unearned Ticket Revenue

45 0 0 0 00

Ticket Revenue

45 0 0 0 00

Exercise 4 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Adjusting Entries

1 2

PAGE

20--

Dec. 31

Income Summary

60 0 0 0 00

Merchandise Inventory

60 0 0 0 00

4 5

Merchandise Inventory

57 0 0 0 00

Income Summary

57 0 0 0 00

7 8

Unearned Repair Revenue

5 0 0 0 00

Repair Revenue

5 0 0 0 00

10 11

Supplies Expense

3 2 0 0 00

Supplies

Depreciation Expense—Building

8 0 0 0 00

Accumulated Depreciation—Building

8 0 0 0 00 15

3 2 0 0 00 12

9 10

Wages Expense Wages Payable

2 4 0 0 00

2 4 0 0 00 18

Chapter 14

Adjustments and the Work Sheet for a Merchandising Business

147

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Aug.

Merchandise Inventory Accounts Payable/Gul Paper

10 0 0 0 00 10 0 0 0 00

Merchandise Inventory

5 0 0 0 00

Cash

5 0 0 0 00

Accounts Receivable/Padam Medical Services

2 0 0 0 00

Sales

2 0 0 0 00

Cost of Goods Sold

1 5 0 0 00

Merchandise Inventory

1 5 0 0 00 11

Exercise 6 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Dec. 31

Inventory Short and Over Merchandise Inventory

2 0 0 00 2 0 0 00

Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Land Building Accum. Depr.—Building Store Equipment Accum. Depr.—Store Equipment Accounts Payable Wages Payable Sales Tax Payable Unearned Tour Revenue Mortgage Payable N. Smith, Capital N. Smith, Drawing Income Summary Sales Sales Returns and Allowances Tour Revenue Purchases Purchases Returns and Allowances Purchases Discounts Freight-In Wages Expense Advertising Expense Supplies Expense Phone Expense Utilities Expense Insurance Expense Depr. Expense—Building Depr. Expense—Store Equipment Miscellaneous Expense

36 Net Income

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

Account Title

Problem 7 1. and 2.

PROBLEMS

348,090 00

790 00

1,800 00 7,600 00

2,500 00 47,000 00 4,800 00

38,000 00

4,200 00

33,000 00

348,090

2,600 00 1,400 00

(d) (e) (f)

(c)

(h)

(a)

00 00 (g) 00 00

122,000 00

6,100 6,800 43,000 124,590

Trial Balance Debit Credit 27,000 00 9,000 00 31,000 00 (b) 7,500 00 4,900 00 40,000 00 60,000 00 25,000 00 29,000 00 9,000 00 7,600 00

90,175 00

394,990 00

Ocean Beach Sail Shop Work Sheet For Year Ended December 31, 20-Adjustments Adjusted Trial Balance Debit Credit Debit Credit 27,000 00 9,000 00 36,000 00 (a) 31,000 00 36,000 00 (c) ,000.00 5,150 00 2,350 00 (d) 3,025 00 1,875 00 40,000 00 60,000 00 (e) 7,000 00 32,000 00 29,000 00 (f) 2,800 00 11,800 00 7,600 00 (h) 1,100 00 1,100 00 6,100 00 4,100 00 2,700 00 43,000 00 124,590 00 33,000 00 31,000 00 (b) 36,000 00 31,000 00 36,000 00 122,000 00 4,200 00 (g) 4,100 00 4,100 00 38,000 00 2,600 00 1,400 00 2,500 00 1,100 00 48,100 00 4,800 00 5,150 00 5,150 00 1,800 00 7,600 00 3,025 00 3,025 00 7,000 00 7,000 00 2,800 00 2,800 00 790 00 00 00 00 00 00 00 00 00 00 00

2,600 00 1,400 00

4,100 00

36,000 00 122,000 00

166,100 00 166,100 00

9,335 00

156,765 00 166,100 00

2,500 48,100 4,800 5,150 1,800 7,600 3,025 7,000 2,800 790

38,000 00

4,200 00

31,000 00

Income Statement Debit Credit

238,225 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

238,225 00 37

9,335 00 36

228,890 00 35

Balance Sheet Debit Credit 27,000 00 9,000 00 36,000 00 2,350 00 1,875 00 40,000 00 60,000 00 32,000 00 29,000 00 11,800 00 7,600 00 1,100 00 6,100 00 2,700 00 43,000 00 124,590 00 33,000 00

148 Chapter 14

Chapter 14

Adjustments and the Work Sheet for a Merchandising Business

149

Problem 8 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Adjusting Entries

1 2

PAGE

20--

Dec. 31

Income Summary

31 0 0 0 00

Merchandise Inventory

31 0 0 0 00

4 5

Merchandise Inventory

36 0 0 0 00

Income Summary

36 0 0 0 00

7 8

Supplies Expense

5 1 5 0 00

Supplies

5 1 5 0 00

10 11

Insurance Expense

3 0 2 5 00

Prepaid Insurance

Depreciation Expense—Building

7 0 0 0 00

Accumulated Depreciation—Building

Depreciation Expense—Store Equipment

2 8 0 0 00

Accumulated Depreciation—Store Equipment

Unearned Tour Revenue

4 1 0 0 00

Tour Revenue

4 1 0 0 00 21

2 8 0 0 00 18

7 0 0 0 00 15

3 0 2 5 00 12

9 10

Wages Expense Wages Payable

1 1 0 0 00

1 1 0 0 00 24

150

Chapter 14

CHAPTER 14 APPENDIX Apx. Exercise 1 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Adjusting Entry

1 2

PAGE

20--

Dec. 31

Prepaid Insurance

1 8 0 0 00

Insurance Expense

1 8 0 0 00

Apx. Exercise 2 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Aug. 21

Supplies Expense Cash

6 0 0 0 00 6 0 0 0 00

Purchased supplies

Adjusting Entry

5 6 7

Dec. 31

Supplies Supplies Expense

1 0 0 0 00

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

151

CHAPTER 15 REVIEW QUESTIONS 1. work sheet 2. single-step 3. net sales 4. Gross profit 5. income from operations 6. net income or net loss 7. increase decrease

8. classified 9. liquidity 10. undepreciated cost 11. Current liabilities 12. mortgage payable 13. working capital 14. current 15. Quick

16. return on owner’s equity 17. accounts receivable turnover 18. inventory turnover 19. temporary 20. post-closing trial balance 21. adjusting 22. zero

152

Chapter 15

EXERCISES Exercise 1 Morse Motor Company Income Statement For Year Ended December 31, 20-1 Revenue from sales: Sales

$118,300

Less: Sales returns and allowances

$ 1,000

Sales discounts

280

1,280

Net sales Cost of goods sold:

$117,020

Merchandise inventory, Jan. 1, 20-1

$ 28,900

Purchases

$68,000

Less: Purchases returns and allow.

$2,140

Purchases discounts

1,360

Net purchases Add freight-in

3,500 $64,500 540

Cost of goods purchased

65,040

Goods available for sale Less merchandise inv., Dec. 31, 20-1

$ 93,940 29,600

Cost of goods sold

64,340

Gross profit Operating expenses: Wages expense

$ 52,680 $ 23,200

Rent expense

8,000

Supplies expense

900

Phone expense

2,600

Utilities expense

3,800

Insurance expense

1,000

Depreciation expense—equipment

2,000

Miscellaneous expense

300

Total operating expenses

41,800

Income from operations Other revenues: Interest revenue

$ 10,880 $

1,900

Other expenses: Interest expense Net income

700

1,200 $ 12,080

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

153

Exercise 2 Morse Motor Company Statement of Owner’s Equity For Year Ended December 31, 20-1 K. T. Morse, capital, January 1, 20-1

$66,740

Add additional investment

10,000

Total investment

$76,740

Net income for the year Less withdrawals for the year Increase in capital K. T. Morse, capital, December 31, 20-1

$12,080 8,000 4,080 $80,820

154

Chapter 15

Exercise 2 (Concluded) Morse Motor Company Balance Sheet December 31, 20-1 Assets Current assets: Cash

$19,200

Accounts receivable

28,500

Merchandise inventory

29,600

Supplies

1,800

Prepaid insurance

1,100

Total current assets

$ 80,200

Property, plant, and equipment: Equipment

$32,000

Less accumulated depreciation—equipment

4,000

Total assets

28,000 $108,200

Liabilities Current liabilities: Accounts payable

$18,620

Wages payable

280

Sales tax payable

480

Mortgage payable (current portion)

1,200

Total current liabilities

$20,580

Long-term liabilities: Mortgage payable

$ 8,000

Less current portion

1,200

Total liabilities

6,800 $ 27,380

Owner’s Equity K. T. Morse, capital Total liabilities and owner’s equity

80,820 $108,200

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

155

Exercise 3 1.

Current Assets – Current Liabilities

Current Assets

$80,200 –20,580 $59,620

$80,200 =

= 3.90 to 1

Current Liabilities

Quick Assets

$20,580

$47,700

Current Liabilities 4.

= 2.32 to 1

$20,580

Net Income

$12,080

= Average Owner’s Equity 5.

Net Credit Sales

$73,780

$88,000

Average Accounts Receivable

($24,200 + $28,500)/2

Cost of Goods Sold

$64,340 =

Average Inventory

= 16.4%

($66,740 + $80,820)/2

$26,350

$64,340 =

($28,900 + $29,600)/2

= 3.34; 365 ÷ 3.34 = 109.3 days

= 2.2; 365 ÷ 2.2 = 165.9 days $29,250

156

Chapter 15

Exercise 4 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Closing Entries

1 2

PAGE

20-1

Dec. 31 Sales

118 3 0 0 00

Interest Revenue

1 9 0 0 00

Purchases Returns and Allowances

2 1 4 0 00

Purchases Discounts

1 3 6 0 00

Income Summary

123 7 0 0 00

31 Income Summary

112 3 2 0 00

Sales Returns and Allowances

1 0 0 0 00

Sales Discounts

2 8 0 00

Purchases

68 0 0 0 00 10

Freight-In

5 4 0 00 11

Wages Expense

23 2 0 0 00 12

Rent Expense

8 0 0 0 00 13

Supplies Expense

9 0 0 00 14

Phone Expense

2 6 0 0 00 15

Utilities Expense

3 8 0 0 00 16

Insurance Expense

1 0 0 0 00 17

Depreciation Expense—Equipment

2 0 0 0 00 18

Miscellaneous Expense

3 0 0 00 19

Interest Expense

7 0 0 00 20

31 Income Summary

12 0 8 0 00

K. T. Morse, Capital

12 0 8 0 00 23

31 K. T. Morse, Capital

8 0 0 0 00

K. T. Morse, Drawing

Reversing Entry

8 0 0 0 00 26

20-2

Jan.

1 Wages Payable Wages Expense

2 8 0 00

2 8 0 00 30

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

157

This page intentionally left blank.

158

Chapter 15

PROBLEMS Problem 5 Clark’s Clothing Work For Year Ended ACCOUNT TITLE

TRIAL BALANCE DEBIT

ADJUSTMENTS

CREDIT

DEBIT

CREDIT

Cash

16 4 0 0 00

Accounts Receivable

7 1 0 0 00

Merchandise Inventory

28 0 0 0 00

Supplies

3 0 0 0 00

(c)

9 0 0 00

Prepaid Insurance

2 0 0 0 00

(d)

5 0 0 00

Land

10 0 0 0 00

Building

100 0 0 0 00

Accum. Depr.—Building

Fixtures

(b) 12 4 0 0 00 (a) 28 0 0 0 00

10 0 0 0 00

(e) 10 0 0 0 00

Accum. Depr.—Fixtures

6 0 0 0 00

(f)

2 0 0 0 00

Accounts Payable

9 0 0 0 00

Wages Payable

(g)

3 8 0 00

Sales Tax Payable

1 2 0 0 00

Unearned Revenue

Mortgage Payable

10 0 0 0 00 (h) 7 0 0 0 00 58 0 0 0 00

Alex Clark, Capital

73 3 0 0 00

Alex Clark, Drawing

18 19 9

Income Summary Sales

Sales Returns and Allowances

Sales Discounts

Purchases

Purchases Returns and Allowances

Purchases Discounts

Freight-In

Wages Expense

Advertising Expense

Rent Expense

Supplies Expense

Phone Expense

Utilities Expense

Insurance Expense

Depr. Expense—Building

Depr. Expense—Fixtures

Miscellaneous Expense

Interest Expense

12 5 0 0 00 (a) 28 0 0 0 00 (b) 12 4 0 0 00 225 5 0 0 00

(h) 7 0 0 0 00

2 0 0 0 00 5 0 0 00 68 5 0 0 00 1 2 0 0 00 1 3 0 0 00 4 4 0 00 19 8 0 0 00

(g)

3 8 0 00

(c)

9 0 0 00

(d)

5 0 0 00

7 0 0 00 82 6 6 0 00 2 1 0 0 00 1 8 0 0 00 0

(e) 10 0 0 0 00 (f)

2 0 0 0 00

6 0 0 00 4 4 0 0 00 395 5 0 0 00

37 38

33 0 0 0 00

395 5 0 0 00

61 1 8 0 00

Net Income

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

159

Problem 5 (Concluded) Store Sheet December 31, 20-1 ADJUSTED TRIAL BALANCE DEBIT

CREDIT

INCOME STATEMENT DEBIT

CREDIT

BALANCE SHEET DEBIT

CREDIT

16 4 0 0 00

7 1 0 0 00

12 4 0 0 00

2 1 0 0 00

1 5 0 0 00

10 0 0 0 00

100 0 0 0 00

20 0 0 0 00

33 0 0 0 00

8 0 0 0 00

8 0 0 0 00 10

9 0 0 0 00

9 0 0 0 00 11

3 8 0 00

3 8 0 00 12

1 2 0 0 00

1 2 0 0 00 13

3 0 0 0 00

3 0 0 0 00 14

58 0 0 0 00

58 0 0 0 00 15

73 3 0 0 00

73 3 0 0 00 16

12 5 0 0 00 28 0 0 0 00

12 5 0 0 00 12 4 0 0 00

28 0 0 0 00

232 5 0 0 00

12 4 0 0 00

232 5 0 0 00

2 0 0 0 00

5 0 0 00

68 5 0 0 00

1 2 0 0 00

1 3 0 0 00

4 4 0 00

20 1 8 0 00

7 0 0 00

82 6 6 0 00

9 0 0 00

2 1 0 0 00

1 8 0 0 00

5 0 0 00

10 0 0 0 00

2 0 0 0 00

6 0 0 00

4 4 0 0 00

420 2 8 0 00

225 2 8 0 00 22 1 2 0 00 247 4 0 0 00

247 4 0 0 00 247 4 0 0 00

195 0 0 0 00

172 8 8 0 00 37

195 0 0 0 00

22 1 2 0 00 38 195 0 0 0 00 39

160

Chapter 15

Problem 6 1. Clark’s Clothing Store Income Statement For Year Ended December 31, 20-1 Revenue from sales: Sales

$232,500

Less: Sales returns and allowances

$ 2,000

Sales discounts

500

2,500

Net sales

$230,000)

Cost of goods sold: Merchandise inventory, Jan. 1, 20-1

$ 28,000

Purchases

$68,500

Less: Purchases returns and allow.

$1,200

Purchases discounts

1,300

2,500

Net purchases

$66,000

Add freight-in

440

Cost of goods purchased Goods available for sale Less merchandise inv., Dec. 31, 20-1

66,440 $ 94,440 12,400

Cost of goods sold

82,040)

Gross profit

$147,960)

Operating expenses: Wages expense Advertising expense Rent expense

$ 20,180 700 82,660

Supplies expense

900

Phone expense

2,100

Utilities expense

1,800

Insurance expense

500

Depreciation expense—building

10,000

Depreciation expense—fixtures

2,000

Miscellaneous expense Total operating expenses Income from operations

600 121,440) $ 26,520)

Other expenses: Interest expense Net income

4,400) $ 22,120)

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

161

Problem 6 (Continued) 2. Clark’s Clothing Store Statement of Owner’s Equity For Year Ended December 31, 20-1 Alex Clark, capital, January 1, 20-1

$73,300

Net income for the year

$22,120

Less withdrawals for the year

12,500

Increase in capital Alex Clark, capital, December 31, 20-1

9,620 $82,920

162

Chapter 15

Problem 6 (Concluded) 3. Clark’s Clothing Store Balance Sheet December 31, 20-1 Assets Current assets: Cash

$16,400

Accounts receivable

7,100

Merchandise inventory

12,400

Supplies

2,100

Prepaid insurance

1,500

Total current assets

$ 39,500

Property, plant, and equipment: Land

$10,000

Building

$100,000

Less accumulated depreciation Fixtures

20,000

80,000

$ 33,000

Less accumulated depreciation

8,000

25,000

Total property, plant, and equipment

115,000

Total assets

$154,500 Liabilities

Current liabilities: Accounts payable

9,000

Wages payable

380

Sales tax payable

1,200

Unearned revenue

3,000

Mortgage payable (current portion)

1,000

Total current liabilities

$14,580

Long-term liabilities: Mortgage payable Less current portion

$ 58,000 1,000

57,000 $ 71,580

Total liabilities Owner’s Equity Alex Clark, capital Total liabilities and owner’s equity

82,920 $154,500

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

163

Problem 7 1.

Current Assets – Current Liabilities

Current Assets

$39,500 –14,580 $24,920 $39,500

Current Liabilities 3.

$14,580

Quick Assets

$23,500 =

Current Liabilities 4.

= 2.71 to 1

= 1.61 to 1 $14,580

Net Income

$22,120

Average Owner’s Equity 5.

($73,300 + $82,920)/2

Net Credit Sales

$78,110

$115,000

= Average Accounts Receivable

= 28.3%

= ($8,400 + $7,100)/2

= 14.84 $7,750

365 ÷ 14.84 = 24.6 days

Cost of Goods Sold

$82,040 =

Average Inventory

$82,040 =

($28,000 + $12,400)/2

= 4.06 $20,200

365 ÷ 4.06 = 89.9 days

164

Chapter 15

Problem 8 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Adjusting Entries

1 2

PAGE

20-1

Dec. 31 Income Summary

28 0 0 0 00

Merchandise Inventory

28 0 0 0 00

31 Merchandise Inventory

Income Summary

12 4 0 0 00

7 8 9

31 Supplies Expense

9 0 0 00

Supplies

9 0 0 00

10 11 12

31 Insurance Expense

5 0 0 00

Prepaid Insurance

31 Depreciation Expense—Building

10 0 0 0 00

Accumulated Depreciation—Building

10 0 0 0 00 15 16

31 Depreciation Expense—Fixtures

2 0 0 0 00

Accumulated Depreciation—Fixtures

2 0 0 0 00 18

19 20

5 0 0 00 12

16 17

9 10

13 14

31 Wages Expense

3 8 0 00

Wages Payable

3 8 0 00 21

31 Unearned Revenue

Sales

7 0 0 0 00

7 0 0 0 00 24

Chapter 15

Financial Statements and Year-End Accounting for a Merchandising Business

165

Problem 8 (Concluded) GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Closing Entries

1 2

PAGE

20-1

Dec. 31 Sales

232 5 0 0 00

Purchases Returns and Allowances

1 2 0 0 00

Purchases Discounts

1 3 0 0 00

Income Summary

235 0 0 0 00

31 Income Summary

197 2 8 0 00

Sales Returns and Allowances

2 0 0 0 00

Sales Discounts

5 0 0 00

Purchases

68 5 0 0 00

Freight-In

Wages Expense

Advertising Expense

Rent Expense

Supplies Expense

9 0 0 00 14

Phone Expense

2 1 0 0 00 15

Utilities Expense

1 8 0 0 00 16

Insurance Expense

5 0 0 00 17

Depreciation Expense—Building

10 0 0 0 00 18

Depreciation Expense—Fixtures

2 0 0 0 00 19

Miscellaneous Expense

Interest Expense

4 4 0 00 10 20 1 8 0 00 11 7 0 0 00 12 82 6 6 0 00 13

6 0 0 00 20 4 4 0 0 00 21

31 Income Summary

22 1 2 0 00

Alex Clark, Capital

31 Alex Clark, Capital

12 5 0 0 00

Alex Clark, Drawing

12 5 0 0 00 27

Reversing Entry

22 1 2 0 00 24

20-2

Jan.

1 Wages Payable Wages Expense

3 8 0 00

3 8 0 00 31

Chapter 16

Accounting for Accounts Receivable

167

CHAPTER 16 REVIEW QUESTIONS 1.

allowance method direct write-off method allowance matching allowance Bad Debt Expense Allowance for Doubtful Accounts contra asset net realizable value or net receivables percentage of sales method percentage of receivables method percentage of sales Allowance for Doubtful Accounts Accounts Receivable

2. 3. 4. 5. 6. 7. 8. 9. 10.

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

percentage of receivables aging the receivables percentage of sales percentage of receivables Accounts Receivable Allowance for Doubtful Accounts Cash Accounts Receivable direct write-off Bad Debt Expense Uncollectible Accounts Recovered Bad Debt Expense

EXERCISES Exercise 1 GENERAL JOURNAL DATE 1

PAGE POST. REF.

DESCRIPTION

DEBIT

CREDIT

20-9

Dec. 31 Bad Debt Expense Allowance for Doubtful Accounts

3 5 0 0 00 3 5 0 0 00

2 3

Net realizable value: Accounts receivable ................................................... Less allowance for doubtful accounts ........................ Net realizable value ....................................................

$ 28,000 3,800 $ 24,200

Exercise 2 GENERAL JOURNAL DATE 1

PAGE POST. REF.

DESCRIPTION

DEBIT

CREDIT

20-6

Dec. 31 Bad Debt Expense

2 8 0 0 00

Allowance for Doubtful Accounts

2 8 0 0 00

Net realizable value: Accounts receivable ................................................ Less allowance for doubtful accounts ..................... Net realizable value .................................................

2 3

$ 32,000 3,200 $ 28,800

168

Chapter 16

Exercise 3 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-7

Nov. 15 Allowance for Doubtful Accounts

Accounts Receivable/B. Fountain

Wrote off uncollectible account

3 5 0 00 3 5 0 00

2 3

4 5

20-8

Jan. 21 Accounts Receivable/B. Fountain Allowance for Doubtful Accounts

3 5 0 00 3 5 0 00

Reinstated account receivable

21 Cash

3 5 0 00

Accounts Receivable/B. Fountain

3 5 0 00 10

Collection on account

Exercise 4 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-8

Mar. 15 Bad Debt Expense Accounts Receivable/B. Karst

2 5 0 00 2 5 0 00

2 3

Chapter 16

Accounting for Accounts Receivable

169

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-4

Nov. 15 Bad Debt Expense Accounts Receivable/B. Farlow

4 0 0 00 4 0 0 00

Wrote off uncollectible account

15 Bad Debt Expense

5 0 0 00

Accounts Receivable/C. Turner

5 0 0 00

Wrote off uncollectible account

8 9

Dec. 21 Accounts Receivable/B. Farlow

4 0 0 00

Bad Debt Expense

4 0 0 00 10

Reinstated account receivable

21 Cash

4 0 0 00

Accounts Receivable/B. Farlow

4 0 0 00 14

Collection on account

16 17

20-5

Jan. 15 Accounts Receivable/C. Turner

5 0 0 00

Uncollectible Accounts Recovered

5 0 0 00 18

Reinstated account receivable

20 21 22 23

15 Cash

5 0 0 00

Accounts Receivable/C. Turner Collection on account

5 0 0 00 22 23

170

Chapter 16

PROBLEMS Problem 6 (a) (1) Amount of adjusting entry: $450,800 × 0.01 = $4,508 Accounts receivable ................................................................ Allowance for doubtful accounts ............................................ Net realizable value.................................................................

$32,000 4,908 $27,092

(2) Amount of adjusting entry: $4,250 – $400 = $3,850 Accounts receivable ................................................................ Allowance for doubtful accounts ............................................ Net realizable value.................................................................

$32,000 4,250 $27,750

(b) (1) Amount of adjusting entry: $450,800 × 0.015 = $6,762 Accounts receivable ................................................................ Allowance for doubtful accounts ............................................ Net realizable value.................................................................

$32,000 6,162 $25,838

(2) Amount of adjusting entry: $6,200 + $600 = $6,800 Accounts receivable ................................................................ Allowance for doubtful accounts ............................................ Net realizable value.................................................................

$32,000 6,200 $25,800

Problem 7 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT 1

Adjusting Entry 20-6

Dec. 31 Bad Debt Expense Allowance for Doubtful Accounts

17 0 0 0 00 17 0 0 0 00

4 5

20-7

Mar. 1 Allowance for Doubtful Accounts

3 8 0 00

Accounts Receivable/J. Dullard

3 8 0 00

Wrote off uncollectible account

8 9 10

May 30 Accounts Receivable/J. Dullard

3 8 0 00

Allowance for Doubtful Accounts

3 8 0 00 10

Reinstated account receivable

12 13 14 15 16

30 Cash

3 8 0 00

Accounts Receivable/J. Dullard Collection on account

3 8 0 00 14 15 16

Chapter 16

Accounting for Accounts Receivable

171

Problem 8 1. and 2.

1 2

TALLAHASSEE SEMINOLE SHOP AGING SCHEDULE OF ACCOUNTS RECEIVABLE A

Customer

3 Borthick, A.

Total

C Not Yet Due

D 1–30

$ 6,500

$ 3,000

$1,200

E F G Number of Days Past Due 31–60 61–90 Over 90 $2,300

4 Clark, R.

3,700

5 Copley, P.

9,600

2,800

6 Davis, H.

1,500

7 Heagy, C.

200

8 O’Keefe, S.

4,700

1,400

9 Pasewark, W.

5,500

10 Schroeder, M.

2,300

11 Shockley, W.

3,800

3,000

800

12 Wilkerson, J.

3,100

1,700

1,100

$40,900

$21,200

$6,400

$4,600

$4,700

$4,000

16%

32%

$424

$256

$368

$752

$1,280

13 Total

Estimated percent 14 uncollectible Total est. uncollectible 15 accounts

$3,080

$3,700 2,300

$4,500 200

3,300

300

16 17 18 19 20

3. GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-9

Dec. 31 Bad Debt Expense Allowance for Doubtful Accounts

3 5 8 0 00 3 5 8 0 00

2 3

172

Chapter 16

Problem 9 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-6

Mar. 20 Accounts Receivable/Ready Merchants Sales

19 4 0 0 00 19 4 0 0 00

Made sale on account

4 5

May 12 Accounts Receivable/Neighborhood Watchers

13 8 0 0 00

Sales

13 8 0 0 00

Made sale on account

8 9

July

9 Cash

12 0 0 0 00

Accounts Receivable/Ready Merchants

12 0 0 0 00 10

Collection on account

9 Bad Debt Expense

7 4 0 0 00

Accounts Receivable/Ready Merchants

Oct. 15 Cash

6 0 0 0 00

Accounts Receivable/Neighborhood Watchers

15 Bad Debt Expense

7 8 0 0 00

Accounts Receivable/Neighborhood Watchers

Dec.

5 Accounts Receivable/Ready Merchants

7 4 0 0 00

Bad Debt Expense

30 31

7 4 0 0 00 26

Reinstated account receivable

7 8 0 0 00 22

Wrote off uncollectible account

6 0 0 0 00 18

Collection on account

7 4 0 0 00 14

Wrote off uncollectible account

5 Cash

7 4 0 0 00

Accounts Receivable/Ready Merchants Collection on account

7 4 0 0 00 30 31

Chapter 16

Accounting for Accounts Receivable

173

Problem 9 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-7

Feb. 26 Accounts Receivable/Neighborhood Watchers

Uncollectible Accounts Recovered

Reinstated account receivable

7 8 0 0 00 7 8 0 0 00

2 3

4 5 6 7

26 Cash

7 8 0 0 00

Accounts Receivable/Neighborhood Watchers

7 8 0 0 00

Collection on account

Chapter 17

Accounting for Notes and Interest

175

CHAPTER 17 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

promissory note maker payee principal interest term Time Maturity value Accounts Receivable credit advice discounting bank discount

13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

proceeds contingent dishonored Accounts Receivable notes receivable notes accrued discounting contra-liability Accrued interest current liability

For ease of presentation, the exercise and problem journal entries do not include explanations. Students should include explanations similar to those illustrated in the chapter.

EXERCISES Exercise 1 68 58 65 94 48 91

Exercise 2 March 18 July 10 June 16 July 1 February 8 February 28

Exercise 3 $ 9.38 30.00 131.25 20.53 56.47 52.40

176

Chapter 17

Exercise 4 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Jan.

2 Notes Receivable Sales

3 0 0 0 00 3 0 0 0 00

15 Notes Receivable Accounts Receivable/K. Jones

2 5 0 0 00 2 5 0 0 00

6 7

Feb.

1 Cash Notes Receivable (new note)

8 9

Notes Receivable (old note)

Interest Revenue

1 5 00

3 0 0 0 00

1 5 00 10

14 Cash

Notes Receivable (new note)

13 14

Notes Receivable (old note)

Interest Revenue

5 1 0 42

2 0 0 0 00

2 5 0 0 00 14 1 0 42 15

16 17

Mar.

3 Cash

3 0 1 6 25

Notes Receivable

3 0 0 0 00 18

Interest Revenue

1 6 25 19

20 21

16 Cash

2 0 1 0 00

Notes Receivable

2 0 0 0 00 22

Interest Revenue

1 0 00 23

24 25

Chapter 17

Accounting for Notes and Interest

177

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Apr.

1 Notes Receivable Accounts Receivable

5 0 0 0 00 5 0 0 0 00

20 Cash

5 0 1 1 10

Notes Receivable

5 0 0 0 00

Interest Revenue

1 1 10

($5,000  0.065  90/360 = $81.25 interest)

($5,000 + $81.25 = $5,081.25 maturity value)

($5,081.25  0.07  71/360 = $70.15 discount)

($5,081.25 − $70.15 = $5,011.10 net proceeds)

11 12

May

2 Notes Receivable

3 5 0 0 00

Accounts Receivable

3 5 0 0 00 13

14 15

July

1 Accounts Receivable

3 5 3 5 00

Notes Receivable

3 5 0 0 00 16

Interest Revenue

3 5 00 17

($3,500  0.06  60/360 = $35 interest)

($3,500 + $35 = $3,535 maturity value)

20 21

Aug. 15 Cash

3 5 6 1 51

Accounts Receivable

Interest Revenue

($3,535  0.06  45/360 = $26.51 interest)

3 5 3 5 00 22 2 6 51 23 24

178

Chapter 17

Exercise 6 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Jan. 11 Accounts Payable/G. Adams

5 0 0 0 00

Notes Payable

5 0 0 0 00

3 4

20 Purchases

3 0 0 0 00

Notes Payable

3 0 0 0 00

6 7 8

Feb. 10 Notes Payable (old note) Interest Expense

Notes Payable (new note)

Cash

5 0 0 0 00

2 5 00

4 5 0 0 00

5 2 5 00 10

($5,000  0.06  30/360 = $25 interest)

12 13 14 15 16

Mar. 12 Notes Payable Interest Expense

4 5 0 0 00

2 2 50

Cash

4 5 2 2 50 15

($4,500  0.06  30/360 = $22.50 interest)

17 18 19 20 21

21 Notes Payable Interest Expense Cash ($3,000  0.06  60/360 = $30 interest)

3 0 0 0 00

3 0 00

3 0 3 0 00 20 21

Chapter 17

Accounting for Notes and Interest

179

Exercise 7 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

1 Cash

Apr.

Notes Payable

5 0 0 0 00 5 0 0 0 00

3 4

May

1 Cash Discount on Notes Payable

5 8 9 5 00

1 0 5 00

Notes Payable

6 0 0 0 00

($6,000  0.07  90/360 = $105 interest)

8 9

May 31 Notes Payable Interest Expense

5 0 0 0 00

5 0 00

Cash

5 0 5 0 00 11

($5,000  0.06  60/360 = $50 interest)

13 14

July

30 Notes Payable Interest Expense

15 16

Discount on Notes Payable

Cash

6 0 0 0 00

1 0 5 00

1 0 5 00 16 6 0 0 0 00 17

Exercise 8 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Dec. 31 (a) Accrued Interest Receivable

3 7 50

Interest Revenue

3 7 50

3 4 5

2 3

31 (b) Interest Expense Accrued Interest Payable

7 1 10

180

Chapter 17

PROBLEMS Problem 9 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Mar.

1 Notes Receivable

1 4 0 0 00

Sales

1 4 0 0 00

3 4 5

13 Notes Receivable

2 0 0 0 00

Accounts Receivable

2 0 0 0 00

6 7

29 Cash

1 4 0 2 85

Notes Receivable

1 4 0 0 00

Interest Revenue

2 85

($1,400  0.05  90/360 = $17.50 interest)

($1,400 + $17.50 = $1,417.50 maturity value)

($1,417.50  0.06  62/360 = $14.65 discount)

($1,417.50 − $14.65 = $1,402.85 proceeds)

14 15 16

Apr. 12 Cash Notes Receivable (new note)

Notes Receivable (old note)

Interest Revenue

4 0 9 17

1 6 0 0 00

2 0 0 0 00 17 9 17 18

($2,000  0.055  30/360 = $9.17)

20 21

May 12 Cash

1 6 0 8 00

Notes Receivable

1 6 0 0 00 22

Interest Revenue

8 00 23

(1,600 x 0.06 x 30/360 = $8 interest)

25 26 27

30 Accounts Receivable

1 4 4 7 50

Cash

1 4 4 7 50 27

28 29

June 29 Cash

1 4 7 2 24

Accounts Receivable

Interest Revenue

32 33

($1,447.50  0.06  30/360 = $7.24)

1 4 6 5 00 30 7 24 31 32 33

Chapter 17

Accounting for Notes and Interest

181

Problem 10 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

May

1 Purchases Notes Payable

4 0 0 0 00 4 0 0 0 00

20 Accounts Payable

1 5 0 0 00

Notes Payable

1 5 0 0 00

31 Cash

Discount on Notes Payable

4 9 5 0 00

5 0 00

Notes Payable

5 0 0 0 00

($5,000  0.06  60/360 = $50 discount)

11 12

June 19 Notes Payable Interest Expense

1 5 0 0 00

8 75

Cash

1 5 0 8 75 14

($1,500 x 0.07 x 30/360 = $8.75 interest)

30 Notes Payable (old note)

Interest Expense

4 0 0 0 00

4 6 67

Cash

1 0 4 6 67 19

Notes Payable (new note)

3 0 0 0 00 20

($4,000 x 0.07 x 60/360 = $46.67 interest)

22 23 24

July

15 Cash

3 0 0 0 00

Notes Payable

3 0 0 0 00 24

25 26 27

30 Notes Payable Interest Expense

Cash

Discount on Notes Payable

5 0 0 0 00

5 0 00

5 0 0 0 00 28 5 0 00 29

182

Chapter 17

Problem 11 (a)

(b) $ 7.50 8.75 9.47 $25.72

$10.69 7.00 15.00 $32.69

GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Dec. 31 (a) Accrued Interest Receivable

2 5 72

Interest Revenue

2 5 72

3 4 5

2 3

31 (b) Interest Expense Accrued Interest Payable

3 2 69

Chapter 18

Accounting for Long-Term Assets

183

CHAPTER 18 REVIEW QUESTIONS 1. long-term 2. tangible 3. land 4. property, plant, and equipment 5. equivalent price 6. allocation 7. physical 8. functional 9. depreciation

10. useful life 11. salvage 12. Depreciable cost 13. undepreciated cost 14. straight-line 15. declining-balance 16. sum-of-the-years’-digits 17. units-of-production 18. equipment

19. Accumulated Depreciation— Equipment 20. depletion 21. wasting 22. patent 23. copyright 24. trade name 25. franchise or license 26. goodwill 27. impaired

EXERCISES Exercise 1 Purchase price.......................................................... Legal fees related to purchase................................. Removal of old warehouse...................................... Realtor fee...............................................................

$30,000 1,000 8,000 1,200 $40,200

Exercise 2

$5,000 – $500 5 years Year 1: Year 2: Year 3: Year 4: Year 5:

= $900/year

$900 $900 $900 $900 $900

Exercise 3 Straight-line rate: 100% divided by 5 = 20% Double-declining rate: 40% Year 1: Year 2: Year 3: Year 4: Year 5:

$11,000.00 × 0.40 6,600.00 × 0.40 3,960.00 × 0.40 2,376.00 × 0.40 1,425.60 × 0.40

= = = = =

$4,400.00 depreciation expense 2,640.00 depreciation expense 1,584.00 depreciation expense 950.40 depreciation expense 425.60 depreciation expense*

*(maximum deduction is $425.60 because of $1,000 salvage value)

184

Chapter 18

Exercise 4 5 + 4 + 3 + 2 + 1 = 15 20-1:

$7,500 × 5/15 = $2,500 × 3/12 =

$ 625

20-2:

$7,500 × 5/15 = $2,500 × 9/12 = $7,500 × 4/15 = $2,000 × 3/12 =

$1,875 500

$2,375

$7,500 × 4/15 = $2,000 × 9/12 = $7,500 × 3/15 = $1,500 × 3/12 =

$1,500 375

1,875

$7,500 × 3/15 = $1,500 × 9/12 = $7,500 × 2/15 = $1,000 × 3/12 =

$1,125 250

1,375

$7,500 × 2/15 = $1,000 × 9/12 = $7,500 × 1/15 = $ 500 × 3/12 =

$ 750 125

875

$7,500 × 1/15 = $ 500 × 9/12 =

$ 375

20-3: 20-4: 20-5: 20-6:

Exercise 5

$9,000 – $500 34,000

= $0.25 per unit

Year 1: 12,000 × $0.25 = $3,000 Year 2: 8,000 × $0.25 = 2,000 Year 3: 14,000 × $0.25 = 3,500 Exercise 6 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

1 2

Repairs Expense

5 0 00

Cash

5 0 00

4 5

Accumulated Depreciation—Hydraulic Lift #2

6 0 0 00

Cash

6 0 0 00

7 8 9 10

Hydraulic Lift #2 Cash

1 0 0 0 00

9 10

Chapter 18

Accounting for Long-Term Assets

185

Exercise 7 $400,000,000/16,000 tons = $25,000/ton Year 1:

800 ×

$25,000

$20,000,000

Year 2:

1,200 ×

$25,000

30,000,000

Year 3:

750 ×

$25,000

18,750,000

PROBLEMS Problem 8 1. (a) Year

Depreciation Expense

Book Value

1 2 3 4 5

$15,000 × 0.20 15,000 × 0.20 15,000 × 0.20 15,000 × 0.20 15,000 × 0.20

= = = = =

$3,000 3,000 3,000 3,000 3,000

$15,000 12,000 9,000 6,000 3,000

1. (b) 1 2 3 4 5

$15,000 × 5/15 15,000 × 4/15 15,000 × 3/15 15,000 × 2/15 15,000 × 1/15

= = = = =

$5,000 4,000 3,000 2,000 1,000

$13,000 9,000 6,000 4,000 3,000

1. (c) 1 2 3 4

$18,000 × 0.40 10,800 × 0.40 6,480 × 0.40 3,888

= = = =

$7,200 4,320 2,592 888*

$10,800 6,480 3,888 3,000

*Cannot be depreciated below $3,000 salvage value. 2.

1 2 3 4 5 6 Total

$18,000 × 0.20 = $ 3,600.00 18,000 × 0.32 = 5,760.00 18,000 × 0.192 = 3,456.00 18,000 × 0.1152 = 2,073.60 18,000 × 0.1152 = 2,073.60 18,000 × 0.576 = 1,036.80 $18,000.00

186

Chapter 18

Problem 9 1.

GENERAL JOURNAL

DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT 1

Adjusting Entries 20-1

Dec. 31

Depreciation Expense—Sonar System #1

6 0 0 00

Accumulated Depreciation—Sonar System #1

6 0 0 00

3 4

Depreciation Expense—Sonar System #2

6 0 0 00

Accumulated Depreciation—Sonar System #2

6 0 0 00

GENERAL JOURNAL

2. DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-2 1

Jan.

Accumulated Depreciation—Sonar System #1

2 0 0 00

Cash

2 0 0 00

3 4 5

2 3

Sonar System #2

1 0 0 0 00

Cash

1 0 0 0 00

Depreciation expense for each sonar system for 20-2 through 20-6.

Cost of sonar system............................................................................. Accumulated depreciation .................................................................... Book value ............................................................................................ Salvage value ........................................................................................ New depreciable base ........................................................................... $3,200/8 years = $400 depreciation per year for Sonar System #1 $4,000/5 years = $800 depreciation per year for Sonar System #2

Sonar System #1 $4,000 (400) $3,600 (400) $3,200

Sonar System #2 $5,000 (600) $4,400 (400) $4,000

Chapter 18

Accounting for Long-Term Assets

187

Problem 10 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

Jan.

Accumulated Depreciation—Backhoe

85 0 0 0 00

Backhoe

85 0 0 0 00

3 4

Cash

1 0 0 0 00

Accumulated Depreciation—Truck

27 2 0 0 00

Truck

Gain on Sale of Truck

28 0 0 0 00

2 0 0 00

8 9

Feb. 10

Cash

Accumulated Depreciation—Handtruck

Loss on Sale of Handtruck

1 5 0 00

2 2 0 0 00

1 5 0 00

Handtruck

2 5 0 0 00 12

13 14

Mar. 11

Forklift (new)

60 0 0 0 00

Accumulated Depreciation—Forklift

45 0 0 0 00

Forklift (old)

50 0 0 0 00 16

Cash

55 0 0 0 00 17

Caterpillar (new)

120 0 0 0 00

Accumulated Depreciation—Caterpillar

90 0 0 0 00

Loss on Exchange of Caterpillar

5 0 0 0 00

May 16

Caterpillar (old)

105 0 0 0 00 22

Cash

110 0 0 0 00 23

24 25 26

June 10

Dump Truck (new)

90 0 0 0 00

Accumulated Depreciation—Dump Truck

78 0 0 0 00

Dump Truck (old)

80 0 0 0 00 27

Cash

87 0 0 0 00 28

Gain on Exchange of Dump Truck

1 0 0 0 00 29

188

Chapter 18

Problem 11 1.

$105,000,000 – $5,000,000

= $10/karat mined

10,000,000 20-1: 20-2: 20-3:

4,000,000 × $10 3,500,000 × $10 2,000,000 × $10

= $40 million = $35 million = $20 million

2. GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

PAGE

DEBIT

CREDIT

20-1 1

Dec. 31

Depletion Expense—Diamond Mine Accum. Depletion—Diamond Mine

40,000 0 0 0 00 40,000 0 0 0 00

20-2 4

Dec. 31

Depletion Expense—Diamond Mine Accum. Depletion—Diamond Mine

35,000 0 0 0 00 35,000 0 0 0 00

20-3 7

Dec. 31

Depletion Expense—Diamond Mine Accum. Depletion—Diamond Mine

20,000 0 0 0 00 20,000 0 0 0 00

Problem 12 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

PAGE

DEBIT

CREDIT

20-1

Dec. 31

2 2 5 0 00

1 8 3 3 33

($22,000/8 yrs. = $2,750 x 8/12 = $1,833.33)

Patent Amortization ($15,000/5 yrs. = $3,000 x 9/12 = $2,250)

2 3

Patent #2

1 5 0 0 00

($12,000/8 yrs. = $1,500)

1 5 0 0 00

Patent #1

Patent Amortization

Franchise Amortization Franchise ($200,000/10 yrs. = $20,000 x 3/12 = $5,000.00)

5 0 0 0 00

5 0 0 0 00 11 12

Chapter 19

Accounting for Partnerships

189

CHAPTER 19 REVIEW QUESTIONS 1. partnership 2. partnership agreement 3. mutual agency 4. unlimited liability 5. dissolves 6. journal entry 7. assets liabilities 8. balance sheets 9. fair market values

10. investment ratio 11. capital account drawing account 12. equally 13. $4,800 14. financial statements 15. income statement 16. partners’ equity 17. Dissolution 18. business operations

19. limited lives 20. equal to greater than less 21. credit balance 22. increase 23. Liquidation 24. partnership liquidation

EXERCISES Exercise 1 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

June 1

Cash Mary Campbell, Capital

20 0 0 0 00 20 0 0 0 00

Mary Campbell’s investment in partnership

4 5 6 7

Cash

25 0 0 0 00

Barb Stanley, Capital

25 0 0 0 00

Barb Stanley’s investment in partnership

190

Chapter 19

Exercise 2 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-2 1

Cash

3 3 0 0 00

Merchandise Inventory

38 0 0 0 00

Store Equipment

25 0 0 0 00

Jan.

Notes Payable

20 0 0 0 00

Accounts Payable

15 0 0 0 00

Jim Hassel, Capital

31 3 0 0 00

Jim Hassel’s investment in partnership

Cash

12 1 0 0 00

Merchandise Inventory

24 0 0 0 00

Notes Payable

5 0 0 0 00 11

Accounts Payable

8 0 0 0 00 12

Mark Back, Capital

23 1 0 0 00 13

Mark Back’s investment in partnership

Exercise 3 Fisher and Worth Statement of Partners’ Equity For Year Ended December 31, 20-Fisher

Worth

Total

Capital, January 1, 20--

$ 85,000

$64,000

$149,000

Net income for the year

46,800

31,200

78,000

$131,800

$95,200

$227,000

35,000

28,000

63,000

$ 96,800

$67,200

$164,000

Withdrawals Capital, December 31, 20--

Chapter 19

Accounting for Partnerships

191

Exercise 3 (Concluded) Fisher and Worth Balance Sheet (Partial) December 31, 20-Partners’ Equity Fisher, capital

$96,800

Worth, capital

67,200

Total partners’ equity

$164,000

Exercise 4 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-4 1

July 30

Cash Susan Blue, Capital

60 0 0 0 00 60 0 0 0 00

Susan Blue admitted to partnership

2 3

Exercise 5 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-3 1

Cash

8 3 0 0 00

Accounts Receivable

12 0 0 0 00

Construction Equipment

35 0 0 0 00

May 16

Allowance for Bad Debts

2 0 0 0 00

Notes Payable

15 0 0 0 00

Accounts Payable

5 0 0 0 00

Linda Philipich, Capital

33 3 0 0 00

Linda Philipich admitted to partnership

8 9

192

Chapter 19

Exercise 6 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-6 1

Dec. 31

R. W. Campbell, Capital Cash

78 0 0 0 00 78 0 0 0 00

R. W. Campbell retired, withdrawing $78,000 in

equity settlement

Exercise 7 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

Oct.

Cash

101 0 0 0 00

Inventory

92 0 0 0 00

Gain on Sale of Inventory

9 0 0 0 00

Sale of inventory

5 6

Gain on Sale of Inventory

9 0 0 0 00

L. Ling, Capital

4 5 0 0 00

S. Salk, Capital

4 5 0 0 00

Allocation of gain

Chapter 19

Accounting for Partnerships

193

PROBLEMS Problem 8 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-4 1

Cash

3 2 0 0 00

Accounts Receivable

2 5 2 4 00

Merchandise Inventory

4 8 0 0 00

Projection Equipment

7 5 0 0 00

Snack Bar and Facilities

18 5 0 0 00

Jan.

Notes Payable

13 5 0 0 00

Accounts Payable

5 4 8 0 00

Allowance for Bad Debts

4 3 0 00

Fred Dusk, Capital

17 1 1 4 00

Fred Dusk’s investment in partnership

Cash

1 5 3 3 00

Accounts Receivable

2 1 6 0 00

Merchandise Inventory

11 4 0 0 00

Supplies

3 5 6 00

Office Equipment

4 8 0 0 00

Projection Equipment

11 2 0 0 00

Snack Bar and Facilities

48 0 0 0 00

Notes Payable

26 0 0 0 00 19

Accounts Payable

16 3 0 0 00 20

Allowance for Bad Debts

Nancy Dawn, Capital

23 24

Nancy Dawn’s investment in partnership

3 2 0 00 21 36 8 2 9 00 22 23 24

194

Chapter 19

Problem 9 1. Dusk to Dawn Drive-In Theaters Income Statement (Partial) For Year Ended December 31, 20-4 F. Dusk

N. Dawn

Total

Net income

$176,500

Allocation of net income: Salary allowance

$35,000

$ 45,000

$ 80,000

Interest allowance

2,054

4,419

6,473

Remaining income

36,011

54,016

90,027

$73,065

$103,435

$176,500

2. Dusk to Dawn Drive-In Theaters Statement of Partners’ Equity For Year Ended December 31, 20-4 F. Dusk Capital, January 1, 20-4

Total

$ 17,114

$ 36,829

$ 53,943

10,000

$ 27,114

$ 36,829

$ 63,943

73,065

103,435

176,500

$100,179

$140,264

$240,443

35,000

45,000

80,000

$ 65,179

$ 95,264

$160,443

Additional investments during the year

Net income for the year

Withdrawals (salary allowance) Capital, December 31, 20-4

N. Dawn

3. Dusk to Dawn Drive-In Theaters Balance Sheet (Partial) December 31, 20-4 Partners’ Equity F. Dusk, capital

$65,179

N. Dawn, capital

95,264

Total partners’ equity

$160,443

Chapter 19

Accounting for Partnerships

195

Problem 9 (Concluded) 4. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT 1

Closing Entries 20-4

Dec. 31

Income Summary

176 5 0 0 00

F. Dusk, Capital

73 0 6 5 00

N. Dawn, Capital

103 4 3 5 00

F. Dusk, Capital

35 0 0 0 00

F. Dusk, Drawing

35 0 0 0 00

N. Dawn, Capital

45 0 0 0 00

N. Dawn, Drawing

45 0 0 0 00 10

Problem 10 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1 1

Cash

3 2 0 0 00

Accounts Receivable

22 5 2 4 00

Merchandise Inventory

84 8 0 0 00

Office Equipment

5 0 0 0 00

Notes Payable

12 2 0 0 00

Accounts Payable

25 4 8 0 00

Allowance for Bad Debts

1 2 0 0 00

B. Murry, Capital

76 6 4 4 00

9 10

June 1

B. Murry admitted to partnership

9 10

196

Chapter 19

Problem 11 1. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-5 1

May

J. D. Courtney, Capital

30 0 0 0 00

Cash

26 0 0 0 00

S. S. Casler, Capital

3 0 0 0 00

E. R. Snavely, Capital

1 0 0 0 00

Dissolution of partnership, payment to J. D. Courtney

2. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-5 1

J. D. Courtney, Capital

30 0 0 0 00

S. S. Casler, Capital

6 0 0 0 00

E. R. Snavely, Capital

2 0 0 0 00

May

Cash

38 0 0 0 00

Dissolution of partnership, payment to J. D. Courtney

4 5

3. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-5 1 2

May

J. D. Courtney, Capital E. R. Snavely, Capital

30 0 0 0 00 30 0 0 0 00

Dissolution of partnership, purchase of

J. D. Courtney’s interest by E. R. Snavely

Chapter 19

Accounting for Partnerships

197

Problem 12 1. Thay, Walter, and Carpenter Statement of Partnership Liquidation For Period July 1–7, 20-Other Capital Cash Inventory Assets Liabilities Thay Walter Carpenter $ 18,300 $ 28,000 $ 75,000 $ 13,000 $ 35,200 $ 39,900 $ 33,200 94,000 (28,000) (75,000) (3,000) (3,000) (3,000) $112,300 0 0 $ 13,000 $ 32,200 $ 36,900 $ 30,200 (13,000) (13,000) $ 99,300 0 0 0 $ 32,200 $ 36,900 $ 30,200 (99,300) (32,200) (36,900) (30,200) 0 0 0 0 0 0 0

Balance before sale of assets Sale of noncash assets and alloc. of loss Balance after sale Payment of liabilities Balance after payment of liabilities Distribution of cash to partners Final balances

2. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

July

Cash

94 0 0 0 00

Loss on Sale of Assets

9 0 0 0 00

Inventory

28 0 0 0 00

Other Assets

75 0 0 0 00

Loss on sale of assets

G. B. Thay, Capital

3 0 0 0 00

E. F. Walter, Capital

3 0 0 0 00

Q. E. Carpenter, Capital

3 0 0 0 00

Loss on Sale of Assets

9 0 0 0 00 10

Distribution of loss

12 13

Liabilities

13 0 0 0 00

Cash

13 0 0 0 00 14

Payment of liabilities

G. B. Thay, Capital

32 2 0 0 00

E. F. Walter, Capital

36 9 0 0 00

Q. E. Carpenter, Capital

30 2 0 0 00

20 21 22

Cash Distribution of cash to partners

99 3 0 0 00 20 21 22

Chapter 20

Corporations: Organization and Capital Stock

199

CHAPTER 20 REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

liability stockholders’ equity shares Mutual agency income dividends charter bylaws stockholders board of directors

11. 12. 13. 14. 15. 16. 17. 18. 19.

organization costs paid-in capital Retained earnings authorized issued treasury outstanding par value Market

20. 21. 22. 23. 24. 25. 26. 27.

no-par stated value common Preferred cumulative preferred premium subscription preferred

EXERCISES Exercise 1 GENERAL JOURNAL DATE 1

20--

DESCRIPTION

Organization Expenses

PAGE POST. REF.

DEBIT

CREDIT 1

9 0 0 0 00

Cash

9 0 0 0 00

Exercise 2 Total amount available for dividends.......................................................... Dividend to preferred stock (5,000 × $8) ................................................... Amount available for common stock ......................................................... Dividends per share: Preferred stock ...................................................................................... Common stock ($10,000/10,000 shares) ...............................................

$50,000 40,000 $10,000 $8 $1

200

Chapter 20

Exercise 3 Year 2 Cumulative Noncumulative Cumulative preferred dividend from prior year (4,000 × $4) ....... $16,000 $ 0 Preferred dividend—current year: Cumulative (4,000 × $4) .......................................................... 16,000 Noncumulative (6,000 × $3) ................................................... 18,000 Total preferred dividends .............................................................. $32,000 $18,000 Common dividends: $113,000 − $50,000 ($32,000 + $18,000) = $63,000 Dividends per share: Preferred cumulative ($32,000/4,000) ..................................... $8 Preferred noncumulative ($18,000/6,000) ............................... $3 Common stock ($63,000/25,000) ............................................. $2.52

Exercise 4

Stockholders’ Equity Paid-in capital: Preferred stock, $12 par, 8%, 6,000 shares

$ 72,000

Common stock, $4 par, 14,000 shares

$56,000

Common stock subscribed, $4 par, 12,000 shares

48,000

Total paid-in capital Retained earnings

104,000 $176,000 33,000 $209,000

Less: Common stock subscriptions receivable Total stockholders’ equity

14,000 $195,000

Chapter 20

Corporations: Organization and Capital Stock

201

PROBLEMS Problem 5 GENERAL JOURNAL DATE 1 2

DESCRIPTION

(a) Cash

PAGE POST. REF.

DEBIT

CREDIT

40 0 0 0 00

Common Stock

40 0 0 0 00

3 4

(b) Cash

17 2 0 0 00

Common Stock

16 0 0 0 00

Paid-In Capital in Excess of Par—Common Stock

1 2 0 0 00

7 8

32 0 0 0 00

Preferred Stock

30 0 0 0 00

Paid-In Capital in Excess of Par—Preferred Stock

2 0 0 0 00

11 12 13

(d) Cash

15 0 0 0 00

Common Stock

15 0 0 0 00

14 15 16

(e) Cash

30 0 0 0 00

Common Stock

30 0 0 0 00

17 18

16 17

(f) Cash

25 5 0 0 00

Common Stock

24 0 0 0 00

Paid-In Cap. in Excess of Stated Value—Com. Stock

1 5 0 0 00

21 22 23

(g) Land

50 0 0 0 00

Common Stock

50 0 0 0 00

24 25

23 24

(h) Truck

41 5 0 0 00

Common Stock

40 0 0 0 00

Paid-In Capital in Excess of Par—Common Stock

1 5 0 0 00

202

Chapter 20

Problem 6 GENERAL JOURNAL DATE 1 2

DESCRIPTION

(a) Common Stock Subscriptions Receivable/J. Adams

PAGE POST. REF.

DEBIT

CREDIT

32 0 0 0 00

Common Stock Subscribed

32 0 0 0 00

3 4

(b) Common Stock Subscriptions Receivable/R. Jones

Common Stock Subscribed

Paid-In Capital in Excess of Par—Common Stock

27 0 0 0 00

26 6 0 0 00

4 0 0 00

7 8 9

16 0 0 0 00

Common Stock Subscriptions Receivable/J. Adams

16 0 0 0 00

10 11

8 9 10

(d) Preferred Stock Subscriptions Receivable/T. Lyman

66 0 0 0 00

Preferred Stock Subscribed

65 0 0 0 00 12

Paid-In Capital in Excess of Par—Preferred Stock

1 0 0 0 00 13

14 15 16

(e) Cash

13 5 0 0 00

Common Stock Subscriptions Receivable/R. Jones

13 5 0 0 00 16

17 18 19

(f) Cash

33 0 0 0 00

Preferred Stock Subscriptions Receivable/T. Lyman

22 23 24

(g) Cash

16 0 0 0 00

Common Stock Subscriptions Receivable/J. Adams Common Stock Subscribed

27 28 29

32 0 0 0 00

Common Stock

32 33 34

32 0 0 0 00 24 25

(h) Cash

13 5 0 0 00

Common Stock Subscriptions Receivable/R. Jones Common Stock Subscribed

13 5 0 0 00 27 26 6 0 0 00

Common Stock

26 6 0 0 00 29

30 31

16 0 0 0 00 22

25 26

33 0 0 0 00 19

20 21

(i) Cash

33 0 0 0 00

Preferred Stock Subscriptions Receivable/T. Lyman Preferred Stock Subscribed Preferred Stock

33 0 0 0 00 32 65 0 0 0 00

65 0 0 0 00 34

Chapter 20

Corporations: Organization and Capital Stock

203

Problem 7 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Mar. 28 Organization Expenses Cash

12 6 0 0 00 12 6 0 0 00

3 4

Apr. 12 Cash

81 2 0 0 00

Common Stock

80 0 0 0 00

Paid-In Capital in Excess of Par—Common Stock

1 2 0 0 00

7 8

May

1 Common Stock Subscriptions Receivable

Common Stock Subscribed

Paid-In Capital in Excess of Par—Common Stock

32 5 0 0 00 32 0 0 0 00

June 21 Cash

16 5 0 0 00

Common Stock Subscriptions Receivable

July

5 Common Treasury Stock

9 0 0 0 00

Cash

12 Cash

Common Stock

Paid-In Cap. in Excess of Stated Value—Com. Stock

28 2 0 0 00

23 24 25

28 0 0 0 00 19 2 0 0 00 20

21 22

9 0 0 0 00 16

17 18

16 5 0 0 00 13

14 15

5 0 0 00 10

11 12

Aug. 21 Cash

16 0 0 0 00

Common Stock Subscriptions Receivable Common Stock Subscribed Common Stock

16 0 0 0 00 23 32 0 0 0 00

32 0 0 0 00 25

204

Chapter 20

Problem 7 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Sept. 28 Cash

4 7 5 0 00

Common Treasury Stock

Paid-In Capital from Sale of Treasury Stock

4 5 0 0 00

2 5 0 00

4 5

Nov. 9 Land

75 6 0 0 00

Preferred Stock

Paid-In Capital in Excess of Par—Preferred Stock

75 0 0 0 00

6 0 0 00

8 9

Dec. 20 Cash Paid-In Capital from Sale of Treasury Stock

4 3 7 5 00

1 2 5 00

Common Treasury Stock

4 5 0 0 00 11

Problem 8

Stockholders’ Equity Paid-in capital: Preferred stock, 8%, $10 par, 10,000 shares

$100,000

Preferred stock subscribed, 5,000 shares

50,000

Common stock, $5 par, 50,000 shares

$250,000

Common stock subscribed, 20,000 shares

100,000

Paid-in capital in excess of par—preferred stock

$ 18,000

Paid-in capital from sale of treasury stock

9,000

Total paid-in capital

$150,000

350,000

27,000 $527,000

Retained earnings

62,000 $589,000

Less: Preferred stock subscriptions receivable

$ 15,000

Common stock subscriptions receivable

25,000

Common treasury stock

20,000

Total stockholders’ equity

60,000 $529,000

Chapter 21

Corporations: Taxes, Earnings, Distributions, and the Statement of Retained Earnings

205

CHAPTER 21 REVIEW QUESTIONS 1. Income Tax Expense 2. Investment by the owners Earnings retained in the business 3. net income 4. net loss, closing the dividends account, and appropriation of retained earnings 5. net income 6. Retained Earnings Income Summary 7. dividend 8. cash stock

9. Unrestricted retained earnings Adequate cash balance Declaration of dividend 10. date of declaration 11. date of record 12. date of payment 13. cash dividends 14. common dividends payable 15. current liability 16. stock dividend 17. Stock Dividends Distributable

18. Stock Dividends Distributable Common Stock 19. retained earnings paid-in capital 20. stock split 21. memorandum notation 22. retained earnings appropriation 23. statement of retained earnings 24. unappropriated appropriated

EXERCISES Exercise 1 1. and 2. GENERAL JOURNAL DATE 1

2 3

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-1

Apr. 15 Income Tax Expense

25 0 0 0 00

Cash

25 0 0 0 00

First quarterly income tax payment

4 5 6 7

Dec. 31 Income Tax Expense

Income Tax Payable

7 0 0 0 00

Additional income tax expense

206

Chapter 21

Exercise 2 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Dec. 31 Income Summary Retained Earnings

72 1 0 0 00 72 1 0 0 00

31 Retained Earnings

23 0 0 0 00

Cash Dividends

23 0 0 0 00

31 Retained Earnings

38 0 0 0 00

Income Summary

38 0 0 0 00

31 Retained Earnings

15 0 0 0 00

Stock Dividends

15 0 0 0 00 11

31 Retained Earnings

20 0 0 0 00

Retained Earnings Appropriated for Bond Interest

20 0 0 0 00 14

1. The Income Summary credit balance represented net income for the year. 2. The Cash Dividends debit balance represented cash dividends for the year. 3. The Income Summary debit balance represented a net loss for the year. 4. The Stock Dividends debit balance represented stock dividends for the year. Exercise 3 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Sept. 3 Cash Dividends Common Dividends Payable

100 0 0 0 00 100 0 0 0 00

3 4 5

2 3

Oct.

5 Common Dividends Payable Cash

100 0 0 0 00

Chapter 21

Corporations: Taxes, Earnings, Distributions, and the Statement of Retained Earnings

207

Exercise 4 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

1 Cash Dividends

June

Preferred Dividends Payable

16 0 0 0 00 16 0 0 0 00

20 Preferred Dividends Payable

16 0 0 0 00

Cash

16 0 0 0 00

Exercise 5 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20--

Feb.

3 Stock Dividends

168 0 0 0 00

Stock Dividends Distributable

120 0 0 0 00

Paid-In Capital in Excess of Par—Common Stock

48 0 0 0 00

24 Stock Dividends Distributable

Common Stock

120 0 0 0 00

7 8

July

1 Memo entry: Declared 2-for-1 stock split. Issued

184,000 shares of $5 par common stock in exchange

for 92,000 shares of $10 par common stock.

208

Chapter 21

Exercise 6 Register Co. Statement of Retained Earnings For Year Ended December 31, 20-1 Retained earnings, January 1 Add income for the year

$ 80,000 89,000 $169,000

Less cash dividends Retained earnings, December 31

50,000 $119,000

Chapter 21

Corporations: Taxes, Earnings, Distributions, and the Statement of Retained Earnings

209

PROBLEMS Problem 7 GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

20-2

Mar. 20 Cash Dividends

15 9 0 0 00

Preferred Dividends Payable

2 4 0 0 00

Common Dividends Payable

13 5 0 0 00

Apr. 15 Preferred Dividends Payable

2 4 0 0 00

Common Dividends Payable

13 5 0 0 00

Cash

15 9 0 0 00

8 9 10

June 16 Retained Earnings

210 0 0 0 00

Retained Earnings Appropriated for Treatment Plant

210 0 0 0 00 10

11 12

Oct. 10 Cash Dividends

15 9 0 0 00

Preferred Dividends Payable

2 4 0 0 00 13

Common Dividends Payable

13 5 0 0 00 14

Nov. 10 Preferred Dividends Payable

2 4 0 0 00

Common Dividends Payable

13 5 0 0 00

Cash

15 9 0 0 00 18

19 20

17 Stock Dividends

108 0 0 0 00

Common Stock Dividends Distributable

45 0 0 0 00 21

Paid-In Capital in Excess of Par—Common Stock

63 0 0 0 00 22

23 24 25

Dec. 15 Common Stock Dividends Distributable

45 0 0 0 00

Common Stock

45 0 0 0 00 25

26 27 28

31 Income Summary

195 0 0 0 00

Retained Earnings

195 0 0 0 00 28

29 30

31 Retained Earnings

139 8 0 0 00

Cash Dividends

31 8 0 0 00 31

Stock Dividends

108 0 0 0 00 32

210

Chapter 21

Problem 8

Lloyd Corporation Statement of Retained Earnings For Year Ended December 31, 20-2 Appropriated: Appropriated for plant expansion

60,000

Unappropriated: Balance, January 1

$700,000

Add net income for year

300,000

Less: Cash dividends, preferred stock

$ 30,000

Cash dividends, common stock

100,000

Retained earnings unappropriated, December 31 Total retained earnings, December 31

$1,000,000

130,000 870,000 $930,000

Chapter 22

Corporations: Bonds

211

CHAPTER 22 REVIEW QUESTIONS 1. bond 2. secured 3. mortgage 4. unsecured debenture 5. principal 6. Term

7. Serial 8. Convertible 9. Callable 10. registered 11. coupon 12. market 13. discount

14. premium 15. leverage 16. Bond Interest Payable 17. reversed 18. amortized 19. unamortized 20. bond sinking funds

EXERCISES Exercise 1 (a) Issuance of bonds 2

20-1

Apr.

Cash Bonds Payable

400 0 0 0 00 400 0 0 0 00

(b) Interest payment 10

Sept. 30

Bond Interest Expense

18 0 0 0 00

Cash

18 0 0 0 00 11

Dec. 31

Bond Interest Expense Bond Interest Payable

9 0 0 0 00

9 0 0 0 00 19

212

Chapter 22

Exercise 2

1. (a) Issuance of bonds 1

20-1

Mar.

Cash

515 0 0 0 00

Bonds Payable

500 0 0 0 00

Premium on Bonds Payable

15 0 0 0 00

(b) Interest payment and premium amortization 9

Aug. 31

Bond Interest Expense Premium on Bonds Payable

19 2 5 0 00

7 5 0 00

Cash

20 0 0 0 00 11

($15,000/20 periods = $750/period)

Dec. 31

Bond Interest Expense

Premium on Bonds Payable

Bond Interest Payable

12 8 3 3 33

5 0 0 00

13 3 3 3 33 27

2. Bonds payable section of balance sheet Long-term liabilities: Bonds payable Premium on bonds payable

$500,000 13,750

$513,750

Chapter 22

Corporations: Bonds

213

Exercise 3

(a) Issuance of bonds 1

20-1

Apr.

Cash

576 0 0 0 00

Discount on Bonds Payable

24 0 0 0 00

Bonds Payable

600 0 0 0 00

(b) Interest payment and discount amortization 9

Sept. 30

Bond Interest Expense

Discount on Bonds Payable

Cash

6 0 0 00 10 18 0 0 0 00 11

($24,000/40 periods = $600/period)

18 6 0 0 00

Dec. 31

Bond Interest Expense

Discount on Bonds Payable

Bond Interest Payable

9 3 0 0 00

3 0 0 00 26 9 0 0 0 00 27

214

Chapter 22

Exercise 4 (a) Initial sinking fund deposit 1 2

Bond Sinking Fund

38 0 0 0 00

Cash

38 0 0 0 00

(b) First year’s earnings 11 12

Bond Sinking Fund

3 0 5 0 00

Sinking Fund Earnings

3 0 5 0 00 12

Bonds Payable

400 0 0 0 00

Bond Sinking Fund

400 0 0 0 00 22

(d) Return of excess cash 31 32

Cash Bond Sinking Fund

10 5 0 0 00

10 5 0 0 00 32

Chapter 22

Corporations: Bonds

215

PROBLEMS Problem 5 GENERAL JOURNAL DATE 1

(a)

DESCRIPTION

Cash

PAGE POST. REF.

DEBIT

500 0 0 0 00

Bonds Payable

CREDIT 1

500 0 0 0 00

3 4

(b)

Bond Sinking Fund

35 0 0 0 00

Cash

35 0 0 0 00

6 7

(c)

Bond Sinking Fund

3 0 0 0 00

Sinking Fund Earnings

3 0 0 0 00

9 10

(d)

Bond Interest Expense

22 5 0 0 00

Cash

11 12 13

(e)

Adjusting Entry Bond Interest Expense

11 2 5 0 00

Bond Interest Payable

(f)

Reversing Entry Bond Interest Payable

11 2 5 0 00

Bond Interest Expense

(g)

Bond Interest Expense

22 5 0 0 00

Cash

Bond Interest Expense

22 5 0 0 00

Cash

(h)

Adjusting Entry Bond Interest Expense

11 2 5 0 00

Bond Interest Payable

(i)

Bonds Payable

500 0 0 0 00

Bond Sinking Fund

500 0 0 0 00 34

11 2 5 0 00 31

22 5 0 0 00 26

(October 1)

22 5 0 0 00 22

(April 1)

11 2 5 0 00 19

20 21

11 2 5 0 00 15

16 17

22 5 0 0 00 11

(j)

Cash Bond Sinking Fund

1 8 5 0 00

1 8 5 0 00 37 38

216

Chapter 22

Problem 6 GENERAL JOURNAL DATE 1

(a)

DESCRIPTION

Cash

PAGE POST. REF.

DEBIT

CREDIT

624 0 0 0 00

Premium on Bonds Payable

24 0 0 0 00

Bonds Payable

600 0 0 0 00

4 5

(b)

Bond Interest Expense Premium on Bonds Payable

17 4 0 0 00

6 0 0 00

Cash

18 0 0 0 00

8 9

(c)

Adjusting Entry

Bond Interest Expense

Premium on Bonds Payable

Bond Interest Payable

11 6 0 0 00 4 0 0 00

(d)

Reversing Entry Bond Interest Payable

15 16

Bond Interest Expense

Premium on Bonds Payable

12 0 0 0 00

4 0 0 00 17 18

(e)

Bond Interest Expense Premium on Bonds Payable

17 4 0 0 00 6 0 0 00

Cash

Bond Interest Expense

Premium on Bonds Payable

17 4 0 0 00 6 0 0 00

Cash

24 25

18 0 0 0 00 26

(September 1)

(f)

Adjusting Entry

Bond Interest Expense

Premium on Bonds Payable

Bond Interest Payable

11 6 0 0 00 4 0 0 00

30 31

12 0 0 0 00 32

18 0 0 0 00 21

(March 1)

11 6 0 0 00 16

18 19

12 0 0 0 00 12

13 14

(g)

Reversing Entry Bond Interest Payable

Bond Interest Expense

Premium on Bonds Payable

12 0 0 0 00

11 6 0 0 00 36 4 0 0 00 37

Chapter 22

Corporations: Bonds

217

Problem 6 (Concluded) GENERAL JOURNAL DATE 1

(h)

2 3 4

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Bonds Payable

60 0 0 0 00

Premium on Bonds Payable

2 1 6 0 00

Loss on Bonds Redeemed Cash

1 4 4 0 00

63 6 0 0 00

Problem 7 GENERAL JOURNAL DATE 1

(a)

DESCRIPTION

Cash Discount on Bonds Payable

PAGE POST. REF.

DEBIT

396 0 0 0 00

4 0 0 0 00

Bonds Payable

CREDIT

400 0 0 0 00

4 5

(b)

Bond Interest Expense

Discount on Bonds Payable

Cash

16 2 0 0 00

2 0 0 00

16 0 0 0 00

8 9

(c)

Adjusting Entry Bond Interest Expense

10 11

Discount on Bonds Payable

Bond Interest Payable

8 1 0 0 00

1 0 0 00 11 8 0 0 0 00 12

13 14

(d)

Reversing Entry

Bond Interest Payable

Discount on Bonds Payable

Bond Interest Expense

8 0 0 0 00 1 0 0 00

Bond Interest Expense Discount on Bonds Payable

Cash

16 2 0 0 00

16 0 0 0 00 21

(April 1)

22 23

Bond Interest Expense

Discount on Bonds Payable

Cash

2 0 0 00 20

23 24

(e)

8 1 0 0 00 17

18 19

(October 1)

16 2 0 0 00

2 0 0 00 25 16 0 0 0 00 26 27

218

Chapter 22

Problem 7 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

(f)

POST. REF.

DEBIT

CREDIT

Adjusting Entry Bond Interest Expense

PAGE

Discount on Bonds Payable

Bond Interest Payable

8 1 0 0 00

1 0 0 00

8 0 0 0 00

5 6

(g)

Reversing Entry

Bond Interest Payable

Discount on Bonds Payable

Bond Interest Expense

8 0 0 0 00

1 0 0 00

8 1 0 0 00

10 11

(h)

Bond Interest Expense

Discount on Bonds Payable

Cash

16 2 0 0 00

16 0 0 0 00 13 14

Bond Interest Expense

16 17

Discount on Bonds Payable

Cash

16 2 0 0 00

16 0 0 0 00 18 19

(i)

Adjusting Entry Bond Interest Expense

22 23

Discount on Bonds Payable

Bond Interest Payable

8 1 0 0 00

1 0 0 00 23 8 0 0 0 00 24

(j)

Reversing Entry

Bond Interest Payable

Discount on Bonds Payable

Bond Interest Expense

8 0 0 0 00 1 0 0 00

27 28

8 1 0 0 00 29

30 31

2 0 0 00 17

(October 1)

2 0 0 00 12

(April 1)

(k)

Bonds Payable

80 0 0 0 00

Discount on Bonds Payable

5 6 0 00 32

Gain on Bonds Redeemed

1 8 4 0 00 33

Cash

77 6 0 0 00 34

Chapter 22

Corporations: Bonds

219

CHAPTER 22 APPENDIX

Apx. Exercise 1 GENERAL JOURNAL DATE

DESCRIPTION

Bond Interest Expense

Premium on Bonds Payable

PAGE POST. REF.

DEBIT

4 2 7 2 00

2 2 8 00

Cash

CREDIT

4 5 0 0 00

Apx. Exercise 2 GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

Bond Interest Expense

DEBIT

CREDIT

16 4 1 0 00

Cash

Discount on Bonds Payable

15 7 5 0 00

6 6 0 00

Apx. Problem 3 GENERAL JOURNAL DATE 1

DESCRIPTION

Sept. 1

PAGE POST. REF.

DEBIT

Bond Interest Expense

28 7 5 6 00

Premium on Bonds Payable

1 2 4 4 00

Cash

CREDIT

30 0 0 0 00

Adjusting Entry

5 6

Dec. 31

Bond Interest Expense

Premium on Bonds Payable

Bond Interest Payable

19 1 3 3 00

8 6 7 00

20 0 0 0 00

Reversing Entry

10 11

Jan.

Bond Interest Payable

Bond Interest Expense

Premium on Bonds Payable

20 0 0 0 00

19 1 3 3 00 12 8 6 7 00 13

14 15 16 17 18

Mar.

Bond Interest Expense

28 7 0 0 00

Premium on Bonds Payable

1 3 0 0 00

Cash

30 0 0 0 00 17 18

220

Chapter 22

Apx. Problem 4 GENERAL JOURNAL DATE 1

Oct.

DESCRIPTION

Bond Interest Expense

Discount on Bonds Payable

Cash

PAGE POST. REF.

DEBIT

4 2 2 0 00 75 2

CREDIT 1

1 7 0 00

4 0 5 0 00

Adjusting Entry

5 6

Dec. 31

Bond Interest Expense

Discount on Bonds Payable

Bond Interest Payable

2 1 1 4 00

8 9 00

2 0 2 5 00

Reversing Entry

10 11

Jan.

Bond Interest Payable

Discount on Bonds Payable

Bond Interest Expense

2 0 2 5 00

8 9 00

2 1 1 4 00 13

14 15

Apr.

Bond Interest Expense

Discount on Bonds Payable

Cash

4 2 2 8 00

1 7 8 00 16 4 0 5 0 00 17 18

Chapter 23

Statement of Cash Flows

221

CHAPTER 23 REVIEW QUESTIONS 1. net income cash flows from operating activities 2. accrual 3. sources, uses Or, where the cash came from and how it was used. 4. operating, investing, and financing 5. investing 6. financing 7. operating 8. operating

9. operating 10. cash and cash equivalents 11. income statement, statement of retained earnings, balance sheet for beginning and end of period, additional information on cash flows 12. direct, indirect 13. added to 14. added to 15. deducted from 16. deducted from 17. deducted from

18. added to 19. additions to net income, cash inflows from investing and financing activities 20. subtractions from net income, cash outflows from investing and financing activities 21. cash paid for interest, income taxes 22. noncash investing and financing activity 23. subtracted from net income to compute cash from operating activities 24. cash equivalents 25. operating

5. operating activity 6. investing activity 7. investing activity

8. operating activity 9. financing activity 10. operating activity

EXERCISES Exercise 1 1. financing activity 2. operating activity 3. financing activity 4. investing activity

Exercise 2 $87,500 – $78,600 = $8,900 increase

222

Chapter 23

Exercise 3 Accounts Receivable BB

164,500

BB 243,600 9,800 (1)

Merchandise Inventory

154.700

(2)

7,200

EB 250,800 Cash

Cash flows from operating activities:

Operating Activities

Net income

$300,000

Decrease in accounts receivable

(1)

9,800

Increase in merchandise inventory

(2)

(7,200)

Net cash provided by operating activities BB: Beginning Balance

$302,600

Net income

300,000 (1)

9,800 7,200 (2)

Cash from operating activities

302,600

EB: Ending Balance

(1) The decrease in accounts receivable increases cash from operating activities. (2) The increase in merchandise inventory decreases cash from operating activities.

Chapter 23

Statement of Cash Flows

223

Exercise 4 Accounts Receivable

Accounts Payable

BB 164,500

145,000 BB 9,800

(1)

11,000 (4)

EB 154,700

156,000 EB

Merchandise Inventory

Income Tax Payable

BB 243,600

15,000 BB 16,800

(2)

(5)

5,000

EB 226,800

10,000 EB

Prepaid Rent BB

24,000

(3)

2,000

26,000 Cash

Cash flows from operating activities:

Operating Activities

Net income

$200,000

Net income

200,000

Decrease in accounts receivable

(1)

9,800

(1)

9,800

Decrease in merchandise inventory

(2)

16,800

(2)

16,800

Increase in prepaid rent

(3)

(2,000)

Increase in accounts payable

(4)

11,000

Decrease in income tax payable

(5)

(5,000)

Net cash provided by operating activities BB: Beginning Balance

$230,600

2,000 (3) (4)

11,000 5,000 (5)

Cash from operating activities

230,600

EB: Ending Balance

224

Chapter 23

Exercise 5 Cash flows from operating activities after adjusting for changes in current assets and current liabilities:

$225,000

Adjustments for noncash expenses: Depreciation expense

20,000

Patent amortization

35,000

Total cash provided by operating activities

$280,000

Exercise 6 Cash flows from investing activities: Purchased land

$(10,000)

Total cash used for investing activities

$(10,000)

Cash flows from financing activities: Issued note payable

$ 50,000)

Paid mortgage

(5,000)

Net cash provided by financing activities

45,000)

Exercise 7

Cash................................................................................................ Government notes ..........................................................................

20-2 $87,500 10,000 $97,500

20-1 $78,600 12,000 $90,600

Change in cash and cash equivalents = $97,500 − $90,600 = $6,900 increase

Chapter 23

Statement of Cash Flows

225

Exercise 8 Kenlawn Nursery Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$18,000

Add loss on sale of land

2,000

Total cash provided by operating activities

$20,000

Investing activities: Sold land

15,000

Net increase in cash

$35,000

Cash, January 1, 20-2

10,000

Cash, December 31, 20-2

$45,000

Exercise 9 Pinehurst Corporation Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$46,300)

Adjustments for changes in current assets and liabilities related to operating activities: Increase in accounts receivable

(9,300)

Increase in merchandise inventory

(9,600)

Decrease in supplies

2,300)

Increase in prepaid insurance

(1,900)

Decrease in accounts payable

(8,000)

Decrease in accrued wages payable

(900)

Increase in accrued payroll taxes

500)

Noncash expenses Depreciation expense Net cash provided by operating activities

45,000) $64,400

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226

Chapter 23

Exercise 10 Schedule of Noncash Investing and Financing Activities: Acquired furniture by issuing a five-year note payable...........

$20,000

Exercise 11 Interest expense in 20-2

$8,200

Plus the decrease in accrued interest payable

800

Amount of cash paid for interest in 20-2

Cash 9,000*

$9,000

Accrued Interest Payable 3,200 BB (3)

(2)

800

Interest Expense (1)

2,400

8,200

*Cash paid for interest in 20-2 Income tax expense in 20-2

$30,300

Less the increase in income tax payable

(4,200)

Amount of cash paid for income taxes in 20-2

$26,100

Cash 26,100*

Income Tax Payable 11,300 (3)

Income Tax Expense BB

4,200

(2)

15,500

(1)

30,300

*Cash paid for income taxes in 20-2 BB: Beginning Balance EE: Ending Balance

Chapter 23

Statement of Cash Flows

227

PROBLEMS Problem 12 Roget’s Bottling Company Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$150,000

Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accounts receivable

5,000

Decrease in merchandise inventory

20,000

Increase in accounts payable

10,000

Total cash provided by operating activities

$185,000

228

Chapter 23

Problem 13 1. and 2. Moles Company Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$ 80,000)

Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accounts receivable

20,000)

Decrease in merchandise inventory

20,000)

Decrease in accounts payable

(60,000)

Net cash provided by operating activities

$ 60,000)

Cash flows from investing activities: Sold land

$ 10,000)

Purchased building

(140,000)

Purchased equipment

(90,000)

Net cash used by investing activities

(220,000)

Cash flows from financing activities: Issued common stock

$ 60,000)

Paid cash dividends

(20,000)

Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

40,000) $(120,000) 200,000) $ 80,000)

Schedule of Noncash Investing and Financing Activities: Acquired equipment by issuing a note payable

$ 10,000)

Supplemental Disclosures of Cash Flow Information: Cash paid during the year for income taxes

$ 43,000)

Chapter 23

Statement of Cash Flows

229

Problem 14 1. and 2.

T Accounts for Indirect Method Statement of Cash Flows Eubanks Corporation

Accrued Interest Receivable 175 100 (2) EB 75 BB

(19)

Notes Payable 29,500 4,300 10,000 35,200

BB (18) EB

(12)

Bonds Payable 50,000 50,000 —

BB EB

(plug at end)

Accounts Receivable 126,500 13,723 140,223

BB (3) EB

Merchandise Inventory 168,780 7,360 161,420

BB (5) EB

Supplies and Prepayments 6,840 3,198 10,038

BB (13) EB

Store Equipment 97,000 23,000 50,000 70,000

(6)

(4)

(10)

Delivery Equipment 80,000 32,500 112,500

Accumulated Depreciation— Delivery Equipment 20,000 BB 11,250 31,250

BB (15) (18) EB

Income Tax Payable 20,000 4,000 16,000

(11) EB

Office Equipment 84,975 10,025 10,000 105,000

Accumulated Depreciation— Office Equipment 15,250 BB 4,750 (11) 20,000 EB

Common Stock 215,000 35,000 250,000

BB EB

Accrued and Withheld Payroll Taxes 3,800 BB (8) 1,325 2,475 EB

Accumulated Depreciation— Store Equipment 35,000 BB (10) 20,000 10,000 (11) 25,000 EB BB (14) EB

(7)

Accounts Payable 96,864 31,576 65,288

BB (17) EB

Paid-In Capital in Excess of Par— Common Stock 77,500 BB 22,500 (17) 100,000 EB

(16)

Retained Earnings 59,156 32,000 118,124 145,280

BB (1) EB

Accrued Interest Payable 200 BB 10 (9) 210 EB Major entries of interest: Cash Accumulated Depreciation—Store Equipment Gain on Sale of Store Equipment Store Equipment

(10) (10) (10) (10)

40,000 20,000

Depreciation Expense Accumulated Depreciation—Store Equipment Accumulated Depreciation—Delivery Equipment Accumulated Depreciation—Office Equipment

(11)

26,000

Bonds Payable Loss on Retirement of Bond Cash

(12) (12) (12)

Cash and cash equivalents Cash Government notes Cash and cash equivalents Net increase in cash and cash equivalents

10,000 50,000

(11)

10,000

(11)

11,250

(11)

4,750 50,000 3,000 53,000 20-2 $89,947 1,500 $91,447 $33,447

20-1 $53,000 5,000 $58,000 (20)

BB: Beginning Balance EB: Ending Balance

230

Chapter 23

Problem 14 (Concluded) Eubanks Corporation Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accrued interest receivable Increase in accounts receivable Decrease in merchandise inventory Increase in supplies and prepayments Decrease in accounts payable Decrease in income tax payable Decrease in accrued and withheld payroll taxes Increase in accrued interest payable Noncash expenses and other adjustments: Gain on sale of store equipment Depreciation expense Loss on retirement of bonds payable Net cash provided by operating activities Cash flows from investing activities: Sold store equipment Purchased store equipment Purchased delivery equipment Purchased office equipment Net cash used by investing activities Cash flows from financing activities: Retired bonds payable Paid cash dividends Issued common stock Payment on short-term note payable Net cash used by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

$118,124

(1)

100 (13,723) 7,360 (3,198) (31,576) (4,000) (1,325) 10

(2) (3) (4) (5) (6) (7) (8) (9)

(10,000) 26,000 3,000

(10) (11) (12) $ 90,772

$ 40,000 (23,000) (32,500) (10,025)

(10) (13) (14) (15) (25,525)

$ (53,000) (32,000) 57,500 (4,300)

(12) (16) (17) (19) (20)

(31,800) $ 33,447 58,000 $ 91,447

Schedule of Noncash Investing and Financing Activities: Purchased office equipment by issuing long-term note payable

(18)

$ 10,000

Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest Income taxes

(21) (21)

To compute cash paid for interest and taxes, prepare the following entries: Interest Expense (see income statement) Accrued Interest Payable (increase in Accrued Interest Payable) Cash (plug) Income Tax Expense (see income statement) Income Tax Payable (decrease in Income Tax Payable) Cash (plug)

2,490 64,000

2,500 (21)

10 2,490

(21)

64,000

60,000 4,000

Chapter 23

Statement of Cash Flows

231

CHAPTER 23 APPENDIX REVIEW QUESTIONS 1. 2. 3. 4. 5. 6.

deducted from added to added to deducted from added to deducted from

EXERCISES Apx. Exercise 1 Net sales .................................................................................. Add the decrease in accounts receivable ................................. Cash received from customers................................................. Cash (2)

559,800

$550,000 9,800 $559,800

Accounts Receivable BB (1)

164,500 550,000 559,800

154,700

Sales (2)

550,000

(1)

BB: Beginning Balance EB: Ending Balance

(1)

Entry for sales assuming that all were made on account.

(1)

Accounts Receivable……………. Sales……………………….

550,000

(2)

Credit that must be made to accounts receivable to balance the account. This represents the amount of cash collected from customers.

(2)

Cash………………..……………. Accounts Receivable……....

559,800

550,000 559,800

232

Chapter 23

Apx. Exercise 2 Cost of goods sold ................................................................... Less decrease in merchandise inventory ................................. Cost of goods purchased.......................................................... Less increase in accounts payable ........................................... Cash paid to suppliers for merchandise, 20-2..........................

Cash

Merchandise Inventory BB 243,600

302,200 (3)

$330,000 16,800 $313,200 11,000 $302,200

Accounts Payable

Cost of Goods Sold

145,000 BB

(2) 313,200 330,000 (1) EB 226,800

(3) 302,200 313,200 (2)

(1)

330,000

Cost of Goods Sold ........................ Merchandise Inventory ..........

330,000

Merchandise Inventory .................. Accounts Payable ..................

313,200

Accounts Payable ........................... Cash ......................................

302,200

156,000 EB

BB: Beginning Balance EB: Ending Balance (1) (2)

(3)

Entry to record cost of goods sold.

(1)

Debit required to balance the merchandise inventory account. This represents purchases for the period. Assume that all purchases were made on account.

(2)

Debit required to balance accounts payable account. This represents the amount of cash paid for merchandise.

(3)

330,000 313,200

302,200

Chapter 23

Statement of Cash Flows

233

Apx. Exercise 3 (a) Net sales .................................................................................. Less increase in accounts receivable ....................................... Cash received from customers.................................................

$625,000 (9,300) $615,700

(b) Cost of goods sold ................................................................... Add increase in merchandise inventory .................................. Cost of goods purchased during 20-2 ...................................... Add reduction in accounts payable.......................................... Cash paid to suppliers of merchandise ....................................

$330,000 9,600 $339,600 8,000 $347,600

(c) Wages expense ........................................................................ Add reduction in accrued wages payable ................................ Cash paid to employees ...........................................................

$125,500 900 $126,400

(d) No cash is paid for depreciation. (e) Insurance expense.................................................................... Add increase in prepaid insurance ........................................... Cash paid for insurance ...........................................................

$22,500 1,900 $24,400

(f) Supplies expense ..................................................................... Less decrease in supplies ......................................................... Cash paid for supplies .............................................................

$45,500 (2,300) $43,200

(g) Payroll tax expense .................................................................. Less increase in accrued payroll taxes..................................... Cash paid for payroll taxes ......................................................

$10,200 (500) $ 9,700

Apx. Exercise 4 Interest expense.............................................................................. Less increase in accrued interest payable ...................................... Cash paid for interest .....................................................................

$18,200 (200) $18,000

Interest revenue .............................................................................. Plus decrease in accrued interest receivable .................................. Cash received from interest ...........................................................

$10,300 800 $11,100

234

Chapter 23

PROBLEMS Apx. Problem 5 1. Roget’s Bottling Company Schedule for the Calculation of Cash Generated from Operating Activities For Year Ended December 31, 20-2 Income Statement

Additions

Net sales

$800,000

Cost of goods sold

450,000

(1)

Deductions

$5,000

$805,000

Cash received from customers

420,000

Cash paid for merchandise

(2) $(20,000) (3)

Gross profit

Cash Flows

$350,000

(10,000)

$385,000

Cash paid for operating expenses

Operating expenses

119,000

Operating income

$231,000

$266,000

Income tax expense

81,000

Cash paid for income taxes Cash generated from

$150,000

$185,000

operating activities

Net income

1. The decrease in accounts receivable increased the amount of cash received from sales. Add this $5,000 increase to sales to compute cash received from customers. 2. The $20,000 decrease in merchandise inventory indicates that Roget’s purchased less inventory than it sold. Subtract this decrease from cost of goods sold to compute the cost of goods purchased for the year ($450,000 − $20,000 = $430,000). 3. The $10,000 increase in accounts payable means that Roget’s did not pay for all of the purchases made in 20-2. Subtract the increase in the amount owed to suppliers from the cost of goods purchased to compute cash paid for merchandise ($430,000 − $10,000 = $420,000). 2. Roget’s Bottling Company Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from operating activities: Cash received from customers

$ 805,000)

Cash paid for merchandise

$(420,000)

Cash paid for operating expenses

(119,000)

Income taxes paid

(81,000)

Total cash disbursed for operating activities

(620,000)

Net cash provided by operating activities

$ 185,000)

Chapter 23

Statement of Cash Flows

235

Apx. Problem 6 1. Moles Company Schedule for the Calculation of Cash Generated from Operating Activities For Year Ended December 31, 20-2 Income Statement Net sales

Operating expenses Operating income

700,000 $ 300,000

(3)

60,000

Cash Flows $1,020,000

(2) $(20,000)

740,000 $ 280,000

Cash paid for merchandise Cash paid for operating expenses

$ 103,000

43,000

Cash paid for income taxes Cash generated from

60,000

operating activities

80,000

177,000

Cash received from customers

177,000 177,000 $ 123,000

Income tax expense Net income

Deductions

$1,000,000 (1) $20,000

Cost of goods sold Gross profit

Additions

1. Add the reduction in receivables to net sales to compute cash received from customers. 2. The $20,000 reduction in merchandise inventory is subtracted from cost of goods sold to compute the cost of goods purchased ($700,000 − $20,000 = $680,000). 3. Reducing the amount owed to suppliers (accounts payable) required the expenditure of additional cash. By adding the reduction in accounts payable to the cost of goods purchased, cash paid for merchandise is determined ($680,000 + $60,000 = $740,000).

236

Chapter 23

Apx. Problem 6 (Concluded) 2. Moles Company Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Cash received from customers Cash paid for merchandise

$1,020,000) $ (740,000)

Cash paid for operating expenses

(177,000)

Cash paid for income taxes

(43,000)

Total cash disbursed for operating activities

(960,000)

Net cash provided by operating activities

60,000)

Cash flows from investing activities: Sold land

10,000)

Purchased building

(140,000)

Purchased equipment

(90,000)

Net cash used by investing activities

(220,000)

Cash flows from financing activities: Issued common stock Paid cash dividends

60,000) (20,000)

Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents

40,000) $ (120,000)

Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

200,000) $

80,000)

10,000)

Schedule of Noncash Investing and Financing Activities: Acquired equipment by issuing a note payable

Chapter 23

Statement of Cash Flows

237

Apx. Problem 7 1. Eubanks Corporation Schedule for the Calculation of Cash Generated from Operating Activities For Year Ended December 31, 20-2 Income Statement Net sales Cost of goods sold Gross profit Operating expenses

Additions

$1,150,250 675,250

(3)

$31,576

Deductions

Cash Flows

(1) $(13,723)

$1,136,527

(2)

(7,360)

$ 475,000 301,876

(4)

3,198

(6)

1,325

(5)

280,399

(26,000)

$ 173,124

Interest revenue

500

Interest expense

2,500

(8)

(10)

Gain on sale of store equipment Loss on the retirement of bond Income tax expense

10,000

(9)

(10,000)

Cash paid for operating expenses

$ 156,662 (7)

(3,000) (10) 60,000 (11)

$ 118,124

Cash paid for merchandise

$ 437,061

Operating income

Net income

699,466

Cash received from customers

100

600

3,000 4,000

Interest received

2,490

Interest paid

64,000

Gain not related to operating activities Loss not from operating activities Cash paid for income taxes

90,772

Cash generated from operating activities

1. The increase in receivables reduced the amount of cash received from sales. This $13,723 increase is subtracted from net sales to compute cash received from customers. 2. The $7,360 decrease in merchandise inventory indicates that Eubanks purchased less inventory than it sold. This decrease must be subtracted from cost of goods sold to compute purchases for the year ($675,250 − $7,360 = $667,890). 3. By accelerating payments to suppliers of merchandise inventory, the amount of cash paid to suppliers this period was increased. The $31,576 decrease in the amount owed to suppliers is added to the cost of goods purchased to compute cash paid for merchandise ($667,890 + $31,576 = $699,466). 4. The increase in supplies and prepayments indicates that Eubanks not only replenished these items for the amounts used during the period, but also increased the supplies on hand and prepayments. Thus, the cash paid for these items is greater than the expense recognized for the period. The increase of $3,198 must be added in the calculation of cash paid for operating expenses. 5. Depreciation is an operating expense but requires no cash outflow. The $26,000 in depreciation expense is subtracted from operating expenses to compute cash paid for operating expenses. 6. By making payments to the government and reducing accrued and withheld payroll taxes, the amount of cash paid to the government this period was increased. This increase of $1,325 is added to operating expenses to compute cash paid for operating expenses. 7. The $100 reduction in accrued interest receivable is added to interest revenue to determine the amount of interest received. 8. The $10 increase in accrued interest payable is deducted from interest expense to compute the amount of interest paid. 9. The gain on the sale of store equipment is reduced to zero. It is not related to operating activities. 10. The loss on the retirement of the bond is reduced to zero. It is not related to operating activities. 11. The reduction in income tax payable is added to income tax expense to compute cash paid for income taxes.

238

Chapter 23

Apx. Problem 7 (Concluded) 2. Eubanks Corporation Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Cash received from customers

$1,136,527)

Interest received

600)

Cash provided by operating activities Cash paid for merchandise

$1,137,127) $ (699,466)

Cash paid for interest

(2,490)

Cash paid for operating expenses

(280,399)

Cash paid for income taxes

(64,000)

Cash disbursed for operating activities

(1,046,355)

Net cash provided by operating activities

90,772)

Cash flows from investing activities: Sold store equipment

40,000)

Purchased store equipment

(23,000)

Purchased delivery equipment

(32,500)

Purchased office equipment

(10,025)

Net cash used by investing activities

(25,525)

Cash flows from financing activities: Retired bonds payable

(53,000)

Paid cash dividends

(32,000)

Issued common stock

57,500)

Payment on short-term note payable

(4,300)

Net cash used by financing activities

Net increase (decrease) in cash and cash equivalents

(31,800)

Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

33,447) 58,000)

91,447)

10,000)

Schedule of Noncash Investing and Financing Activities: Purchased office equipment by issuing long-term note payable

Chapter 24

Analysis of Financial Statements

239

CHAPTER 24 REVIEW QUESTIONS 1. liquidity 2. activity 3. profitability 4. Leverage 5. Market 6. horizontal 7. Vertical 8. working capital 9. current

10. acid-test current liabilities 11. net sales 12. cost of goods sold 13. net income 14. Return on common stockholders’ equity 15. number of common shares

16. leverage 17. interest expense 18. book value per share of common stock

EXERCISES Exercise 1

20-2 20-1

Current Assets $260,718 $240,775

Exercise 2 – – –

Current Liabilities $116,750 $127,900

÷ ÷ ÷

Current Liabilities $116,750 $127,900

= = =

Working Capital $143,968 $112,875

= = =

Quick Ratio 1.24 to 1 0.95 to 1

Current Assets 20-2 $260,718 20-1 $240,775

÷ ÷ ÷

Current Liabilities $116,750 $127,900

= = =

Current Ratio 2.23 to 1 1.88 to 1

Exercise 3

20-2 20-1

Quick Assets $144,646 $121,404

20-2

20-1

Quick assets: Cash Government notes Accounts receivable (net)

$ 49,646 20,000 75,000

$ 41,904 15,000 64,500

Total quick assets

$144,646

$121,404

Exercise 4 20-2 Accounts Receivable Turnover

Net Sales on Account

Average Accounts Receivable

$1,399,352 $69,750 20.06

Average Accounts Receivable

Average Collection Period

Beginning Accounts Rec. + Ending Accounts Rec.

365 Accounts Receivable Turnover

$64,500 + $75,000 2 $69,750

365 20.06 18.2 days

240

Chapter 24

Exercise 5 20-2 Merchandise Inventory Turnover

Average Merchandise Inventory

Cost of Goods Sold Average Merchandise Inventory

Beginning Merchandise Inv. + Ending Merchandise Inv.

$757,667 $106,400 7.12

$106,150 + $106,650 2

$106,400

Average Number of Days to Sell Inventory

365 Merchandise Inventory Turnover

365 7.12 51.26 days

Exercise 6 Asset Turnover

Net Sales

Average Assets

Beginning Assets + Ending Assets

20-2 $1,399,352 $1,057,996.50 1.32 to 1

$1,030,275 + $1,085,718 2 $1,057,996.50

Exercise 7 Profit Margin Ratio

Net Income Net Sales

20-2 $131,093 $1,399,352 9.37%

Chapter 24

Analysis of Financial Statements

241

Exercise 8 Return on Assets

Net Income Average Assets

Average Assets

Beginning Assets + Ending Assets

20-2 $131,093 $1,057,996.50 12.39%

$1,030,275 + $1,085,718 2

$1,057,996.50 Exercise 9 20-2 Return on Common Stockholders’ Equity

Net Income Available to Common Stockholders Average Common Stockholders’ Equity

$131,093 $723,171.50

18.13% Average Common Stockholders’ Equity

Beginning Stockholders’ Equity + Ending Stockholders’ Equity 2

$677,375 + $768,968 2 $723,171.50

Exercise 10 20-2 Earnings per Share of Common Stock

Average Common Shares Outstanding

Net Income Available to Common Stockholders Average Common Shares Outstanding

Beginning Shares of Common Stock + Ending Shares of Common Stock 2

$131,093 22,500 $5.83 per share

20,000 + 25,000 2 22,500

242

Chapter 24

Exercise 11 20-2

Debt-to-Equity Ratio Total Liabilities

Total Stockholders’ Equity

$316,750

$768,968

Ratio of Liabilities to Stockholders’ Equity 0.41 to 1

Exercise 12 20-2

Assets-to-Equity Ratio Total Assets

Total Stockholders’ Equity

$1,085,718

$768,968

1.41 to 1

Exercise 13 Times Interest Earned

20-2

Net income Income tax Interest expense Income before taxes and interest $163,708 ÷ $22,250 = 7.36 times

$131,093 10,365 22,250 $163,708

Exercise 14 Return on Assets with Two Components Profit margin ratio



Asset turnover

Net income Net sales



Net sales Avg. assets

$131,093 $1,399,352



$1,399,352 $1,057,996.50 ($1,030,275 + $1,085,718)/2

9.37%



1.32

12.37%

Chapter 24

Analysis of Financial Statements

243

Exercise 15 Return on Equity with Three Components Profit margin ratio



Asset turnover



Leverage

Net income Net sales



Net sales Avg. assets



Avg. assets Avg. stockholders’ equity

$131,093 $1,399,352



$1,399,352 $1,057,996.50



$1,057,996.50 $723,171.50

($1,030,275 + $1,085,718)/2

9.37%



($677,375 + $768,968)/2



1.32

1.46

18.06%

Exercise 16 20-2

Price-Earnings Ratio (PE) Market Price of Common Stock

Earnings per Share of Common Stock

Price-Earnings Ratio

$116/share

$5.83

19.90

Exercise 17 Book Value per Share of Common Stock

20-2

Total Common Stockholders’ Equity

Number of Common Shares Outstanding

$768,968

25,000

Book = Value per Share of Common Stock =

$30.76

244

Chapter 24

PROBLEMS Problem 18 Ala Moana Company Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 INCREASE (DECREASE)

20-2

20-1

Net sales

$971,772)

$908,778)

$ 62,994)

6.9

Cost of goods sold

547,690)

517,968)

29,722)

5.7

Gross profit

$424,082)

$390,810)

$ 33,272)

8.5

Operating expenses

396,675)

347,890)

48,785)

14.0

Operating income

$ 27,407)

$ 42,920)

$(15,513)

−36.1

(1,000)

(2,000)

(1,000)

−50.0

$ 26,407)

$ 40,920)

$(14,513)

−35.5

7,922)

13,504)

(5,582)

−41.3

$ 18,485)

$ 27,416)

$ (8,931)

−32.6

Other revenues and expenses Income before income tax Income tax expense Net income

PERCENT

Problem 19 Ala Moana Company Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2

PERCENT

20-1

PERCENT

Net sales

$971,772)

100.0

$908,778)

100.0

Cost of goods sold

547,690)

56.4

517,968)

57.0

Gross profit

$424,082)

43.6

$390,810)

43.0

Operating expenses

396,675)

40.8

347,890)

38.3

Operating income

$ 27,407)

2.8

$ 42,920)

4.7

(1,000)

0.1

(2,000)

0.2

$ 26,407)

2.7

$ 40,920)

4.5

7,922)

0.8

13,504)

1.5

$ 18,485)

1.9

$ 27,416)

3.0

Other revenue and expenses Income before income tax Income tax expense Net income

Chapter 24

Analysis of Financial Statements

245

Problem 20 Ala Moana Company Comparative Balance Sheet December 31, 20-2 and 20-1 INCREASE (DECREASE)

20-2

20-1

PERCENT

$179,318

$167,204

$ 12,114)

7.2

Land

$130,000

0.0

Building (net)

400,000

450,000

(50,000)

−11.1

Delivery equipment (net)

30,000

39,000

(9,000)

−23.1

Office equipment (net)

47,800

51,600

(3,800)

−7.4

Patents

8,000

9,000

(1,000)

−11.1

$615,800

$679,600

$(63,800)

−9.4

$795,118

$846,804

$(51,686)

−6.1

$ 86,675

$121,165

$(34,490)

−28.5

300,000

350,000

(50,000)

−14.3

$386,675

$471,165

$(84,490)

−17.9

Common stock

$215,000

$200,000

$ 15,000)

7.5

Paid-in capital in excess of par

125,000

120,000

5,000)

4.2

Retained earnings

68,443

55,639

12,804)

23.0

$408,443

$375,639

$ 32,804)

8.7

$795,118

$846,804

$(51,686)

−6.1

Assets Current assets Property, plant, and equipment:

Total property, plant, and equipment Total assets Liabilities Current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders’ Equity

Total stockholders’ equity Total liabilities and stockholders’ equity

246

Chapter 24

Problem 21 Ala Moana Company Comparative Balance Sheet December 31, 20-2 and 20-1 20-2

PERCENT*

20-1

PERCENT*

Assets Current assets

$179,318

22.6

$167,204

19.7

Land

$130,000

16.3

$130,000

15.4

Building (net)

400,000

50.3

450,000

53.1

Delivery equipment (net)

30,000

3.8

39,000

4.6

Office equipment (net)

47,800

6.0

51,600

6.1

Patents

8,000

1.0

9,000

1.1

$615,800

77.4

$679,600

80.3

$795,118

100.0

$846,804

100.0

$ 86,675

10.9

$121,165

14.3

300,000

37.7

350,000

41.3

$386,675

48.6

$471,165

55.6

Common stock

$215,000

27.0

$200,000

23.6

Paid-in capital in excess of par

125,000

15.7

120,000

14.2

Retained earnings

68,443

8.6

55,639

6.6

$408,443

51.4

$375,639

44.4

$795,118

100.0

$846,804

100.0

Property, plant, and equipment:

Total property, plant, and equip. Total assets Liabilities Current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders’ Equity

Total stockholders’ equity Total liabilities and stockholders’ equity

*Percentage may vary due to rounding.

Chapter 25

Departmental Accounting

247

CHAPTER 25 REVIEW QUESTIONS 1.

2. 3. 4. 5.

planning control performance evaluation profit center departmental gross profit gross profit percentage departmental operating income

6. 7. 8. 9. 10. 11. 12.

indirect direct expenses indirect expenses total net sales relative square feet experience with accounts written off departmental direct operating margin

EXERCISES Exercise 1 Pittsfield Plumbing and Hardware Supplies Income Statement (Condensed) For the Year Ended December 31, 20-Plumbing Supplies Net sales Cost of goods sold Gross profit

Hardware

Total

$100,550

$250,000

$350,550

70,480

155,870

226,350

$ 30,070

$ 94,130

$124,200

Operating expenses

95,700

Operating income

$ 28,500

Gross profit percentage: Plumbing supplies = $30,070/$100,550 = 30% Hardware = $94,130/$250,000 = 38% Exercise 2

Expense Store clerk wages

Installer wages

Rent expense

Allocation of Expenses to Departments Department Direct Indirect Floor $54,788 $26,733 Wall 22,600 23,707 Floor 42,732 0 Wall 52,020 0 Floor 0 6,138 Wall 0 3,762

Total $81,521 46,307 42,732 52,020 6,138 3,762

Calculations: 1. $485,000 + $538,866 = $1,023,866 Percent of net sales—wall covering = $485,000/$1,023,866 = 47% Percent of net sales—floor covering = $538,866/$1,023,866 = 53%

248

Chapter 25

Exercise 2 (Concluded) Indirect expenses: Employee No. 4 Employee No. 5

Wall covering = Floor covering =

$31,800 18,640 $50,440

$50,440 × 0.47 = $50,440 × 0.53 =

Employee No. 8 9 10 11

Hours— Floor 1,288 1,180 980 300

$23,707 26,733 $50,440

Hours— Wall 658 850 1,480 1,725

Total Hours 1,946 2,030 2,460 2,025

Percentage— Percentage— Floor Wall 66% 34% 58% 42% 40% 60% 15% 85%

Note: Due to differences in wage rates paid to each employee, it is better to allocate for each employee, rather than for all employees at once. Employee No. 8 9 10 11

Wage Expense $21,406 23,345 30,258 19,743 $94,752

Square footage, floor covering Square footage, wall covering

Floor % Amount 66% $14,128 58% 13,540 40% 12,103 15% 2,961 $42,732

Wall % Amount 34% $ 7,278 42% 9,805 60% 18,155 85% 16,782 $52,020

4,280 2,600 6,880

Percentage of square footage: Floor covering: 4,280/6,880 = 62% Wall covering: 2,600/6,880 = 38% Allocation of rent expense: Floor covering: $9,900  0.62 = Wall covering: 9,900  0.38 =

$6,138 3,762 $9,900

Chapter 25

Departmental Accounting

249

Exercise 3 Miller & Hastey Departmental Operating Expense Summary For Year Ended December 31, 20-Expense

Total

Direct

Store clerks’ wages expense Installer wages expense Rent expense Total expenses

$127,828 94,752 9,900 $232,480

$54,788 42,732 0 $97,520

Floor Covering Indirect Total $26,733 0 6,138 $32,871

$ 81,521 42,732 6,138 $130,391

Direct

Wall Covering Indirect

$22,600 52,020 0 $74,620

$23,707 0 3,762 $27,469

Total $ 46,307 52,020 3,762 $102,089

PROBLEMS Problem 4 Moss and Miller Bakery Shop Income Statement (Condensed) For Year Ended December 31, 20-Cake Dept.

Bread Dept.

Total

Net sales

$850,000

$770,000)

$1,620,000

Cost of goods sold

488,500

526,800)

1,015,300

Gross profit

$361,500

$243,200)

$ 604,700

$ 45,600

$ 82,800)

$ 128,400

Truck drivers’ wages expense

23,800

38,800)

62,600

Depreciation expense—delivery equipment

12,600

11,400)

24,000

Bakery rent expense

10,700

15,800)

26,500

Bad debt expense

2,300

1,800)

4,100

128,200

95,600)

223,800

$223,200

$246,200)

$ 469,400

$138,300

$ (3,000)

$ 135,300

Operating expenses: Bakery wages expense

Other operating expenses Total operating expenses Operating income (loss)

250

Chapter 25

Problem 5 1. Wild West Wear Income Statement For Year Ended June 30, 20-Boots

Accessories

Total

Net sales

$550,200

$257,000

$807,200

Cost of goods sold

247,600

141,400

389,000

Gross profit

$302,600

$115,600

$418,200

$107,000

$ 50,800

$157,800

Advertising expense

43,200

15,700

58,900

Other operating expenses

49,000

26,000

75,000

$199,200

$ 92,500

$291,700

$103,400

$ 23,100

$126,500

Operating expenses: Wages expense

Total operating expenses Operating income

2. Departmental operating expense percentages: Boots operating expense percentage Accessories operating expense percentage

$199,200/$550,200 = 36.2% $92,500/$257,000 = 36.0%

Operating income percentages: Boots operating income percentage Accessories operating income percentage

$103,400/$550,200 = 18.8% $23,100/$257,000 = 9.0%

Chapter 25

Departmental Accounting

251

Problem 6 1. Games Unlimited Income Statement For Year Ended December 31, 20-Home Market

Commercial Market

Total

Net sales

$284,000

$395,000

$679,000

Cost of goods sold

146,250

175,000

321,250

Gross profit

$137,750

$220,000

$357,750

$ 26,000

$ 38,000

$ 64,000

Store clerks’ wages expense

32,000

36,000

68,000

Truck drivers’ wages expense

13,000

16,000

29,000

Bad debt expense

5,000

7,000

12,000

Depreciation expense—delivery equipment

8,000

6,000

14,000

Other operating expenses

24,000

18,000

42,000

$108,000

$121,000

$229,000

$ 29,750

$ 99,000

$128,750

Direct operating expenses: Advertising expense

Total direct operating expenses Departmental direct operating margin Indirect operating expenses: Store clerks’ wages expense

$ 12,000

Advertising expense

11,000

Store rent expense

22,000

Other operating expenses

15,000

Total indirect operating expenses

$ 60,000

Operating income

$ 68,750

2. Departmental direct operating margin percentages: Home market direct operating margin percentage Commercial market direct operating margin percentage

$29,750/$284,000 = 10.5% $99,000/$395,000 = 25.1%

Problem 7 Since department D has a negative direct operating margin, it should be eliminated, unless there is reason to believe that this is a temporary situation. Department A should be retained because of its positive direct operating margin, unless management believes that more than $70,000 in indirect costs could be eliminated by discontinuing the department.

Chapter 26

Manufacturing Accounting: The Job Order Cost System

253

CHAPTER 26 REVIEW QUESTIONS 1.

2. 3. 4. 5. 6. 7.

materials labor factory overhead direct indirect direct indirect factory overhead indirect materials indirect labor other factory overhead

10. 11.

12. 13.

materials work in process finished goods direct materials direct labor factory overhead cost of goods manufactured Materials Work in Process Finished Goods job order Materials

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

subsidiary materials requisition work in process subsidiary predetermined overhead job cost control overapplied underapplied process process

EXERCISES Exercise 1 Jonas Manufacturing Company Schedule of Cost of Goods Manufactured For Year Ended December 31, 20-Work in process, January 1

$22,000

Materials inventory, January 1

$18,000

Materials purchases

19,000

Materials available for use

$37,000

Materials inventory, December 31

21,500

Cost of materials used

$15,500

Direct labor

16,500

Overhead

8,200

Total manufacturing costs

40,200

Total work in process during the period

$62,200

Work in process, December 31

24,000

Cost of goods manufactured

$38,200

254

Chapter 26

Exercise 2 Jonas Manufacturing Company Cost of Goods Sold For Year Ended December 31, 20-Cost of goods sold: Finished goods inventory, January 1

$28,000

Cost of goods manufactured

38,200

Goods available for sale

$66,200

Finished goods inventory, December 31

26,000

Cost of goods sold

$40,200

Exercise 3 Jonas Manufacturing Company Balance Sheet (Partial) December 31, 20-Current assets: Cash

$ 18,000

Accounts receivable

15,000

Inventories: Finished goods

$26,000

Work in process

24,000

Materials

21,500

Supplies Total current assets

71,500 8,000 $112,500

Chapter 26

Manufacturing Accounting: The Job Order Cost System

255

Exercise 4 WATERTOWN Manufacturing Co.

JOB COST SHEET Job No.

Date Started

329

Item

RC Boat

For

Lakeside Wholesalers

DIRECT MATERIALS Req. No.

Date Completed

DIRECT LABOR

Amount

Hours

Jan. 24, 20--

Feb. 22, 20--

FACTORY OVERHEAD

Amount Direct Labor

471

$ 600

301

$1,000

507

1,500

$1,095.00

Overhead Rate Overhead Applied

50% $547.50

SUMMARY Direct Materials

$2,100.00

Direct Labor

1,095.00

Overhead

547.50

Total Cost

$3,742.50

Exercise 5 Direct labor hours rate:

$600,000 = $6/direct labor hour 100,000

Direct labor cost:

$600,000 = 150% of direct labor costs $400,000

Machine hours rate:

$600,000 = $3/machine hour used 200,000

Exercise 6 1.

Job 101

(a) (b) (c)

10 direct labor hours = 10 × $6 = $60 applied $80 direct labor costs = $80 × 1.5 = $120 applied 30 machine hours = 30 × $3 = $90 applied

Job 102

(a) (b) (c)

25 direct labor hours = 25 × $6 = $150 applied $250 direct labor costs = $250 × 1.5 = $375 applied 60 machine hours = 60 × $3 = $180 applied

Job 103

(a) (b) (c)

15 direct labor hours = 15 × $6 = $90 applied $100 direct labor costs = $100 × 1.5 = $150 applied 12 machine hours = 12 × $3 = $36 applied

256

Chapter 26

PROBLEMS Problem 7 GENERAL JOURNAL DATE 1

DESCRIPTION

Materials

PAGE POST. REF.

DEBIT

28 0 0 0 00

Accounts Payable

CREDIT 1

28 0 0 0 00

3 4

Work in Process (Job No. 101)

12 0 0 0 00

Work in Process (Job No. 102)

10 0 0 0 00

Materials

22 0 0 0 00

7 8

Factory Overhead

4 0 0 0 00

Materials

4 0 0 0 00

10 11

Work in Process (Job No. 101)

13 0 0 0 00

Work in Process (Job No. 102)

11 0 0 0 00

Wages Payable

24 0 0 0 00 13

Factory Overhead

2 5 0 0 00

Wages Payable

Factory Overhead

5 0 0 0 00

Cash

Work in Process (Job No. 101)

6 5 0 0 00

Work in Process (Job No. 102)

5 5 0 0 00

Factory Overhead

12 0 0 0 00 23

24 25 26

5 0 0 0 00 19

20 21

2 5 0 0 00 16

17 18

9 10

Finished Goods Inventory (Product A)

31 5 0 0 00

Work in Process (Job No. 101)

31 5 0 0 00 26

Finished Goods Inventory (Product B)

Work in Process (Job No. 102)

26 5 0 0 00

26 5 0 0 00 29

257

Chapter 26

Problem 7 (Concluded) GENERAL JOURNAL DATE 1

DESCRIPTION

Accounts Receivable

PAGE POST. REF.

DEBIT

35 0 0 0 00

Sales

CREDIT 1

35 0 0 0 00

Cost of Goods Sold

31 5 0 0 00

Finished Goods Inventory (Product A)

31 5 0 0 00

Accounts Receivable

29 0 0 0 00

Sales

29 0 0 0 00

Cost of Goods Sold

26 5 0 0 00

Finished Goods Inventory (Product B)

26 5 0 0 00 11

12 13 14

Factory Overhead Cost of Goods Sold

5 0 0 00

5 0 0 00 14

($12,000 factory overhead was applied, $11,500

actual factory overhead)

258

Chapter 26

Problem 8 GENERAL JOURNAL DATE 1

DESCRIPTION

Materials

PAGE POST. REF.

DEBIT

40 0 0 0 00

Accounts Payable

CREDIT 1

40 0 0 0 00

Work in Process (Job No. 20)

10 0 0 0 00

Work in Process (Job No. 21)

8 0 0 0 00

Work in Process (Job No. 22)

7 0 0 0 00

Work in Process (Job No. 23)

9 0 0 0 00

Materials

34 0 0 0 00

9 10

Factory Overhead

1 0 0 0 00

Materials

1 0 0 0 00 11

Work in Process (Job No. 20)

1 5 0 0 00

Work in Process (Job No. 21)

3 2 0 0 00

Work in Process (Job No. 22)

2 0 0 0 00

Work in Process (Job No. 23)

3 0 0 0 00

Wages Payable

9 7 0 0 00 17

18 19

Factory Overhead

5 0 0 00

Wages Payable

5 0 0 00 20

21 22

Factory Overhead

3 0 0 00

Cash

3 0 0 00 23

Work in Process (Job No. 20)

2 5 0 00

Work in Process (Job No. 21)

6 0 0 00

Work in Process (Job No. 22)

3 5 0 00

Work in Process (Job No. 23)

5 0 0 00

Factory Overhead

1 7 0 0 00 29

30 31 32

Finished Goods (Product D)

11 7 5 0 00

Work in Process (Job No. 20)

11 7 5 0 00 32

33 34 35

Finished Goods (Product E) Work in Process (Job No. 21)

11 8 0 0 00

11 8 0 0 00 35

259

Chapter 26

Problem 8 (Continued) GENERAL JOURNAL DATE

DESCRIPTION

Finished Goods (Product F)

PAGE POST. REF.

DEBIT

9 3 5 0 00

Work in Process (Job No. 22)

CREDIT 1

9 3 5 0 00

Finished Goods (Product G)

12 5 0 0 00

Work in Process (Job No. 23)

12 5 0 0 00

6 7

Accounts Receivable

13 0 0 0 00

Sales

13 0 0 0 00

Cost of Goods Sold

11 7 5 0 00

Finished Goods (Product D)

11 7 5 0 00 11

Accounts Receivable

12 8 0 0 00

Sales

Cost of Goods Sold

11 8 0 0 00

Finished Goods (Product E)

11 8 0 0 00 17

Accounts Receivable

10 7 0 0 00

Sales

10 7 0 0 00 20

Cost of Goods Sold

9 3 5 0 00

Finished Goods (Product F)

9 3 5 0 00 23

Accounts Receivable

14 3 0 0 00

Sales

14 3 0 0 00 26

Cost of Goods Sold

12 5 0 0 00

Finished Goods (Product G)

12 5 0 0 00 29

12 8 0 0 00 14

Cost of Goods Sold Factory Overhead

1 0 0 00

1 0 0 00 32

260

Chapter 26

Problem 8 (Concluded) Materials (a)

40,000

(b) (c)

Work in Process: Job No. 20 34,000 1,000

(b) (d) (g)

Work in Process: Job No. 21 (b) (d) (g)

8,000 3,200 600

(h)

9,000 3,000 500

(h)

11,800

(b) (d) (g)

11,750 11,800 9,350 12,500 100

11,750

7,000 2,000 350

(h)

9,350

Finished Goods 12,500

(h) (h) (h) (h)

Cost of Goods Sold (i) (i) (i) (i) (j)

(h)

Work in Process: Job No. 22

Work in Process: Job No. 23 (b) (d) (g)

10,000 1,500 250

11,750 11,800 9,350 12,500

(i) (i) (i) (i)

11,750 11,800 9,350 12,500

Factory Overhead (c) (e) (f)

1,000 500 300

(g) (j)

1,700 100

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

261

CHAPTER 27 REVIEW QUESTIONS 1.

materials work in process finished goods Cost of Goods Sold actual overhead costs overhead applied to production Work in Process Inventory Factory Overhead Factory Overhead

2. 3. 4. 5.

7. 8. 9.

10. 11. 12. 13.

Interest Expense Interest Payable Factory Overhead Factory Overhead Accumulated Depreciation underCost of Goods Sold Income Tax Payable Income Statement Balance Sheet

14. 15. 16.

17. 18. 19. 20.

factory overhead Income Statement cost of goods sold cost of goods manufactured factory overhead Income Summary Retained Earnings Factory Overhead Work in Process Inventory

EXERCISES Exercise 1 1. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Adjusting Entries

20-2

Dec. 31

(a) Work in Process Inventory Factory Overhead

8 0 0 0 00 8 0 0 0 00

4 5

(b) Factory Overhead

3 5 2 5 00

Factory Supplies

3 5 2 5 00

7 8

4 2 9 5 00

Prepaid Insurance

4 2 9 5 00

10 11

8 9 10

(d) Factory Overhead

14 1 8 5 00

Accumulated Depreciation—Factory Building

5 4 5 0 00 12

Accumulated Depreciation—Factory Equipment

8 7 3 5 00 13

14 15 16

(e) Factory Overhead Cost of Goods Sold

3 4 2 5 00

3 4 2 5 00 16

262

Chapter 27

Exercise 1 (Concluded) 2.

Factory overhead was overapplied by $3,425.

Exercise 2 Brinley Company Schedule of Cost of Goods Manufactured For Year Ended June 30, 20-2 Work in process, July 1, 20-1

$ 13,250

Direct materials Materials inventory, July 1, 20-1

$ 10,260

Materials purchases

147,150

Materials available for use

$157,410

Materials inventory, June 30, 20-2 Cost of materials used Less indirect materials charged to production Cost of direct materials used

14,300 $143,110 4,500 $138,610

Direct labor

290,350

Factory overhead

160,240

Total manufacturing costs

589,200

Total work in process during the period

$602,450

Work in process, June 30, 20-2

18,260

Cost of goods manufactured

$584,190

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

263

Exercise 3 1. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Adjusting Entries

20-3 2

Dec. 31

Work in Process Inventory Factory Overhead

12 8 0 0 00 12 8 0 0 00

4 5

Interest Receivable

9 2 0 00

Interest Revenue

9 2 0 00

7 8

Bad Debt Expense

3 9 2 0 00

Allowance for Doubtful Accounts

3 9 2 0 00

10 11

Office Supplies Expense

1 3 5 0 00

Office Supplies

Factory Overhead (Factory Supplies Expense)

4 2 5 0 00

Factory Supplies

Factory Overhead (Ins. Exp.—Factory Building & Equip.)

3 4 0 0 00

Prepaid Insurance

Factory Overhead (Depr. Expense—Factory Building)

4 6 0 0 00

Accumulated Depreciation—Factory Building

Factory Overhead (Depr. Expense—Factory Equipment)

6 1 0 0 00

Accumulated Depreciation—Factory Equipment

6 1 0 0 00 24

4 6 0 0 00 21

3 4 0 0 00 18

4 2 5 0 00 15

1 3 5 0 00 12

9 10

Interest Expense Interest Payable

8 2 5 0 00

8 2 5 0 00 27

264

Chapter 27

Exercise 3 (Concluded) 2. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Reversing Entries

20-4 2

Jan.

Factory Overhead Work in Process Inventory

12 8 0 0 00 12 8 0 0 00

4 5

Interest Revenue

9 2 0 00

Interest Receivable

9 2 0 00

7 8 9

Interest Payable Interest Expense

8 2 5 0 00

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

265

Exercise 4 GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Closing Entries

1 2

PAGE

Dec. 31

Income Summary

216 8 5 0 00

Factory Overhead (Subsidiary ledger accounts)

216 8 5 0 00

4 5

Factory Overhead

216 8 5 0 00

Income Summary

216 8 5 0 00

7 8

Sales Interest Revenue

842 7 5 0 00

1 4 0 0 00

Income Summary

844 1 5 0 00 10

11 12

Income Summary

750 9 8 5 00

Cost of Goods Sold

583 6 4 0 00 13

Wages Expense

102 4 0 0 00 14

Office Supplies Expense

3 7 4 0 00 15

Depreciation Expense—Office Equipment

6 2 3 0 00 16

Utilities Expense—Office

5 4 8 5 00 17

Bad Debt Expense

2 3 5 0 00 18

Advertising Expense

9 3 5 0 00 19

Interest Expense

8 4 2 0 00 20

Income Tax Expense

29 3 7 0 00 21

22 23

Income Summary

93 1 6 5 00

Retained Earnings

93 1 6 5 00 24

25 26 27

Retained Earnings Cash Dividends

16 0 0 0 00

16 0 0 0 00 27

266

Chapter 27

PROBLEMS Problem 5 1.

Rogerson Work For Year Ended TRIAL BALANCE DEBIT CREDIT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Cash Government Notes Interest Receivable Accounts Receivable Allowance for Doubtful Accounts Finished Goods Inventory Work in Process Inventory Materials Inventory Office Supplies Factory Supplies Land Factory Building Accum. Depr.—Factory Building Factory Equipment Accum. Depr.—Factory Equip. Accounts Payable Income Tax Payable Interest Payable Bonds Payable Capital Stock Paid-In Capital in Excess of Par Retained Earnings Cash Dividends Sales Interest Revenue Factory Overhead

28 3 0 0 00 7 0 0 0 00 (b)

7 2 0 00 21 4 6 0 00 11 3 2 0 00 10 2 4 0 00 5 7 2 0 00 7 1 5 0 00 100 0 0 0 00 90 0 0 0 00

(a)

33 34 35 36

2 9 0 0 00 4 2 5 0 00

3 0 0 0 00

10 0 0 0 00 15 2 0 0 00

(h)

4 5 0 0 00

(j)

5 2 7 5 00 4 0 0 00

50 0 0 0 00

(c)

100 0 0 0 00 60 0 0 0 00 20 0 0 0 00 76 2 7 0 00 20 0 0 0 00

84 6 0 0 00

395 2 0 0 00 5 0 0 00 97 5 0 0 00 (f) (h) (i)

(e)

2 9 5 0 00

(g)

3 3 8 0 00

15 0 0 0 00

(d)

(f)

(g)

Cost of Goods Sold Wages Expense Office Supplies Expense Utilities Expense—Office Bad Debt Expense Interest Expense Income Tax Expense

1 0 0 00

28 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(b)

4 2 5 0 00 (a) 3 0 0 0 00 4 5 0 0 00 4 1 0 0 00 (i)

210 4 0 0 00 82 1 0 0 00 (e)

2 9 0 0 00

(d)

3 3 8 0 00 4 0 0 00 5 2 7 5 00 30 8 5 5 00

1 0 0 00 2 9 5 0 00

4 1 0 0 00

5 1 0 0 00 8 0 0 0 00 21 0 0 0 00 790 3 9 0 00

790 3 9 0 00

30 8 5 5 00

Net Income

39 40

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

267

Problem 5 (Continued) Company Sheet December 31, 20-ADJUSTED TRIAL BALANCE DEBIT CREDIT

INCOME STATEMENT DEBIT CREDIT

28 3 0 0 00 7 0 0 0 00 1 0 0 00 28 0 0 0 00

BALANCE SHEET DEBIT CREDIT

28 3 0 0 00 7 0 0 0 00 1 0 0 00 28 0 0 0 00 4 1 0 0 00

2 3 4

4 1 0 0 00

21 4 6 0 00 14 2 7 0 00 10 2 4 0 00 2 8 2 0 00 2 9 0 0 00 100 0 0 0 00 90 0 0 0 00

21 4 6 0 00 14 2 7 0 00 10 2 4 0 00 2 8 2 0 00 2 9 0 0 00 100 0 0 0 00 90 0 0 0 00 18 0 0 0 00

5 6 7 8 9 10 11 12

18 0 0 0 00 13

50 0 0 0 00

50 0 0 0 00 14 5 0 0 00 15 2 0 0 00 5 2 7 5 00 4 0 0 00 100 0 0 0 00 60 0 0 0 00 20 0 0 0 00 76 2 7 0 00

14 5 0 0 00 15 15 2 0 0 00 16 5 2 7 5 00 17 4 0 0 00 18 100 0 0 0 00 19 60 0 0 0 00 20 20 0 0 0 00 21 76 2 7 0 00 22

20 0 0 0 00

100 4 5 0 00

20 0 0 0 00 395 2 0 0 00 6 0 0 00 100 4 5 0 00

395 2 0 0 00 6 0 0 00

23 24 25 26 27 28 29

206 3 0 0 00 82 1 0 0 00 2 9 0 0 00 5 1 0 0 00 3 3 8 0 00 8 4 0 0 00 26 2 7 5 00 809 9 9 5 00

809 9 9 5 00

206 3 0 0 00 82 1 0 0 00 2 9 0 0 00 5 1 0 0 00 3 3 8 0 00 8 4 0 0 00 26 2 7 5 00 334 4 5 5 00 61 3 4 5 00 395 8 0 0 00

30 31 32 33 34 35 36

395 8 0 0 00 5

375 0 9 0 00

313 7 4 5 00 37

395 8 0 0 00 7 0

375 0 9 0 00

61 3 4 5 00 38 8 375 0 9 0 00 39 40

268

Chapter 27

Problem 5 (Continued) 2. a. Rogerson Company Income Statement For Year Ended December 31, 20-Net sales

$395,200

Less cost of goods sold: Finished goods inventory, January 1

$ 19,300

Cost of goods manufactured

208,460

Cost of goods available for sale

$227,760

Finished goods inventory, December 31

21,460

Cost of goods sold

206,300

Gross profit

$188,900

Operating expenses: Wages expense

$ 82,100

Office supplies expense

2,900

Utilities expense—office

5,100

Bad debt expense

3,380

Total operating expenses Operating income

93,480 $ 95,420

Other revenue: Interest revenue

600 $ 96,020

Other expense: Interest expense Income before income taxes

8,400 $ 87,620

Income tax

26,275

Net income

$ 61,345

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

269

Problem 5 (Continued) 2. b. Rogerson Company Schedule of Cost of Goods Manufactured For Year Ended December 31, 20-Work in process, January 1

Materials inventory, January 1

$13,650

Materials purchases

43,200

Materials available for use

$56,850

Materials inventory, December 31

10,240

Cost of materials used

9,480

$46,610

Direct labor

70,290

Factory overhead

96,350

Total manufacturing costs

213,250

Total work in process during the period

$222,730

Work in process, December 31

14,270

Cost of goods manufactured

$208,460

2. c. Rogerson Company Statement of Retained Earnings For Year Ended December 31, 20-Retained earnings, January 1 Add net income for the year (after provision for income taxes of $26,275)

$ 76,270 61,345 $137,615

Less cash dividends Retained earnings, December 31

20,000 $117,615

270

Chapter 27

Problem 5 (Continued) 2. d. Rogerson Company Balance Sheet December 31, 20-Assets Current assets: Cash

$ 28,300

Government notes

7,000

Interest receivable

100

Accounts receivable Less allowance for doubtful accounts

$28,000 4,100

23,900

Inventories: Finished goods

$21,460

Work in process

14,270

Materials

10,240

45,970

Office supplies

2,820

Factory supplies

2,900

Total current assets

$110,990

Property, plant, and equipment: Land Factory building Less accumulated depreciation Factory equipment Less accumulated depreciation Total property, plant, and equipment Total assets

$100,000 $90,000 18,000

72,000

$50,000 14,500

35,500 207,500 $318,490

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

271

Problem 5 (Concluded) 2. d. Rogerson Company Balance Sheet (Continued) December 31, 20-Liabilities Current liabilities: Accounts payable Income tax payable Interest payable

$ 15,200 5,275 400

Total current liabilities

$ 20,875

Long-term liabilities: Bonds payable

100,000

Total liabilities

$120,875 Stockholders’ Equity

Capital stock

$ 60,000

Paid-in capital in excess of par

20,000

Retained earnings

117,615

Total stockholders’ equity Total liabilities and stockholders’ equity

197,615 $318,490

272

Chapter 27

Problem 6 1. Omega Company Income Statement For Year Ended December 31, 20-Net sales

$533,960

Less cost of goods sold: Finished goods inventory, January 1

$ 20,345

Cost of goods manufactured

361,190

Cost of goods available for sale

$381,535

Finished goods inventory, December 31

23,900

Cost of goods sold

357,635

Gross profit

$176,325

Operating expenses: Wages expense

$ 74,125

Office supplies expense

2,500

Bad debt expense

1,890

Utilities expense—office

2,200

Total operating expenses Operating income

80,715 $ 95,610

Other revenue: Interest revenue

440 $ 96,050

Other expense: Interest expense Income before income taxes

3,600 $ 92,450

Income tax

19,680

Net income

$ 72,770

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

273

Problem 6 (Continued) 1. Omega Company Schedule of Cost of Goods Manufactured For Year Ended December 31, 20-Work in process, January 1

7,535

Direct materials Materials inventory, January 1

4,820

Materials purchases

167,060

Materials available for use

$171,880

Materials inventory, December 31

6,380

Cost of materials used

$165,500

Less indirect materials charged to production Cost of direct materials used

3,800 $161,700

Direct labor

97,500

Factory overhead

104,300

Total manufacturing costs

363,500

Total work in process during the period

$371,035

Work in process, December 31

9,845

Cost of goods manufactured

$361,190

2. Omega Company Statement of Retained Earnings For Year Ended December 31, 20-Retained earnings, January 1 Add net income for the year (after provision for income taxes of $19,680)

$ 68,925 72,770 $141,695

Less cash dividends Retained earnings, December 31

20,000 $121,695

274

Chapter 27

Problem 6 (Continued) 3. Omega Company Balance Sheet December 31, 20-Assets Current assets: Cash

$23,475

Treasury notes

5,500

Interest receivable Accounts receivable Less allowance for doubtful accounts

95 $ 48,210 2,895

45,315

Inventories: Finished goods

$ 23,900

Work in process

9,845

Materials

6,380

40,125

Office supplies

770

Factory supplies

915

Prepaid insurance

850

Total current assets

$117,045

Property, plant, and equipment: Land Building Less accumulated depreciation Equipment Less accumulated depreciation Total property, plant, and equipment Total assets

$30,000 $ 95,000 23,800

71,200

$110,000 32,000

78,000 179,200 $296,245

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

275

Problem 6 (Concluded) 3. Omega Company Balance Sheet (Continued) December 31, 20-Liabilities Current liabilities: Accounts payable Income tax payable Interest payable

$ 24,000 4,950 600

Total current liabilities

$ 29,550

Long-term liabilities: Bonds payable

60,000

Total liabilities

$ 89,550 Stockholders’ Equity

Capital stock

$ 70,000

Paid-in capital in excess of par

15,000

Retained earnings

121,695

Total stockholders’ equity Total liabilities and stockholders’ equity

206,695 $296,245

276

Chapter 27

Problem 7 1. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Adjusting Entries

20-4 2

Dec. 31

(a) Work in Process Inventory Factory Overhead

2 8 5 0 00 2 8 5 0 00

4 5

(b) Interest Receivable

1 6 5 00

Interest Revenue

1 6 5 00

7 8

1 3 5 0 00

Interest Payable

1 3 5 0 00

10 11

(d) Bad Debt Expense

2 4 7 5 00

Allowance for Doubtful Accounts

(e) Office Supplies Expense

5 2 4 5 00

Office Supplies

(f) Factory Overhead

4 9 5 0 00

Factory Supplies

(g) Factory Overhead

6 2 0 0 00

Prepaid Insurance

(h) Factory Overhead

6 0 0 0 00

Accumulated Depreciation—Factory Building

(i) Factory Overhead

7 5 0 0 00

Accumulated Depreciation—Factory Equipment

(j) Cost of Goods Sold

6 4 0 0 00

Factory Overhead

6 4 0 0 00 30

7 5 0 0 00 27

6 0 0 0 00 24

6 2 0 0 00 21

4 9 5 0 00 18

5 2 4 5 00 15

2 4 7 5 00 12

9 10

(k) Income Tax Expense Income Tax Payable

4 8 0 0 00

4 8 0 0 00 33

Chapter 27

Manufacturing Accounting: The Work Sheet and Financial Statements

277

Problem 7 (Continued) 2. GENERAL JOURNAL DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

Closing Entries

1 2

PAGE

20-4

Dec. 31

Income Summary Factory Overhead (Subsidiary ledger accounts)

107 8 5 0 00 107 8 5 0 00

4 5

Factory Overhead

107 8 5 0 00

Income Summary

107 8 5 0 00

7 8

Sales Interest Revenue

357 2 0 0 00

7 6 5 00

Income Summary

357 9 6 5 00 10

11 12

Income Summary

349 5 0 0 00

Cost of Goods Sold

205 3 0 0 00 13

Wages Expense

90 0 0 0 00 14

Office Supplies Expense

5 2 4 5 00 15

Utilities Expense—Office

5 9 3 0 00 16

Bad Debt Expense

2 4 7 5 00 17

Interest Expense

8 7 5 0 00 18

Income Tax Expense

31 8 0 0 00 19

20 21

Income Summary

8 4 6 5 00

Retained Earnings

8 4 6 5 00 22

23 24 25

Retained Earnings Cash Dividends

10 0 0 0 00

10 0 0 0 00 25

278

Chapter 27

Problem 7 (Concluded) 3. GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

DEBIT

CREDIT

Reversing Entries

20-5 2

Jan.

Factory Overhead Work in Process Inventory

2 8 5 0 00 2 8 5 0 00

4 5

Interest Revenue

1 6 5 00

Interest Receivable

1 6 5 00

7 8 9

Interest Payable Interest Expense

1 3 5 0 00

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