Financial Accounting, Enhanced eText, 11th Edition Solution Manual by Ace Test Banks

Financial Accounting, Enhanced eText, 11th Edition BY Weygandt, Kimmel, Kieso

CC1

(a)

Continuing Case: Cookie Creations Solution

Natalie has a choice between a sole proprietorship, partnership, and a corporation. A partnership is not an option since she is the sole owner of the business. A proprietorship is the easiest to create and operate because there are no formal procedures involved in creating the proprietorship. However, if she operates the business as a proprietorship, she will personally have unlimited liability for the debts of the business. Operating the business as a corporation would limit her liability to her investment in the business. Natalie will, in all likelihood, require the services of a lawyer to incorporate. Costs to incorporate as well as additional ongoing costs to administrate and operate the business as a corporation may be costly. My recommendation is that Natalie choose the corporate form of business organization. If she expands the business after graduation, she can raise additional capital by issuing more stock. In addition, she limits her liability to her investment in the business. If she decides to transfer ownership to another student, she can do so without dissolving the corporation.

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CC1 (Continued) (b) Yes, Natalie will need accounting information to help her operate her business. She will need information on her cash balance on a daily or weekly basis to help her determine if she can pay her bills. She will need to know the cost of her services so she can establish her prices. She will need to know revenue and expenses so she can report her net income for corporate income tax purposes, on an annual basis. If she borrows money, she will need financial statements so lenders can assess the profitability of the business. Natalie would also find financial statements useful to better understand her business and identify any financial issues as early as possible. Monthly financial statements would be best because they are more timely, but they are also more work to prepare. (c)

Assets: Cash, Accounts Receivable, Supplies, Equipment Liabilities: Accounts Payable, Notes Payable Stockholders’ Equity: Common Stock, Retained Earnings, Dividends Revenue: Service Revenue Expenses: Advertising Expense, Supplies Expense, Utilities Expense

(d) Natalie should have a separate bank account. This will make it easier to prepare financial statements for her business. The business is a separate entity from Natalie and must be accounted for separately.

(For Instructor Use Only)

CC2

(a)

Continuing Case: Cookie Creations Solution

GENERAL JOURNAL Account Titles and Explanation

Nov.

Debit

J1 Credit

8 No entry required for cashing U.S. Savings Bonds—this is a personal transaction. 8 Cash .......................................................... Common Stock ....................................

500

11 Advertising Expense ............................... Cash .....................................................

13 Supplies.................................................... Cash .....................................................

125

14 Equipment ................................................ Common Stock ....................................

300

16 Cash .......................................................... Notes Payable......................................

2,000

17 Equipment ................................................ Cash .....................................................

900

20 Cash .......................................................... Service Revenue .................................

125

25 Cash .......................................................... Unearned Service Revenue ................

30 Prepaid Insurance.................................... Cash .....................................................

1,320

500 65 125 300 2,000 900 125 30 1,320

CC2 (Continued) (b) Cash Date Nov.

Explanation 8 11 13 16 17 20 25 30

Date

Explanation

Nov. 13

Date

Nov. 14 17

Debits

J1 J1 J1 J1 J1 J1 J1 J1

500

Explanation

1,320

Credits

Balance

2,000 900 125 30

125

1,320

Equipment Ref. Debits J1 J1

300 900

Balance 500 435 310 2,310 1,410 1,535 1,565 245

Prepaid Insurance Ref. Debits Credits J1

Explanation

Credits

65 125

Supplies Ref. Debits J1

Nov. 30

Date

Ref.

Balance 1,320

Credits

Balance 300 1,200

(For Instructor Use Only)

CC2 (Continued) (b) (Continued)

Date

Explanation

Nov. 25

Date

Explanation

Nov. 16

Date Nov.

Notes Payable Ref. Debits J1

Explanation 8 14

Date

Unearned Service Revenue Ref. Debits

Common Stock Ref. Debits J1 J1

Explanation

Service Revenue Ref. Debits

Nov. 20

Date

Advertising Expense Ref. Debits

Nov. 11

Explanation

Credits

Balance

Credits

Balance

2,000

Credits

Balance

500 300

500 800

Credits

Balance

125

Credits

Balance 65

(For Instructor Use Only)

CC2 (Continued) (c) COOKIE CREATIONS Trial Balance November 30, 2022

Debit Cash...........................................................................

$ 245

Supplies ....................................................................

125

Prepaid Insurance.....................................................

1,320

Equipment .................................................................

1,200

Unearned Service Revenue......................................

Credit

Notes Payable ...........................................................

2,000

Common Stock .........................................................

800

Service Revenue .......................................................

125

Advertising Expense ................................................

$2,955

Note to instructors: Because the notes payable is not due for 24 months, it follows Unearned Revenue in the accounts and the trial balance.

(For Instructor Use Only)

CC3

Cookie Creations

(a) Date

GENERAL JOURNAL Account Titles and Explanation

Debit

Nov. 30 Supplies Expense ......................................... Supplies ....................................................

30 Depreciation Expense .................................. Accumulated Depreciation— Equipment ............................................ ($1,200 ÷ 60 months)

30 Interest Expense ........................................... Interest Payable ........................................ ($2,000 X .06 X 1/12 X .5)

30 Accounts Receivable .................................... Service Revenue.......................................

300

30 Utilities Expense ........................................... Accounts Payable ....................................

J2 Credit

300 45

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CC3 (Continued) (a) (Continued)

Date

Explanation

Nov. 30 Balance

Date

Explanation

Cash Ref.

Debit

✓ Accounts Receivable Ref. Debit J2

Date

Supplies Ref. Debit

Nov. 30 Balance 30

Date

Explanation

Nov. 30 Balance

(For Instructor Use Only)

Credit

300

✓ J2 Prepaid Insurance Ref. Debit ✓

Balance 245

Nov. 30

Explanation

Credit

Balance 300

Credit

Balance

125 90

Credit

Balance 1,320

CC3 (Continued) (a) (Continued)

Date

Explanation

Accumulated Depreciation—Equipment Explanation Ref. Debit Credit

Balance

Explanation

Nov. 30

Date

Accounts Payable Ref. Debit J2

Explanation

Nov. 30

Balance 1,200

Nov. 30

Date

Credit

✓

Nov. 30 Balance

Date

Equipment Ref. Debit

(For Instructor Use Only)

Interest Payable Ref. Debit J2

Credit

Balance

Credit

Balance

CC3 (Continued) (a) (Continued)

Date

Unearned Service Revenue Explanation Ref. Debit

Nov. 30 Balance

Date

Explanation

Nov. 30 Balance

Date

Explanation

Nov. 30 Balance

Date

Explanation

Nov. 30 Balance 30

Date

Explanation

Nov. 30

Date

Nov. 30 Balance

✓

(For Instructor Use Only)

Credit

✓

Balance 2,000

Common Stock Ref. Debit

Credit

✓

Balance 800

Service Revenue Ref. Debit ✓ J2 Utilities Expense Ref. Debit

Credit

Balance

300

125 425

Credit

Balance

Advertising Expense Ref. Debit ✓

Balance 30

Notes Payable Ref. Debit

Explanation

Credit

Balance 65

CC3 (Continued) (a) (Continued)

Date

Explanation

Nov. 30

Date

Explanation

Nov. 30

Date

Explanation

(For Instructor Use Only)

Balance 35

Credit

Interest Expense Ref. Debit J2

Credit

Depreciation Expense Ref. Debit J2

Nov. 30

Supplies Expense Ref. Debit

Balance 20

Credit

Balance 5

CC3 (Continued) (b) COOKIE CREATIONS Adjusted Trial Balance November 30, 2022 Account Cash............................................................................... Accounts Receivable.................................................... Supplies ........................................................................ Prepaid Insurance ........................................................ Equipment ..................................................................... Accumulated Depreciation—Equipment ..................... Accounts Payable ......................................................... Interest Payable ............................................................ Unearned Service Revenue.......................................... Notes Payable ............................................................... Common Stock ............................................................. Service Revenue ........................................................... Utilities Expense ........................................................... Advertising Expense .................................................... Supplies Expense ......................................................... Depreciation Expense .................................................. Interest Expense ........................................................... Totals ...............................................................

(For Instructor Use Only)

Debit $ 245 300 90 1,320 1,200

Credit

20 45 5 30 2,000 800 425

45 65 35 20 5 $3,325

$3,325

CC3 (Continued) (c) COOKIE CREATIONS Income Statement Month Ended November 30, 2022 Revenues Service revenue............................................................. Expenses Advertising expense ..................................................... Utilities expense ............................................................ Supplies expense .......................................................... Depreciation expense ................................................... Interest expense ............................................................ Net income ...........................................................................

$425 $65 45 35 20 5

170 $255

Yes, Cookie Creations has been profitable in November. It has a profit of $255 which is more than one half of the revenue earned in November.

(For Instructor Use Only)

CC3 (Continued) (c) (Continued) [Note: Balance Sheet is not required—shown for information purposes only.] COOKIE CREATIONS Balance Sheet November 30, 2022 Assets Cash ................................................................................. Accounts receivable ....................................................... Supplies........................................................................... Prepaid insurance ........................................................... Equipment ....................................................................... Less: Accumulated depreciation. ................................. Total assets ................................................................

$ 245 300 90 1,320 $1,200 20

1,180 $3,135

Liabilities and Stockholders’ Equity Liabilities Notes payable ............................................................. Accounts payable....................................................... Interest payable .......................................................... Unearned service revenue ......................................... Total liabilities ........................................................ Stockholders’ equity Common stock ........................................................... Retained earnings ...................................................... Total stockholders’ equity .................................... Total liabilities and stockholders’ equity .............

(For Instructor Use Only)

$2,000 45 5 30 2,080 $ 800 255 1,055 $3,135

CC4

Continuing Case: Cookie Creations Solution

(a) COOKIE CREATIONS Income Statement Two Months Ended December 31, 2022 Revenues Service revenue ........................................................ Expenses Supplies expense ..................................................... Salaries and wages expense ................................... Advertising expense ................................................ Utilities expense ....................................................... Insurance expense ................................................... Depreciation expense .............................................. Interest expense ....................................................... Total expenses ..................................................... Net income ....................................................................

$4,515 $1,025 1,006 165 125 110 40 15 2,486 $2,029

COOKIE CREATIONS Retained Earnings Statement Two Months Ended December 31, 2022 Retained earnings, November 1 .................................. Add: Net income ......................................................... Less: Dividends ........................................................... Retained earnings, December 31 .................................

0 2,029 2,029 500 $1,529

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CC4 (Continued) (a) (Continued) COOKIE CREATIONS Balance Sheet December 31, 2022 Assets Current assets Cash ........................................................................... Accounts receivable ................................................. Supplies ..................................................................... Prepaid insurance ..................................................... Total current assets .............................................. Property, plant, and equipment Equipment.................................................................. Less: Accumulated depreciation ............................ Total assets ...........................................................

$1,180 875 350 1,210 3,615 $1,200 40

1,160 $4,775

Liabilities and Stockholders’ Equity Current liabilities Accounts payable....................................................... Salaries and wages payable ...................................... Unearned service revenue ......................................... Total current liabilities........................................... Long-term liabilities Interest payable .......................................................... Notes payable ............................................................. Total long-term liabilities ...................................... Total liabilities .................................................. Stockholders’ equity Common stock ........................................................... Retained earnings ...................................................... Total stockholders’ equity .................................... Total liabilities and stockholders’ equity .............

75 56 300 431

15 2,000 2,015 2,446 $ 800 1,529 2,329 $4,775

(For Instructor Use Only)

CC4 (Continued) (b) Date

GENERAL JOURNAL Account Titles and Explanation

2022 Dec. 31 Service Revenue ................................ Income Summary ..........................

Debit

J4 Credit

4,515 4,515

31 Income Summary ............................... Salaries and Wages Expense ....... Utilities Expense............................ Advertising Expense ..................... Supplies Expense.......................... Insurance Expense ........................ Depreciation Expense ................... Interest Expense............................

2,486

31 Income Summary ............................... Retained Earnings .........................

2,029

31 Retained Earnings ............................. Dividends .......................................

500

1,006 125 165 1,025 110 40 15 2,029 500

(For Instructor Use Only)

CC4 (Continued) (c) COOKIE CREATIONS Post-Closing Trial Balance December 31, 2022 Account Cash ......................................................................... Accounts Receivable .............................................. Supplies................................................................... Prepaid Insurance .................................................. Equipment ............................................................... Accumulated Depreciation- Equipment ................ Accounts Payable ................................................... Salaries and Wages Payable .................................. Unearned Service Revenue .................................... Interest Payable ...................................................... Notes Payable ......................................................... Common Stock ....................................................... Retained Earnings ..................................................

Debit $1,180 875 350 1,210 1,200

$4,815

Credit

40 75 56 300 15 2,000 800 1,529 $4,815

(For Instructor Use Only)

CC5

Continuing Case: Cookie Creations Solution

(a) Responses to Natalie’s questions 1. The mixers should be classified as inventory as they are for resale. 2. A perpetual inventory system will provide better control over inventory. Because you are dealing with high-value items you should use the perpetual system. 3. You still need to count inventory to ensure that your records are accurate and that the inventory that is supposed to be on hand is actually there. I suggest you should count the inventory once a month. (b) GENERAL JOURNAL Account Titles and Explanation

Date Jan. 4

6 7 8 12 12

J1 Debit

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

2,875

Inventory ....................................................... Cash .........................................................

100

Accounts Payable [($2,875 ÷ 5) + $20] ........ Inventory ..................................................

595

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

375

Accounts Receivable ................................... Sales Revenue .........................................

3,450

Cost of Goods Sold ($595 X 3) .................... Inventory ..................................................

1,785

Credit

2,875 100 595 375 3,450 1,785

CC5 (Continued) (b) (Continued) Jan. 14 14 17 18 20 20 28

28 30

Freight-Out .......................................... Cash ................................................

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

2,300

Cash ..................................................... Common Stock ...............................

1,000

Inventory .............................................. Cash ................................................

Cash ..................................................... Sales Revenue ................................

2,300

Cost of Goods Sold ($595 X 2) ........... Inventory .........................................

1,190

Salaries and Wages Expense ............. Salaries and Wages Payable .............. Cash ................................................

160 56

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

3,450

Accounts Payable ............................... Utilities Expense ................................. Cash ................................................

75 70

Accounts Payable ($2,875 – $595 + $2,300) ................... Cash ................................................ Dividends ............................................. Cash ................................................

75 2,300 1,000 80 2,300 1,190

216 3,450

145 4,580 4,580 750 750

(For Instructor Use Only)

CC5 (Continued) (b) and (d)

Date

Explanation

Jan. 1 Balance 6 8 14 17 18 20 28 28 30 31 31

Date

Explanation

Jan. 1 Balance 8 12 28

Date Jan. 4 6 7 12 14 18 20

Explanation

Cash Ref. ✓ J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit

J1 J1 J1 J1 J1 J1 J1

145 4,580 750

Credit

Balance

375 75 1,000 80 2,300 216 3,450

3,450

875 500 3,950 500

Credit

Balance

375 3,450

Inventory Ref. Debit

Balance 1,180 1,080 1,455 1,380 2,380 2,300 4,600 4,384 7,834 7,689 3,109 2,359

100

Accounts Receivable Ref. Debit ✓ J1 J1 J1

Credit

2,875 100 595 1,785 2,300 80 1,190

2,875 2,975 2,380 595 2,895 2,975 1,785

(For Instructor Use Only)

CC5 (Continued) (b) and (d) (Continued) Date Explanation Jan. 1 Balance

Date Explanation Jan. 1 Balance 31 Adjusting entry

Date Explanation Jan. 1 Balance

Supplies Ref. Debit ✓

Prepaid Insurance Ref. Debit ✓ J2

Equipment Ref. Debit ✓

Credit

Balance 350

Credit

Balance 1,210 1,100

110

Credit

Accumulated Depreciation—Equipment Date Explanation Ref. Debit Credit Jan. 1 Balance ✓ 31 Adjusting entry J2 20

Date Explanation Jan. 1 Balance 4 7 14 30 31

Accounts Payable Ref. Debit ✓ J1 J1 595 J1 J1 75 J1 4,580

Credit 2,875 2,300

Balance 1,200

Balance 40 60

Balance 75 2,950 2,355 4,655 4,580 0

(For Instructor Use Only)

CC5 (Continued) (b) and (d) (Continued)

Date

Explanation

Salaries and Wages Payable Ref. Debit ✓ J1

Jan. 1 Balance 28

Date

Explanation

Date

Explanation

Jan. 1 Balance 31 Adjusting entry

Date

Explanation

Jan. 1 Balance

Date

Explanation

Jan. 1 Balance 17

Date

Explanation

Jan. 1 Balance

Credit

✓ Interest Payable Ref. Debit

Balance 56 0

Unearned Service Revenue Ref. Debit

Jan. 1 Balance

Credit

Balance 300

Credit

Balance

✓ J2

15 25

Notes Payable Ref. Debit

Credit

Balance

✓ Common Stock Ref. Debit

2,000

Credit

Balance

✓ J1

1,000

800 1,800

Retained Earnings Ref. Debit

Credit

Balance

✓

1,529

(For Instructor Use Only)

CC5 (Continued) (b) and (d) (Continued) Date

Explanation

Jan. 31

Date

Explanation

Jan. 12 20

Date

Sales Revenue Ref.

Debit

Credit

750

Explanation

Debit

Cost of Goods Sold Ref. Debit J1 J1

Jan. 28

Date

Utilities Expense Ref. Debit

Jan. 30

Credit

Balance

3,450 2,300

3,450 5,750

Credit

Balance

1,785 1,190

Salaries and Wages Expense Explanation Ref. Debit

Explanation

Balance 750

J1 J1

Jan. 12 20

Date

Dividends Ref.

1,785 2,975

Credit

160

Balance 160

Credit

Balance 70

CC5 (Continued) (b) and (d) (Continued) .

(For Instructor Use Only)

Depreciation Expense Ref. Debit

Date

Explanation

Jan. 31 20

Adjusting entry

Date

Explanation

Jan. 31

Adjusting entry

Date

Explanation

Jan. 14

Date

Explanation

Interest Expense Ref. Debit

Jan. 31

Adjusting entry

Credit

Balance

110

Freight Out Ref. Debit

Balance

Insurance Expense Ref. Debit J2

Credit

110

Credit

Balance 75

Credit

Balance 10

(For Instructor Use Only)

CC5 (Continued) (c) COOKIE CREATIONS Trial Balance January 31, 2023 Cash ........................................................................... Accounts Receivable ................................................ Inventory ................................................................... Supplies..................................................................... Prepaid Insurance ..................................................... Equipment ................................................................. Accumulated Depreciation—Equipment ................. Accounts Payable ..................................................... Salaries and Wages Payable .................................... Unearned Service Revenue ...................................... Interest Payable ........................................................ Notes Payable ........................................................... Common Stock ......................................................... Retained Earnings .................................................... Dividends .................................................................. Sales Revenue .......................................................... Cost of Goods Sold .................................................. Salaries and Wages Expense................................... Utilities Expense ....................................................... Depreciation Expense .............................................. Insurance Expense ................................................... Freight-Out ................................................................ Interest Expense .......................................................

Debit $ 2,359 500 1,785 350 1,210 1,200

40 300 15 2,000 1,800 1,529

750 5,750 2,975 160 70 75 $11,434

Credit

$11,434

(For Instructor Use Only)

CC5 (Continued) (d) Date

GENERAL JOURNAL Account Titles and Explanation

J2 Debit

Jan. 31 Depreciation Expense ............................ Accumulated Depreciation— Equipment ...................................... ($1,200 ÷ 60 months)

31 Interest Expense .................................... Interest Payable ................................. ($2,000 X 6% X 1/12)

31 Insurance Expense ................................ Prepaid Insurance .............................

110

Credit

110

(For Instructor Use Only)

CC5 (Continued) (e) COOKIE CREATIONS Adjusted Trial Balance January 31, 2023 Cash .......................................................................... Accounts Receivable ............................................... Inventory .................................................................. Supplies.................................................................... Prepaid Insurance .................................................... Equipment ................................................................ Accumulated Depreciation—Equipment ................ Unearned Service Revenue ..................................... Interest Payable ....................................................... Notes Payable .......................................................... Common Stock ........................................................ Retained Earnings ................................................... Dividends ................................................................. Sales Revenue ......................................................... Cost of Goods Sold ................................................. Salaries and Wages Expense.................................. Utilities Expense ...................................................... Depreciation Expense ............................................. Insurance Expense .................................................. Freight-Out ............................................................... Interest Expense ......................................................

Debit $ 2,359 500 1,785 350 1,100 1,200

Credit

60 300 25 2,000 1,800 1,529

750 5,750 2,975 160 70 20 110 75 10 $11,464

$11,464

(For Instructor Use Only)

CC5 (Continued) (f) COOKIE CREATIONS Income Statement For the Month ended January 31, 2023 Sales revenue................................................................... Cost of goods sold .......................................................... Gross profit ...................................................................... Operating expenses Salaries and wages expense ...................................... Insurance expense ...................................................... Freight-out ................................................................... Utilities expense........ .................................................. Depreciation expense ................................................. Total operating expenses....................................... Income from operations .................................................. Other expenses Interest expense .......................................................... Net income .......................................................................

$5,750 2,975 2,775 $160 110 75 70 20 435 2,340 10 $2,330

(For Instructor Use Only)

CC6

Continuing Case: Cookie Creations Solution

(a) Date Feb. 1 Feb. 2 Mar. 2 Apr. 1 May 4

COST OF GOODS AVAILABLE FOR SALE Explanation Units Unit Cost Total Cost Beginning Inventory 3 $595 $1,785 Purchase 2 600 1,200 Purchase 1 618 618 Purchase 2 612 1,224 Purchase 3 625 1,875 Total 11 $6,702

(b) LIFO Ending Inventory Date Feb. 1 Feb. 2

Units Unit Cost 3 $595 1 600 4

Total Cost $1,785 600 $2,385

Gross Profit Sales Less: Cost of goods sold Gross profit

$8,050* 4,317 $3,733

Cost of Goods Sold Cost of goods available for sale $6,702 Less: Ending inventory 2,385 Cost of goods sold $4,317

Gross Profit Rate $3,733 $8,050

46.37%

*($1,150 + $2,300 + $3,450 + $1,150)

CC6 (Continued) FIFO Ending Inventory Date May 4 Apr. 1

Units Unit Cost 3 $625 1 612 4

Total Cost $1,875 612 $2,487

Cost of Goods Sold Cost of goods available for sale $6,702 Less: Ending inventory 2,487 Cost of goods sold $4,215

Gross Profit Sales Less: Cost of goods sold Gross profit

Gross Profit Rate $3,835 $8,050

$8,050 4,215 $3,835

47.64%

Average Cost Ending Inventory $6,702/11 = $609.273 Units 4

Total Unit Cost Cost $609.273 $2,437.09

Gross Profit Sales $8,050.00 Less: Cost of goods sold 4,264.91 Gross profit $3,785.09

Cost of Goods Sold Cost of goods available for sale $6,702.00 Less: Ending inventory $2,437.09 Cost of goods sold $4,264.91

Gross Profit Rate $3,785.09 $8,050.00

47.02%

________________________________________________________________________________________ .

(For Instructor Use Only)

CC7

Continuing Case: Cookie Creations Solution

Part 1 The weaknesses in internal accounting controls in the system recommended by John are: (1) (2)

(3) (4)

The cash could be stolen from John’s vehicle before it is deposited in the bank. John could potentially steal from the company and then cover the theft because of a lack of segregation of duties between the handling of cash, bank reconciling process, and recording of transactions in the accounting records. The accounting information for the business could be lost or stolen if it is all stored on John’s laptop. John should not be able to write checks to himself as this leaves the company vulnerable to theft.

Improvements should include the following: (1) (2)

(3)

Cash should be deposited in the bank daily. At a minimum cash should be locked in a safe until it can be deposited. John should be responsible for the accounting function only. Natalie (or some other independent person) should sign all checks and make all deposits. Checks should be signed only when there is documentation present to support the payment. All invoices should be stamped “PAID” to avoid duplicate payment. Bank reconciliations should be prepared by a person independent of the handling and recording of cash. However, this may not be possible in a small organization such as Cookie Creations. At a minimum, Natalie and not John should prepare bank reconciliations monthly.

CC7 (Continued) Part 1 (Continued) (4)

(5)

The optimal improvement would be to use an internet-based cloud accounting service where the accounting records would be maintained on the cloud and could be accessed from any computer with internet access. This would allow Natalie to choose the access level to grant John in the accounting system and also to more closely monitor John’s activity and financial performance of the business. Regular backups of the cloud-based accounting records would still be recommended. If Natalie did not choose to add an internet-based cloud accounting service, then the accounting records should be maintained on the business site and regular back-ups should be prepared. It would be best if John used a computer at Cookie Creations to prepare the accounting information; however, if he is going to use his own laptop, Natalie should ensure that she is provided with a regular back-up of all the accounting records. This ensures that if John should ever lose his laptop or decide to no longer perform Cookie Creations’ accounting, Natalie would still have access to the company’s accounting records. John should submit a monthly invoice for the work he has done to Natalie for her approval. Natalie should then write and sign the check.

(For Instructor Use Only)

CC7 (Continued) Part 2 (a) COOKIE CREATIONS Bank Reconciliation June 30, 2023 Cash balance per bank statement .............................. Add: Deposit in transit .............................................. Bank error Check No. 603 ($452 – $425) .........

$3,359 $110 27

Less: Outstanding checks ($238 + $297) .................. Adjusted cash balance per bank ..................... Cash balance per books .............................................. Less: Service charge .................................................. Error in deposit June 20th ($155 – $125).......... Telus.................................................................. NSF check ($100 + $35 service charge) .......... Adjusted cash balance per books ..............................

137 3,496 535 $2,961 $3,224

$ 13 30 85 135

263 $2,961

(For Instructor Use Only)

CC7 (Continued) Part 2 (Continued) (b) June 30 Miscellaneous Expense ......................... Cash ...................................................

30 Service Revenue .................................... Cash ...................................................

30 Utilities Expense .................................... Cash ...................................................

30 Accounts Receivable—Ron Black ........ Cash ...................................................

135

13 30 85 135

Check: $3,224 – $13 – $30 – $85 – $135 = $2,961 adjusted cash balance (c) If a balance sheet were prepared, cash at June 30th, 2023 would be $2,961.

(For Instructor Use Only)

CC8

(a)

Continuing Case: Cookie Creations Solution

Answers to Natalie’s questions 1. Other alternatives to extending credit to Curtis include: • Waiting for 30 days to make the sale. • Have Curtis borrow from the bank. • Have Curtis use a credit card to finance the purchase. 2. The advantages of allowing customers to use credit cards include making the purchase easier for the customer, potentially increasing sales, as customers are not limited to the amount of cash in their wallet, and reducing the accounts receivable you have to manage if credit cards are used instead of granting credit to customers. In addition, the credit card company assumes the risk of nonpayment, and if a bank credit card is used the seller has cash very quickly, usually within one to two business days. The disadvantage is the cost to your business. When a customer makes a purchase using a credit card you will have to pay a percentage of the sale to the credit card company. The rate varies but 3% would not be unusual. You will also have to pay to rent the equipment to process the credit card sales. The fee is not large but is an ongoing expense.

CC8 (Continued) (b) June 1 Accounts Receivable ........................... Sales Revenue ................................. Cost of Goods Sold ............................. Inventory ..........................................

1,150

30 Notes Receivable ................................. Accounts Receivable ......................

1,150

1,150 620 620 1,150

July 31 Accounts Receivable [$1,150 + $8] ................. Notes Receivable......................................... Interest Revenue [$1,150 X 8.25% X 1/12] ....

1,158

Aug. 7 Cash .................................................................. Accounts Receivable ..................................

1,158

1,150 8

1,158

(For Instructor Use Only)

CC9

(a)

Continuing Case: Cookie Creations Solution

Purchase price ............................................................ Painting ....................................................................... Shelving ....................................................................... Cost of van ..................................................................

$36,500 2,500 1,500 $40,500

(b) Straight-line depreciation Year

Depreciable Cost X

Deprec. Rate

2023 2024 2025

$33,000* 33,000 33,000

20% X 4/12 20% 20%

Deprec. = Expense

Accum. Deprec.

$2,200 6,600 6,600

$ 2,200 8,800 15,400

Net Book Value $40,500 38,300 31,700 25,100

*$40,500 – $7,500 Double-declining-balance depreciation Year

NBV (Beg. of Year X

Deprec. Rate

Deprec. = Expense

Accum. Deprec.

2023 2024 2025

$40,500 35,100 21,060

40% X 4/12 40% 40%

$ 5,400 14,040 8,424

$ 5,400 19,440 27,864

Deprec. Deprec. Cost/Unit = Expense

Accum. Deprec.

$0.165* 0.165 0.165

$ 2,475 9,900 18,150

Net Book Value $40,500 35,100 21,060 12,636

Units-of activity depreciation

Year

Units-ofActivity

2023 2024 2025

15,000 45,000 50,000

$ 2,475 7,425 8,250

Net Book Value $40,500 38,025 30,600 22,350

*($40,500 – $7,500) ÷ 200,000 = $0.165 per mile

CC9 (Continued) (c)

Impact on Cookie Creations’ balance sheet and income statement in 2023: DoubleDecliningUnits-ofStraight-Line Balance Activity Cost of asset $40,500 $40,500 $40,500 Accumulated depreciation 2,200 5,400 2,475 Net book value $38,300 $35,100 $38,025 Depreciation expense

$2,200

$5,400

$2,475

The double-declining-balance method of depreciation will result in the lowest amount of net income reported, the lowest amount of stockholders’ equity reported, and the lowest net book value of the asset reported. The straight-line method of depreciation will result in the greatest amount of net income reported, the greatest amount of stockholders’ equity reported, and the greatest net book value of the asset reported. (d) Over the van’s 5-year useful life, the total depreciation will be $33,000 (resulting in a net book value equal to the salvage value of $7,500) under each of the methods. The impact will affect only the timing of the depreciation expense recognized each year. (e)

The units-of-activity method may provide Natalie with a more accurate assessment of usage of the van in relation to the amount of revenue earned. As long as Natalie is willing to track the number of miles driven over the course of the year, then this would be the method recommended.

(For Instructor Use Only)

CC10

Continuing Case: Cookie Creations Solution

(a)

$2,000 X 6% X 8.5/12 = $85

(b)

Aug. 31

(c)

Sept. 15

Interest Expense ($2,000 X 6% X 1/12) ............ Interest Payable ............................................

10 10

Notes Payable .................................................... 2,000 Interest Payable ($15 + $80) .............................. 95 Interest Expense ($2,000 X 6% X 0.5/12) .......... 5 Cash ($2,000 + ($2,000 X 6% X 10/12)) ......... 2,100

(For Instructor Use Only)

CC11

Continuing Case: Cookie Creations Solution

Part 1 (a) 1. One of the major advantages of issuing preferred shares is that the preferred stockholder does not have voting rights. In this case, Curtis’s dad and Natalie’s grandmother can participate in the future success of Cookie & Coffee Creations Inc. (by receiving annual dividends) without attempting to influence any decisions that would require shareholder approval. Both will receive an annual dividend as long as the dividend is declared. Any additional dividends declared and paid will be paid to the common shareholders. This could prove to be another advantage to both Natalie and Curtis if the company is successful and has excess cash to pay out dividends. 2. It is possible to pay for the $750 legal bill by issuing common shares. However, the cost principle still applies. Cost must equal the cash equivalent price, which is generally the fair value of the consideration given up. If this amount cannot be determined, we then look to the fair value of the consideration received to determine the cash equivalent price. In this case, Curtis and Natalie are receiving shares with a value of $1 per share. This $1 per share is the estimated fair value of the shares being given up in return for the legal fee expense. As a result, 750 shares should be given up, valued at $750, which is the value of the legal fees.

CC11 (Continued)

Date

GENERAL JOURNAL Account Titles and Explanation

J1 Debit

Credit

(b) Nov.

1 Cash .................................................. Accounts Receivable ....................... Inventory .......................................... Equipment ........................................ Common Stock .............................

19,130 900 1,650 3,500

1 Cash .................................................. Preferred Stock.............................

10,000

1 Organization Expense ..................... Common Stock .............................

750

25,180

(For Instructor Use Only)

10,000 750

CC11 (Continued) (d) COOKIE & COFFEE CREATIONS INC. Balance Sheet November 1, 2023 ___________________________________________________________ Assets Current assets Cash ....................................................................... Accounts receivable ............................................. Inventory................................................................ Total current assets ........................................ Plant and equipment Equipment ............................................................. Total assets .....................................................

$29,130 900 1,650 31,680 3,500 $35,180

Stockholders’ Equity Paid-in capital $0.50 preferred stock, no par value, noncumulative, 10,000 shares authorized, 2,000 shares issued ........................................ Common stock, no par value, 100,000 shares authorized, 25,930 shares issued ...... Total paid-in capital......................................... Retained earnings (deficit) .......................................... Total stockholders’ equity ..............................

(For Instructor Use Only)

$10,000 25,930 35,930 (750) $35,180

CC11 (Continued) Part 2 GENERAL JOURNAL Account Titles and Explanation

Date (a) Dec. 1 Apr. 30

June 1 30 Oct. 31

Cash ...................................................... Preferred Stock ............................... Cash Dividends (2,800 X $.50 X 1/2) ............................ Dividends Payable ..........................

Debit 4,000

4,000 700 700

Dividends Payable ................................ Cash .................................................

700

Treasury Stock...................................... Cash .................................................

500

Income Tax Expense ............................ Income Tax Payable ($462,500 – $364,050) X 20% .......

19,690

Cash Dividends (2,800 X $.50 X 1/2) ............................ Dividends Payable ..........................

(For Instructor Use Only)

J1 Credit

700 500

19,690 700 700

CC11 (Continued) (b) COOKIE & COFFEE CREATIONS INC. Retained Earnings Statement Year Ended October 31, 2024 Balance, November 1, 2023 ....................................... Add: Net income ...................................................... Less: Cash dividends—preferred ............................ Balance, October 31, 2024 .........................................

0 78,760 78,760 1,400 $77,360

(c) COOKIE & COFFEE CREATIONS INC. Partial Balance Sheet October 31, 2024 Stockholders’ equity Paid-in capital $0.50-noncumulative preferred stock, no par value, 10,000 shares authorized, 2,800 shares issued and outstanding................. Common stock, no par value, 100,000 shares authorized, 25,930 shares issued 25,180 shares outstanding .................................. Total paid-in capital ........................................... Retained earnings .......................................................... Total paid-in capital and retained earnings ...... Less: Treasury stock—common (750 shares) (at cost) Total stockholders’ equity ...................................

(For Instructor Use Only)

$ 14,000 25,930 39,930 77,360 117,290 500 $116,790

CC11 (Continued) (d) Oct. 31 Revenues ........................................... Income Summary..........................

462,500

31 Income Summary .............................. Expenses....................................... Income Tax Expense ....................

383,740

31 Income Summary .............................. Retained Earnings ........................

78,760

31 Retained Earnings............................. Cash Dividends.............................

1,400

(For Instructor Use Only)

462,500 364,050 19,690 78,760 1,400

CC12

(a)

Continuing Case: Cookie Creations Solution

Indirect method COOKIE & COFFEE CREATIONS INC. Cash Flow Statement Year Ended October 31, 2024

Operating activities Net income ................................................................ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense .......................................... $ 3,900 Increase in accounts receivable ......................... (3,250) Increase in inventory ........................................... (17,897) Increase in prepaid expenses ............................. (6,300) Increase in accounts payable ............................. 5,848 Increase in income tax payable .......................... 19,690 Increase in salaries and wages payable ............ 2,250 Increase in interest payable ................................ 188 Net cash provided by operating activities ..... Investing activities Purchase of furniture .......................................... (12,500) Purchase of computer equipment ...................... (4,200) Purchase of kitchen equipment (Note X) .............. (17,000) Net cash used by investing activities ............ Financing activities Issue of preferred stock ...................................... 14,000 Issue of common stock ....................................... 25,930 Principal repayment of note payable .................... (2,000) Repurchase of stock ........................................... (500) Payment of dividends .......................................... (700) Net cash provided by financing activities ..... Net increase in cash ..................................................... Cash, November 1, 2023 ............................................... Cash, October 31, 2024 ................................................ Noncash investing and financing activities Issuance of notes payable to purchase kitchen equipment ...........................................

$78,760

4,429 83,189

(33,700)

36,730 86,219 0 $86,219

$12,000

CC12 (Continued) (b) Direct method COOKIE & COFFEE CREATIONS INC. Cash Flow Statement Year Ended October 31, 2024 Operating activities Cash receipts from customers (1).......................... $459,250 Cash payments To suppliers (2) ................................................... $(243,299) For other operating expenses (3) ...................... (42,287) For salaries and wages (4) ................................. (90,250) For interest (5) .................................................... (225) For income tax (6) ............................................... 0 (376,061) Net cash provided by operating activities....... 83,189 Investing activities Purchase of computer equipment .......................... $ (4,200) Purchase of furniture ............................................. (12,500) Purchase of kitchen equipment (Note X) ............... (17,000) Net cash used by investing activities................ (33,700) Financing activities Issue of common stock .......................................... $ 25,930 Issue of preferred stock .......................................... 14,000 Principal repayment of note payable ..................... (2,000) Repurchase of stock ............................................... (500) Payment of dividends (7) ........................................ (700) Net cash provided by financing activities ......... 36,730 Net increase in cash .................................................... 86,219 Cash, November 1, 2023 .............................................. 0 Cash, October 31, 2024 ............................................... $ 86,219 Noncash investing and financing activities Issuance of notes payable to purchase kitchen equipment ...........................................

$ 12,000

(For Instructor Use Only)

CC12 (Continued) (b) (Continued) Note X: During the year, the company acquired kitchen equipment with a cost of $29,000 by paying $17,000 cash and incurring a $12,000 note payable. Calculations: (1)

Cash receipts from customers Sales revenue.......................................................... Less: Increase in accounts receivable ................. Cash receipts from customers ..............................

(2)

Cash payments to suppliers Cost of goods sold ................................................. Add: Increase in inventory .................................... Cost of goods purchased ....................................... Less: Increase in accounts payable ..................... Cash payments to suppliers ..................................

(3)

$ 35,987 6,300 $ 42,287

Cash payments to employees Salaries and wages expense.................................. Less: Increase in salaries and wages payable .... Cash payments to employees ................................

$231,250 17,897 249,147 (5,848) $243,299

Cash payments for other operating expenses Other operating expenses ...................................... Add: Increase in prepaid expenses ....................... Cash payments for other operating expenses......

(4)

$462,500 (3,250) $459,250

$ 92,500 (2,250) $ 90,250

(For Instructor Use Only)

CC12 (Continued) (b) (Continued) (5)

Cash payments for interest Interest expense ........................................................ Less: Increase in interest payable ........................... Cash payments for interest .......................................

(6)

$19,690 (19,690) $ 0

Cash payments for dividends Dividends ($700 + $700) ............................................ Less: Increase in dividends payable ....................... Cash payments for dividends ...................................

413 (188) 225

Cash payments for income tax Income tax expense ................................................... Less: Increase in income tax payable ..................... Cash payments for income tax .................................

(7)

$ 1,400 (700) $ 700

(For Instructor Use Only)

CC13

(a) 1.

Continuing Case: Cookie Creations Solution

Current ratio $113,666 $32,676 = 3.5:1

Accounts receivables turnover

$462,500 = 142.3 times $3,250 3.

Inventory turnover $231,250 = 12.9 times $17,897

Debt to assets $38,676 = 24.9% $155,466

Times interest earned $98,863 $413

= 239.4 times

Gross profit rate

$231,250 = 50.0% $462,500 7.

Profit margin $78,760 $462,500

= 17.0%

CC13 (Continued) (a) (Continued) 8. Asset turnover $462,500 $155,466

= 3.0 times

9. Return on assets $78,760 $155,466

= 50.7%

10. Return on common stockholders’ equity $78,760-$1,400 $116,790-$14,000

= 75.3%

(b) The company had a very good year. It was very profitable and has a healthy balance sheet. The company is carrying very little debt and can cover the interest charges easily. There are no liquidity or solvency problems. (c) The bank should have no qualms about lending money to the company. The new debt assets ratio would still be reasonably low [($38,676 + $20,000) ÷ ($155,466 + $20,000) = 33.4%]. Even if there were no increases in revenue, operating income would still be more than adequate to cover the additional interest expense. The company is very profitable and is an acceptable credit risk for the bank. (d) Instead of bank financing, Cookies & Coffee Creations could lease the equipment. The company could also consider equity financing or paying cash for the equipment.

(For Instructor Use Only)

CHAPTER 1 SOLUTIONS TO EXERCISES – SET B EXERCISE 1-1B R I C C R R C R C

Summarizing economic events. Selecting economic activities relevant to the company. Reporting information in a standard format. Preparing accounting reports. Measuring events in dollars and cents. Keeping a systematic chronological diary of events. Explaining uses, meaning, and limitations of data. Classifying economic events. Analyzing and interpreting information.

EXERCISE 1-2B (a)

Internal users Marketing manager Production supervisor Store manager Vice-president of finance External users Customers Internal Revenue Service Labor unions Securities and Exchange Commission Suppliers

(b)

E I I E I

Will the company be able to pay its short-term debts? Which product should we emphasize? What does it cost us to manufacture each unit produced? How does the company’s profitability compare to other companies? Do we need to borrow in the near future?

_____________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 10e, Solutions Exercises: Set B (Instructor Use Only)

E I

Did the company earn a satisfactory income? Can we afford to give our employees a pay raise?

EXERCISE 1-3B Bill Belachek, president of Belachek Company, instructed Tom Brady, the head of the accounting department, to report the company’s land in their accounting reports at its market value of $150,000 instead of its cost of $100,000, in an effort to make the company appear to be a better investment. Although we have an accounting system that permits various measurement approaches cost should be used whenever there are questions regarding the reliability of a market value. In this case, valuation of land is too subjective and therefore the cost principle should be used. The stakeholders include stockholders and creditors of Belachek Company, potential stockholders and creditors, other users of Belacheck’s accounting reports, Bill Belachek, and Tom Brady. All users of Belachek’s accounting reports could be harmed by relying on information which violates accounting principles. Bill Belachek could benefit if the company is able to attract more investors, but would be harmed if the fraudulent reporting is discovered. Similarly, Tom Brady could benefit by pleasing his boss, but would be harmed if the fraudulent reporting is discovered. Tom’s alternatives are to report the land at $100,000 or to report it at $150,000. Reporting the land at $150,000 is not appropriate since it would mislead many people who rely on Belachek’s accounting reports to make financial decisions. Tom should report the land at its cost of $100,000. He should try to convince Bill Belachek that this is the appropriate course of action, but be prepared to resign his position if Belachek insists. EXERCISE 1-4B 1.

Incorrect. The cost principle requires that most assets be recorded and reported at their cost due to reliability concerns about valuation. In this case, the cost principle should be applied.

Correct. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money.

Incorrect. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

EXERCISE 1-5B Asset Cash Equipment Supplies Accounts receivable

Liability Salaries and wages payable Income taxes payable

Stockholders’ Equity Common stock Retained earnings

EXERCISE 1-6B 1. 2. 3. 4. 5. 6. 7. 8. 9.

Increase in assets and increase in stockholders’ equity. Decrease in assets and decrease in stockholders’ equity. Increase in assets and increase in liabilities. Increase in assets and increase in stockholders’ equity. Decrease in assets and decrease in stockholders’ equity. Increase in assets and decrease in assets. Increase in liabilities and decrease in stockholders’ equity. Increase in assets and decrease in assets. Increase in assets and increase in stockholders’ equity.

EXERCISE 1-7B 1. 2. 3. 4.

5. 6. 7. 8.

(d) (b) (e) (f)

EXERCISE 1-8B (a) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Stockholders invested $25,000 cash in the business. Purchased equipment for $6,000, paying $4,000 in cash and the balance of $2,000 on account. Paid $650 cash for supplies. Earned $7,500 in revenue, receiving $5,000 cash and $2,500 on account. Paid $1,200 cash on accounts payable. Paid $1,500 cash dividends to stockholders. Paid $850 cash for rent. Collected $750 cash from customers on account. Paid salaries of $4,500. Incurred $300 of utilities expense on account.

(b) Investment ............................................................................... Service revenue ...................................................................... Dividends ................................................................................ Rent expense .......................................................................... Salaries and wages expense .................................................. Utilities expense ..................................................................... Increase in stockholders’ equity............................................

$25,000 7,500 (1,500) (850) (4,500) (300) $25,350

(c) Service revenue ...................................................................... Rent expense .......................................................................... Salaries and wages expense .................................................. Utilities expense ..................................................................... Net income ..............................................................................

$7,500 (850) (4,500) (300) $1,850

EXERCISE 1-9B P. PATRON & CO. Income Statement For the Month Ended August 31, 2022 Revenues Service revenue ........................................................

$7,500

Expenses Salaries and wages expense .................................... Rent expense ............................................................. Utilities expense ........................................................ Total expenses ................................................... Net income ........................................................................

$4,500 850 300 5,650 $1,850

P. PATRON & CO. Retained Earnings Statement For the Month Ended August 31, 2022 Retained earnings, August 1 ........................................... Add: Net income ............................................................

0 1,850 1,850 1,500 $ 350

Less: Dividends .............................................................. Retained earnings, August 31 ............................. P. PATRON & CO. Balance Sheet August 31, 2022 Assets Cash .................................................................................. Accounts receivable ........................................................ Supplies............................................................................ Office equipment ............................................................. Total assets ..............................................................

$ 18,050 1,750 650 6,000 $26,450

Liabilities and Stockholders’ Equity Liabilities Accounts payable .................................................... Stockholders’ equity Common stock ......................................................... Retained earnings ................................................... Total liabilities and stockholders’ equity .........

$ 1,100 $25,000 350

25,350 $26,450

EXERCISE 1-10B _____________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 10e, Solutions Exercises: Set B (Instructor Use Only)

(a) Stockholders’ equity—12/31/21 ($400,000 – $220,000)........ Stockholders’ equity—1/1/21 ................................................ Increase in stockholders’ equity........................................... Add: Dividends..................................................................... Net income for 2021 ...............................................................

$180,000 120,000 60,000 13,000 $ 73,000

(b) Stockholders’ equity—12/31/22 ($510,000 – $300,000)...... Stockholders’ equity—1/1/22—see (a)................................ Increase in stockholders’ equity......................................... Less: Additional investment .............................................. Net loss for 2022 ..................................................................

$210,000 180,000 30,000 60,000 $ 30,000

(c) Stockholders’ equity—12/31/23 ($590,000 – $400,000)...... Stockholders’ equity—1/1/23—see (b) ............................... Decrease in stockholders’ equity ....................................... Less: Additional investment ..............................................

$190,000 210,000 (20,000) 15,000 (35,000) 45,000 $ 10,000

Add: Dividends .................................................................. Net income for 2023 .............................................................

EXERCISE 1-11B (a) Total assets (beginning of year) ......................................... Total liabilities (beginning of year) ..................................... Total stockholders’ equity (beginning of year) ..................

$ 95,000 80,000 $ 15,000

(b) Total stockholders’ equity (end of year) ............................ Total stockholders’ equity (beginning of year) .................. Increase in stockholders’ equity.........................................

$ 40,000 15,000 $ 25,000

Total revenues ..................................................................... Total expenses ..................................................................... Net income ...........................................................................

$215,000 185,000 $ 30,000

Increase in stockholders’ equity.................... Less: Net income ...........................................

$ 25,000 $(30,000)

Add: Dividends .............................................. Additional investment .....................................

20,000)

(10,000) $ 15,000

(c) Total assets (beginning of year).......................................... Total stockholders’ equity (beginning of year) .................. Total liabilities (beginning of year) .....................................

$129,000 90,000 $ 39,000

(d) Total stockholders’ equity (end of year) ............................. Total stockholders’ equity (beginning of year) .................. Increase in stockholders’ equity .........................................

$130,000 90,000 $ 40,000

Total revenues ...................................................................... Total expenses ..................................................................... Net income ............................................................................

$120,000 75,000 $ 45,000

Increase in stockholders’ equity .................... Less: Net income ........................................... Additional investment .......................... Dividends .........................................................

$ 40,000 $(45,000) (3,000)

(48,000) $ 8,000

EXERCISE 1-12B IGNATENKO CO. Income Statement For the Year Ended December 31, 2022 Revenues Service revenue ..................................................... Expenses Salaries and wages expense ................................ Rent expense ......................................................... Utilities expense .................................................... Advertising expense ............................................. Total expenses ............................................... Net income ....................................................................

$60,500 $28,000 10,200 3,000 1,300 42,500 $18,000

IGNATENKO CO. Retained Earnings Statement For the Year Ended December 31, 2022 Retained earnings, January 1 ......................................................... Add: Net income ............................................................................ Less: Dividends .............................................................................. Retained earnings, December 31 ...................................................

$42,000 18,000 60,000 4,000 $56,000

EXERCISE 1-13B PENEZ COMPANY Balance Sheet December 31, 2022 Assets Cash ................................................................................. Accounts receivable........................................................ Supplies ........................................................................... Equipment ........................................................................ Total assets ..............................................................

$17,000 9,500 7,000 45,000 $78,500

Liabilities and Stockholders’ Equity Liabilities Accounts payable .................................................... Stockholders’ equity Common stock ......................................................... Retained earnings ($15,500 – $5,000) ..................... Total liabilities and stockholders’ equity ........

$19,000 $49,000 10,500

59,500 $78,500

EXERCISE 1-14B (a) Camping fee revenues ........................................................... General store revenues ......................................................... Total revenue .................................................................. Expenses ................................................................................ Net income .............................................................................

$160,000 50,000 210,000 160,000 $ 50,000

(b)

DEER PARK Balance Sheet December 31, 2022 Assets Cash ....................................................................................... Supplies ................................................................................. Equipment ............................................................................. Total assets ....................................................................

$ 27,000 3,500 116,500 $147,000

December 31, 2022 Liabilities and Stockholders’ Equity Liabilities Notes payable ................................................... Accounts payable ............................................. Total liabilities ........................................... Stockholders’ equity Common stock .................................................. $20,000 Retained earnings............................................. 50,000 Total liabilities and stockholders’ equity...

$ 65,000 12,000 77,000 70,000 $147,000

EXERCISE 1-15B MIKE GREGORY COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Ticket revenue .................................................. Expenses Salaries and wages expense ........................... Maintenance and repairs expense .................. Utilities expense ............................................... Advertising expense ........................................ Total expenses .......................................... Net income ...............................................................

$340,000 $160,000 98,000 7,000 3,800 268,800 $ 71,200

EXERCISE 1-16B KING AND JAMES, ATTORNEYS AT LAW Retained Earnings Statement For the Year Ended December 31, 2022 Retained earnings, January 1 ................................................ Add: Net income ................................................................... Less: Dividends ..................................................................... Retained earnings, December 31 ..........................................

$ 26,000 120,000* 146,000 74,000 $ 72,000

*Service revenue .................................................................... Total expenses ...................................................................... Net income ............................................................................

$330,000 210,000 $120,000

EXERCISE 1-17B MIDVALE COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from revenues .......................... Cash payments for expenses ......................... Net cash provided by operating activities Cash flows from investing activities Purchase of equipment ................................... Cash flows from financing activities ...................... Sale of common stock ..................................... Payment of cash dividends ............................. Net increase in cash ................................................ Cash at the beginning of the period ....................... Cash at the end of the period .................................

$500,000 (340,000) 160,000 (90,000) $250,000 (10,000)

240,000 310,000 40,000 $350,000

SOLUTIONS TO EXERCISES—SET B EXERCISE 2-1B 1.

False. An account is an accounting record of a specific asset, liability, or stockholders’ equity item.

False. An account shows increases and decreases in the item it relates to.

False. Each asset, liability, and stockholders’ equity item has a separate account.

False. An account has a left, or debit side, and a right, or credit side.

True.

Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B

Transaction

(a) Basic Type

(b) Specific Account

Jan.

Asset

Account Credited

Effect

(d) Normal Balance

(a) Basic Type

(b) Specific Account

Effect

(d) Normal Balance

Cash

Increase

Debit

Stockholders’ Equity

Common Stock

Increase

Credit

Asset

Equipment

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Supplies

Increase

Debit

Liability

Accounts Payable

Increase

Credit

Asset

Accounts Receivable

Increase

Debit

Stockholders’ Equity

Service Revenue

Increase

Credit

Stockholders’ Equity

Advertising Expense

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Cash

Increase

Debit

Asset

Accounts Receivable

Decrease

Debit

Liability

Accounts Payable

Decrease

Credit

Asset

Cash

Decrease

Debit

Stockholders’ Equity

Dividends

Increase

Debit

Asset

Cash

Decrease

Debit

(c)

Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-2B

Account Debited

EXERCISE 2-3B General Journal Account Titles and Explanation Ref.

Date Jan. 2

3 9 11 16 20 23 28

J1 Debit

Cash .................................................. Common Stock .........................

15,000

Equipment ........................................ Cash...........................................

5,000

Supplies ............................................ Accounts Payable .....................

400

Accounts Receivable ....................... Service Revenue .......................

2,400

Advertising Expense ........................ Cash...........................................

250

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

800

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

250

Dividends .......................................... Cash...........................................

1,300

Credit 15,000 5,000 400 2,400 250 800 250 1,300

EXERCISE 2-4B Oct. 1

Debits increase assets: debit Cash $18,000. Credits increase stockholders’ equity: credit Common Stock $18,000.

No transaction.

Debits increase assets: debit Equipment $1,900. Credits increase liabilities: credit Accounts Payable $1,900.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-4B (Continued) Oct. 6

Debits increase assets: debit Accounts Receivable $5,300. Credits increase revenues: credit Service Revenue $5,300.

Debits decrease liabilities: debit Accounts Payable $900. Credits decrease assets: credit Cash $900.

Debits increase expenses: debit Salaries and Wages Expense $2,500. Credits decrease assets: credit Cash $2,500.

EXERCISE 2-5B

Date Oct. 1

General Journal Account Titles and Explanation Ref. Cash................................................... Common Stock ........................

Debits 18,000

18,000

No entry.

Equipment ......................................... Accounts Payable ....................

1,900

Accounts Receivable ........................ Service Revenue ......................

5,300

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

900

Salaries and Wages Expense .......... Cash ..........................................

2,500

6 27 30

Credit

1,900 5,300 900 2,500

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-6B (a)

1. 2. 3.

Increase the asset Cash, increase the liability Notes Payable. Increase the asset Equipment, decrease the asset Cash. Increase the asset Supplies, increase the liability Accounts Payable.

(b)

Cash .................................................................. Notes Payable ........................................... Equipment ........................................................ Cash ........................................................... Supplies ............................................................ Accounts Payable .....................................

2. 3.

6,000 6,000 2,800 2,800 400 400

EXERCISE 2-7B (a)

Assets = Liabilities + Stockholders’ Equity 1. + + (Issue stock) 2. – – (Expense) 3. + + (Revenue) 4. – – (Dividends)

(b)

1. 2. 3. 4.

Cash .................................................................. Common Stock .......................................... Rent Expense ................................................... Cash ........................................................... Accounts Receivable ....................................... Service Revenue ....................................... Dividends.......................................................... Cash ...........................................................

7,000 7,000 1,800 1,800 6,800 6,800 800 800

EXERCISE 2-8B 1. 2. 3. 4.

False. The general ledger contains all the asset, liability, and stockholders’ equity accounts. True. False. The accounts in the general ledger are arranged in financial statement order: first the assets, then the liabilities, common stock, retained earnings, dividends, revenues, and expenses. True.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

False. The general ledger is not a book of original entry; transactions are first recorded in the general journal, then in the general ledger.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-9B (a)

Aug. 1 10 31 Bal.

Cash 6,000 Aug. 12 2,800 900 6,700

Accounts Receivable Aug. 25 1,500 Aug. 31 Bal. 600

Aug. 12 (b)

Equipment 5,000

3,000

900

Notes Payable Aug. 12

2,000

Common Stock Aug. 1

6,000

Service Revenue Aug. 10 25 Bal.

2,800 1,500 4,300

WILL POST, INVESTMENT BROKER Trial Balance August 31, 2022 Cash ........................................................................ Accounts Receivable ............................................. Equipment .............................................................. Notes Payable......................................................... Common Stock ....................................................... Service Revenue ....................................................

Debit $ 6,700 600 5,000

$12,300

Credit

$ 2,000 6,000 4,300 $12,300

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-10B (a) Date Apr. 1

General Journal Account Titles and Explanation Ref. Cash..................................................... Common Stock ............................... (Issued shares of stock for cash)

Debit 18,000

18,000

Cash..................................................... Service Revenue............................. (Received cash for services performed)

800

Salaries and Wages Expense ............ Cash ................................................ (Paid salaries to date)

700

Accounts Payable ............................... Cash ................................................ (Paid creditors on account)

1,400

Cash..................................................... Accounts Receivable ..................... (Received cash in payment of account)

700

Cash..................................................... Unearned Service Revenue ........... (Received cash for future services)

1,200

Credit

800

700

1,400

700

1,200

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-10B (Continued) (b)

GARFUNKLE LANDSCAPING COMPANY Trial Balance April 30, 2022 Cash .......................................................................... Accounts Receivable ............................................... Supplies .................................................................... Accounts Payable .................................................... Unearned Service Revenue ..................................... Common Stock ......................................................... Service Revenue ...................................................... Salaries and Wages Expense ..................................

Debit $18,600 3,100 1,900

Credit

500 1,200 18,000 4,600

700 $24,300

$24,300

EXERCISE 2-11B (a) Oct. 1 Cash ............................................................. Common Stock ..................................... (Issued shares of stock for cash)

5,000

10 Cash ............................................................. Service Revenue ................................... (Received cash for services performed)

930

10 Cash ............................................................. Notes Payable ....................................... (Obtained loan from bank)

2,000

20 Cash ............................................................. Accounts Receivable ........................... (Received cash in payment of account)

700

20 Accounts Receivable .................................. Service Revenue ................................... (Billed clients for services performed)

880

5,000

930

2,000

700

880

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-11B (Continued) (b)

GEORGIA CO. Trial Balance October 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Equipment .......................................................... Notes Payable .................................................... Accounts Payable .............................................. Common Stock .................................................. Dividends ........................................................... Service Revenue ................................................ Salaries and Wages Expense ............................ Rent Expense......................................................

Debit $ 8,100 980 400 2,500

Credit

$ 2,000 1,300 7,500 380 2,610 700 350 $13,410

$13,410

EXERCISE 2-12B (a) Date Sept. 1 5

25 30

General Journal Account Titles and Explanation Cash .................................................. Common Stock .........................

Ref. 101 311

Debit 13,000

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

157 101 201

14,000

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

201 101

5,000

Dividends .......................................... Cash ...........................................

332 101

800

J1 Credit 13,000 4,000 10,000 5,000 800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-12B (Continued) (b) Cash Date Sept. 1 5 25 30

Explanation

Equipment Date Explanation Sept. 5 Accounts Payable Date Explanation Sept. 5 25

Common Stock Date Explanation Sept. 1 Dividends Date Explanation Sept. 30

Ref. J1 J1 J1 J1

Ref. J1

Ref. J1 J1

Ref. J1

Debit 13,000

Credit 4,000 5,000 800

Debit 14,000

Debit

Credit

No. 157 Balance 14,000

Credit 10,000

No. 201 Balance 10,000 5,000

5,000

Debit

Debit 800

No. 101 Balance 13,000 9,000 4,000 3,200

Credit 13,000

Credit

No. 311 Balance 13,000 No. 332 Balance 800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

EXERCISE 2-13B Error 1. 2. 3. 4. 5. 6.

(a) In Balance No Yes Yes No Yes No

(b) Difference $400 — — 500 — 18

EXERCISE 2-14B AYALA DELIVERY SERVICE Trial Balance July 31, 2022 Debit Cash ($77,907 – Debit total without Cash $62,340) .................................................................. Accounts Receivable ................................................ Prepaid Insurance ..................................................... Equipment .................................................................. Notes Payable ............................................................ Accounts Payable...................................................... Salaries and Wages Payable .................................... Common Stock .......................................................... Retained Earnings ..................................................... Dividends ................................................................... Service Revenue ........................................................ Salaries and Wages Expense ................................... Maintenance and Repairs Expense .......................... Gasoline Expense...................................................... Utilities Expense ........................................................

Credit

$15,567 8,642 1,968 45,360 $18,450 6,396 815 35,000 4,636 700 12,610 3,428 961 758 523 $77,907

$77,907

Weygandt, Financial and Managerial Accounting, 11e, Solutions Exercises: Set B

CHAPTER 3 SOLUTIONS TO EXERCISES—SET B EXERCISE 3-1B 1.

False. Adjusting entries are necessary to update the accounting records to the accrual basis.

True.

False. Accounting time periods can be any length, and are generally a month, a quarter, or a year.

True.

False. All calendar years are fiscal years, but not all fiscal years are calendar years. An accounting time period that is one year in length is referred to as a fiscal year. A fiscal year that starts on January 1 and ends on December 31 is a calendar year.

EXERCISE 3-2B (a)

Cash received from revenue .......................................... Cash paid for expenses .................................................. Cash-basis net income ..........................................

$140,000 (110,000) $ 30,000

(b)

Revenues [($140,000 – $30,000) + $47,000] ................... Expenses [($110,000 – $30,000) + $44,000] ................... Accrual-basis net income ......................................

$157,000 (124,000) $ 33,000

EXERCISE 3-3B 1. 2. 3. 4. 5. 6.

Prepaid expense. Accrued expense. Accrued expense. Accrued revenue. Unearned revenue. Prepaid expense.

_________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 3-3B (Continued) 7. 8. 9. 10. 11.

Accrued revenue. Prepaid expense. Unearned revenue. Prepaid expense. Accrued expense.

EXERCISE 3-4B 1.

2. 3. 4.

6. 7.

Interest Expense..................................................... Interest Payable ($30,000 X 12% X 3/12) .................................

900

Supplies Expense................................................... Supplies ($2,650 – $700) .................................

1,950

Depreciation Expense ............................................ Accumulated Depreciation—Equipment ........

2,000

Insurance Expense ................................................. Prepaid Insurance ($2,520 X 5/12) ..............................................

1,050

Unearned Service Revenue ................................... Service Revenue ($50,000 X 1/4) ..............................................

12,500

Accounts Receivable ............................................. Service Revenue ..............................................

5,300

Salaries and Wages Expense ................................ Salaries and Wages Payable ($12,000 X 2/5) ...............................................

4,800

900 1,950 2,000

1,050

12,500 5,300

4,800

EXERCISE 3-5B Item

(a) Type of Adjustment

(b) Accounts before Adjustment

Prepaid Expense

Assets Overstated Expenses Understated

Accrued Revenue

Assets Understated Revenues Understated

Unearned Revenue

Liabilities Overstated Revenues Understated

Accrued Expense

Expenses Understated Liabilities Understated

Prepaid Expense

Assets Overstated Expenses Understated

Accrued Expense

Expenses Understated Liabilities Understated

EXERCISE 3-6B 1.

2. 3. 4. 5.

Mar. 31

31 31 31 31

Depreciation Expense ($300 X 3)................. Accumulated Depreciation— Equipment .........................................

900

Unearned Rent Revenue .............................. Rent Revenue ........................................

10,800

Interest Expense ........................................... Interest Payable ....................................

750

Supplies Expense ......................................... Supplies ($3,400 – $1,300) ....................

2,100

Insurance Expense ($4,200 X 3/24) ............. Prepaid Insurance .................................

525

900 10,800 750 2,100 525

EXERCISE 3-7B 1. 2. 3.

Jan. 31 31 31

31 4. 5.

31 31

Accounts Receivable .................................... Service Revenue ...................................

1,280

Utilities Expense ........................................... Utilities Payable.....................................

365

Depreciation Expense .................................. Accumulated Depreciation— Equipment .........................................

500

Interest Expense ........................................... Interest Payable.....................................

600

Insurance Expense ($9,600 ÷ 12) ................. Prepaid Insurance .................................

800

Supplies Expense ($2,300 – $700) ............... Supplies .................................................

1,600

1,280 365

500 600 800 1,600

EXERCISE 3-8B 1. 2. 3.

4. 5.

Oct. 31 31 31

31 31

Supplies Expense ......................................... Supplies ($2,500 – $900)........................

1,600

Insurance Expense ....................................... Prepaid Insurance .................................

Depreciation Expense .................................. Accumulated Depreciation— Equipment .........................................

100

Unearned Service Revenue .......................... Service Revenue ...................................

800

Accounts Receivable .................................... Service Revenue ...................................

375

1,600 75

100 800 375

EXERCISE 3-8B (Continued) 6. 7.

Oct. 31 31

Interest Expense ..................................... Interest Payable ..............................

Salaries and Wages Expense ................ Salaries and Wages Payable (3 X $300) ......................................

900

EXERCISE 3-9B ACE CO. Income Statement For the Month Ended July 31, 2022 Revenues Service revenue ($7,700 + $650) ............................. Expenses Salaries and wages expense ($2,500 + $350) ........ Supplies expense ($1,700 – $250) .......................... Utilities expense ...................................................... Insurance expense .................................................. Depreciation expense .............................................. Total expenses ................................................. Net income .......................................................................

$8,350 $2,850 1,450 500 600 225 5,625 $2,725

EXERCISE 3-10B Answer

Computation

(a) Supplies balance = $500

Supplies expense Add: Supplies (1/31) Less: Supplies purchased Supplies (1/1)

$1,100 900 (1,500) $ 500

(b) Total premium = $6,000

Total premium = Monthly premium X 12; $500 X 12 = $6,000

Purchase date = June 1

Purchase date: On Jan. 31, there are 4 months’ coverage remaining ($500 X 4).

Thus, the purchase date was 8 months earlier on June 1, 2021. (c) Salaries and wages payable = $1,850 Cash paid Salaries payable (1/31/22)

$4,500 1,000 5,500 3,650 $1,850

Less: Salaries expense Salaries payable (12/31/21)

EXERCISE 3-11B (a) July 10 14 15 20

(b) July 31

31 31 31

Supplies ........................................................ Cash .......................................................

1,500

Cash............................................................... Service Revenue ...................................

3,300

Salaries and Wages Expense ...................... Cash .......................................................

1,400

Cash............................................................... Unearned Service Revenue ..................

1,200

Supplies Expense ......................................... Supplies .................................................

1,900

Accounts Receivable .................................... Service Revenue ...................................

900

Salaries and Wages Expense ...................... Salaries and Wages Payable ................

850

Unearned Service Revenue .......................... Service Revenue ...................................

1,800

1,500 3,300 1,400 1,200

1,900 900 850 1,800

EXERCISE 3-12B Aug. 31 31 31 31

31 31

Accounts Receivable..................................... Service Revenue ....................................

1,500

Supplies Expense .......................................... Supplies ..................................................

1,900

Insurance Expense ........................................ Prepaid Insurance ..................................

1,400

Depreciation Expense ................................... Accumulated Depreciation— Equipment ..........................................

800

Salaries and Wages Expense ....................... Salaries and Wages Payable .................

1,200

Unearned Rent Revenue ............................... Rent Revenue .........................................

1,600

1,500 1,900 1,400

800 1,200 1,600

EXERCISE 3-13B RAMIREZ COMPANY Income Statement For the Year Ended August 31, 2022 Revenues Service revenue ....................................................... Rent revenue ............................................................ Total revenues .................................................. Expenses Salaries and wages expense .................................. Rent expense ........................................................... Supplies expense .................................................... Insurance expense .................................................. Depreciation expense .............................................. Total expenses ................................................. Net income .......................................................................

$39,500 13,600 $53,100 17,200 14,000 1,900 1,400 800 35,300 $17,800

EXERCISE 3-13B (Continued) RAMIREZ COMPANY Retained Earnings Statement For the Year Ended August 31, 2022 Beginning balance, September 1, 2021.......................................... Add: Net income ............................................................................. Ending balance, August 31, 2022 ...................................................

$ 4,700 17,800 $22,500

RAMIREZ COMPANY Balance Sheet August 31, 2022 Assets Cash ................................................................................. Accounts receivable........................................................ Supplies ........................................................................... Prepaid insurance ........................................................... Equipment ........................................................................ Less: Accum. depreciation—equipment....................... Total assets ......................................................

$ 7,700 13,500 900 2,800 $16,000 4,800

11,200 $36,100

Liabilities and Stockholders’ Equity Liabilities Accounts payable .................................................... Salaries and wages payable.................................... Unearned rent revenue ............................................ Total liabilities .................................................. Stockholders’ equity Common stock ......................................................... Retained earnings .................................................... Total liabilities and stockholders’ equity........

$ 2,200 1,200 200 $ 3,600 10,000 22,500

32,500 $36,100

EXERCISE 3-14B (a) 1. 2. 3.

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

17,000

Unearned Revenue ........................................... Service Revenue........................................

22,000

(a) Cash ........................................................... Unearned Service Revenue ...............

38,000

(b) Unearned Service Revenue ($38,000 – $18,000) ................................. Service Revenue ................................ 4.

17,000 22,000 38,000 20,000 20,000

Accounts Receivable ........................................ Service Revenue ($161,000 – $22,000 – $20,000) .............

119,000

Cash ................................................................... Accounts Receivable ($119,000 – $19,000) ...............................

100,000

119,000

100,000

(b) Cash received with respect to service = $17,000 + $100,000 + $38,000 = $155,000 *EXERCISE 3-15B 1. 2.

Prepaid Insurance................................................... Insurance Expense ($3,600 X 7/12) .................

2,100

Service Revenue ..................................................... Unearned Service Revenue ($65,000 X 4/5) ..............................................

52,000

Supplies .................................................................. Supplies Expense ............................................

1,200

2,100

52,000 1,200

*EXERCISE 3-16B (a) Jan. 2 10 15

1/2

1/15

Insurance Expense ...................................... Cash ......................................................

3,000

Supplies Expense ........................................ Cash ......................................................

2,100

Cash.............................................................. Service Revenue ..................................

7,500

Insurance Expense 3,000 Cash 7,500 1/2 1/10

(b) Jan. 31 31 31

1/10

3,000 2,100 7,500

Supplies Expense 2,100

3,000 2,100

Service Revenue 1/15

Prepaid Insurance ($250 X 11 months) ...... Insurance Expense ..............................

2,750

Supplies ....................................................... Supplies Expense ................................

900

Service Revenue .......................................... Unearned Service Revenue .................

3,000

Insurance Expense 1/2 3,000 1/31 2,750 Bal. 250 Prepaid Insurance 1/31 2,750

7,500

2,750 900 3,000

Supplies Expense 1/10 2,100 1/31 900 Bal. 1,200

Service Revenue 1/31 3,000 1/15 7,500 Bal. 4,500

Supplies 900

Unearned Service Revenue 1/31 3,000

1/31

(c) Insurance expense..................................................... Supplies expense....................................................... Service revenue ......................................................... Prepaid insurance ...................................................... Supplies ......................................................................

$ 250 (debit) 1,200 (debit) 4,500 (credit) 2,750 (debit) 900 (debit)

Unearned service revenue ......................................... *EXERCISE 3-17B (a) (b) (c) (d) (e) (f)

2 6 3 4 5 1

3,000 (credit)

Going concern assumption Economic entity assumption Monetary unit assumption Time period assumption Historical cost principle Full disclosure principle

*EXERCISE 3-18B 1.

Incorrect. The historical cost principle requires that assets be recorded and reported at their cost.

Correct. The monetary unit assumption assumes the unit of measure remains sufficiently constant over time.

Incorrect. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

*EXERCISE 3-19B 1. Historical cost principle 2. Consistency 3. Economic entity assumption 4. Full disclosure principle 5. Time period assumption 6. Relevance 7. Comparability 8. Going concern assumption 9. Materiality 10. Faithful representation 11. Monetary unit assumption 12. Expense recognition principle

*EXERCISE 3-20B (a) The primary objective of financial reporting is to provide information useful for decision making. Since Unruh’s shares appear to be actively traded, investors must be capable of using the information made available by Unruh to make decisions about the company. (b) The investors must feel as if the company will show earnings in the future. They must recognize that information relevant to their investment choice is indicated by more than Unruh’s net income. (c)

The change from Canadian dollars to U.S. dollars for reporting purposes should make Unruh’s more comparable with companies traded on U.S. stock exchanges.

*EXERCISE 3-21 (a)

Accounting information is the compilation and presentation of financial information for a company. It provides information in the form of financial statements and additional disclosures that is useful for decision making. The accounting rules and practices that have substantial authoritative support and are recognized as a general guide for financial reporting purposes are referred to as generally accepted accounting principles (GAAP). The biotechnology company that employs Kim will follow GAAP to report its assets, liabilities, stockholders’ equity, revenues, and expenses as it prepares financial statements.

(b) Kim is correct in her understanding that the low success rate for new biotech products will be a cause of concern for investors. Her suggestion that detailed scientific findings be reported to prospective investors might offset some of their concerns but it probably won’t conform to the qualitative characteristics of accounting information. These characteristics consist of relevance, faithful representation, comparability, and consistency, verifiability, timeliness, and understandability. They apply to accounting information rather than the scientific findings that Kim wants to include. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

CHAPTER 4 SOLUTIONS TO EXERCISES—SET B EXERCISE 4-1B LAMAR COMPANY Worksheet For the Month Ended June 30, 2022 Account Titles Cash

Trial Balance

Adjustments

Dr.

Cr.

1,760

Adj. Trial Balance Dr.

Cr.

Income Statement Dr.

Cr.

Balance Sheet Dr.

1,760

2,100

250

Cr.

Accounts Receivable Supplies

2,100 1,320

Accounts Payable

1,070 1,080

1,080

Unearned Service Revenue

360

Common Stock

2,280

Service Revenue

2,100

240 240

120

2,280

2,340

Salaries/Wages Expense

500

250

750

140

1,070

Miscellaneous Expense

140

Totals

5,820

Supplies Expense

5,820 1,070

Salaries/Wages Payable Totals

250 1,560

1,560

250 6,070

6,070

250 1,960

Net Income

380

Totals

2,340

4,110

3,730

2,340

4,110

380

EXERCISE 4-2B GOMEZ COMPANY (Partial) Worksheet For the Month Ended April 30, 2022 Adjusted Trial Balance Account Titles Cash Accounts Receivable Prepaid Rent Equipment Accum. Depreciation Notes Payable Accounts Payable Common Stock Retained Earnings Dividends Service Revenue Salaries and Wages Expense Rent Expense Depreciation Expense Interest Expense Interest Payable Totals Net Income Totals

Dr. 11,400 7,000 2,000 20,000

Cr.

Income Statement Dr.

Cr.

Balance Sheet Dr. 11,400 7,000 2,000 20,000

4,700 5,000 4,950 15,000 10,800

3,500

3,500 14,000

9,450 500 600 50 54,500

Cr.

14,000 9,450 500 600 50

50 54,500

10,600 3,400 14,000

14,000

43,900

14,000

43,900

50 40,500 3,400 43,900

EXERCISE 4-3B GOMEZ COMPANY Income Statement For the Month Ended April 30, 2022 Revenues Service revenue ........................................................ Expenses Salaries and wages expense ................................... Depreciation expense .............................................. Rent expense ............................................................ Interest expense ....................................................... Total expenses .................................................. Net income .......................................................................

$14,000 $9,450 600 500 50 10,600 $ 3,400

GOMEZ COMPANY Retained Earnings Statement For the Month Ended April 30, 2022 Beginning balance, April 1 ....................................................... Add: Net income ...................................................................... Less: Dividends ....................................................................... Ending balance, April 30 ..........................................................

$10,800 3,400 14,200 3,500 $10,700

GOMEZ COMPANY Balance Sheet April 30, 2022 Assets Current assets Cash .......................................................................... Accounts receivable ................................................ Prepaid rent .............................................................. Total current assets.......................................... Property, plant, and equipment Equipment ................................................................ Less: Accumulated depreciation—equip. ............. Total assets .......................................................

$11,400 7,000 2,000 $20,400 20,000 4,700

15,300 $35,700

EXERCISE 4-3B (Continued) GOMEZ COMPANY Balance Sheet (Continued) April 30, 2022 Liabilities and Stockholders’ Equity Current liabilities Notes payable ........................................................... Accounts payable ..................................................... Interest payable ........................................................ Total current liabilities .............................................. Stockholders’ equity Common Stock ......................................................... Retained Earnings .................................................... Total liabilities and stockholders’ equity ................

$ 5,000 4,950 50 $10,000 15,000 10,700

25,700 $35,700

EXERCISE 4-4B (a) Apr. 30 30

30 30

Service Revenue ...................................... Income Summary .............................

14,000

Income Summary ..................................... Salaries and Wages Expense .......... Rent Expense ................................... Depreciation Expense ...................... Interest Expense ..............................

10,600

Income Summary ..................................... Retained Earnings ............................

3,400

Retained Earnings ................................... Dividends ..........................................

3,500

14,000 9,450 500 600 50 3,400 3,500

(b) (2) (3)

Income Summary 10,600 (1) 14,000 3,400 14,000 14,000

(4)

Retained Earnings 3,500 10,800 (3) 3,400 Bal. 10,700

EXERCISE 4-4B (Continued) (c)

GOMEZ COMPANY Post-Closing Trial Balance April 30, 2022 Cash .................................................................... Accounts Receivable ......................................... Prepaid Rent ....................................................... Equipment .......................................................... Accumulated Depreciation—Equipment .......... Notes Payable..................................................... Accounts Payable .............................................. Interest Payable .................................................. Common Stock ................................................... Retained Earnings ..............................................

Debit $11,400 7,000 2,000 20,000

$40,400

Credit

$ 4,700 5,000 4,950 50 15,000 10,700 $40,400

EXERCISE 4-5B (a) Accounts Receivable ......................................... Service Revenue .........................................

1,100

Insurance Expense............................................. Prepaid Insurance.......................................

500

Depreciation Expense ........................................ Accumulated Depreciation - Equipment ...

1,250

Salaries and Wages Expense ............................ Salaries and Wages Payable ......................

650

1,100 500 1,250 650

EXERCISE 4-5B (Continued) (b)

Income Statement Dr. Cr. Accounts Receivable Prepaid Insurance Accum. Depr.—Equip. Salaries and Wages Payable Service Revenue Salaries and Wages Expense Insurance Expense Depreciation Expense

Balance Sheet Dr. Cr. X X X X

X X X X

EXERCISE 4-6B (a) Accounts Receivable—$20,000 ($35,000 – $15,000). Supplies—$1,500 ($8,000 – $6,500). Accumulated Depr.—Equip.—$36,000 ($24,000 + $12,000). Salaries and Wages Payable—$0 No liability recorded until adjustments are made. Insurance Expense—$5,000 ($29,000 – $24,000). Salaries and Wages Expense—$46,000 ($52,000 – $6,000). (b) Accounts Receivable ................................................ Service Revenue................................................

15,000

Insurance Expense ................................................... Prepaid Insurance .............................................

5,000

Supplies Expense ..................................................... Supplies .............................................................

6,500

Depreciation Expense .............................................. Accumulated Depreciation ...............................

12,000

Salaries and Wages Expense ................................... Salaries and Wages Payable ............................

6,000

15,000 5,000 6,500 12,000 6,000

EXERCISE 4-7B (a) Service Revenue ................................................... Income Summary ............................................

5,360

Income Summary .................................................. Salaries and Wages Expense ......................... Miscellaneous Expense .................................. Supplies Expense ...........................................

5,050

Income Summary .................................................. Retained Earnings ...........................................

310

Retained Earnings ................................................. Dividends .........................................................

400

(b)

5,360 1,650 350 3,050 310 400

PENNINGTON COMPANY Post-Closing Trial Balance For the Month Ended June 30, 2022 Account Titles Cash ....................................................................... Accounts Receivable ............................................ Supplies ................................................................. Accounts Payable ................................................. Salaries and Wages Payable ................................ Unearned Service Revenue .................................. Common Stock ...................................................... Retained Earnings .................................................

Debit $ 4,650 5,200 640

$10,490

Credit

$ 2,500 600 200 6,000 1,190 $10,490

EXERCISE 4-8B (a) General Journal Date Account Titles July 31 Service Revenue ................................. Rent Revenue...................................... Income Summary.......................

Ref. 404 429 350

Debit 42,400 6,100

31 Income Summary ................................ Salaries and Wages Expense ... Utilities Expense ........................ Depreciation Expense ...............

350 720 732 711

51,900

31 Retained Earnings .............................. Income Summary.......................

311 350

3,400

31 Retained Earnings .............................. Dividends ...................................

311 332

11,000

J15 Credit

48,500 39,100 10,100 2,700 3,400 11,000

(b) Retained Earnings Date Explanation Ref. Debit July 31 Balance 31 Close net loss J15 3,400 31 Close dividends J15 11,000 Income Summary Date Explanation Ref. Debit July 31 Close revenue J15 31 Close expenses J15 51,900 31 Close net loss J15

Credit

Credit 48,500 3,400

No. 301 Balance 15,700 12,300 1,300 No. 350 Balance 48,500 (3,400) 0

EXERCISE 4-8B (Continued) (c)

WANG COMPANY Post-Closing Trial Balance July 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Equipment .......................................................... Accumulated Depreciation—Equip. .................. Accounts Payable .............................................. Unearned Rent Revenue .................................... Common Stock ................................................... Retained Earnings ..............................................

Debit $ 7,900 6,200 10,600

$24,700

Credit

$ 4,400 2,800 1,200 15,000 1,300 $24,700

EXERCISE 4-9B (a)

WANG COMPANY Income Statement For the Year Ended July 31, 2022 Revenues Service revenue .......................................... Rent revenue ............................................... Total revenues ..................................... Expenses Salaries and wages expense ..................... Utilities expense ......................................... Depreciation expense ................................. Total expenses .................................... Net loss ...............................................................

$42,400 6,100 $48,500 39,100 10,100 2,700 51,900 ($ 3,400)

WANG COMPANY Retained Earnings Statement For the Year Ended July 31, 2022 Beginning balance, August 1, 2020 .................. Less: Net loss .................................................... Dividends ................................................. Ending balance, July 31, 2020 ...........................

$15,700 $ 3,400 11,000

14,400 $ 1,300

(b)

WANG COMPANY Balance Sheet July 31, 2022 Assets Current assets Cash ................................................................ Accounts receivable ...................................... Total current assets ................................ Property, plant, and equipment Equipment....................................................... Less: Accumulated depreciation—equip. ... Total assets .............................................

$ 7,900 6,200 $14,100 10,600 4,400

6,200 $20,300

Liabilities and Stockholders’ Equity Current liabilities Accounts payable........................................... Unearned rent revenue .................................. Total current liabilities............................ Stockholders’ equity Common stock ............................................... Retained earnings .......................................... Total liabilities and stockholders’ equity

$ 2,800 1,200 $ 4,000 15,000 1,300

16,300 $20,300

EXERCISE 4-10B 1. 2. 3.

True. True. False. If the accounting records are free of errors, no correcting entries are needed. 4. False. Some of the steps of the accounting cycle are incorporated into the worksheet. 5. True. 6. False. Steps 1–3 may occur daily in the accounting cycle. Steps 4–7 are performed on a periodic basis. Steps 8 and 9 are usually prepared only at the end of a company’s annual accounting period. 7. True. 8. False. Closing entries are prepared after financial statements are prepared. EXERCISE 4-11B (a) June 30

Service Revenue ....................................

10,100

Income Summary ........................... 30

30 30

10,100

Income Summary ................................... Salaries and Wages Expense ........ Supplies Expense .......................... Rent Expense .................................

8,750

Income Summary ................................... Retained Earnings ..........................

1,350

Retained Earnings ................................. Dividends ........................................

1,700

5,900 850 2,000 1,350 1,700

(b) Income Summary June 30 8,750 June 30 June 30 1,350 10,100

10,100 10,100

EXERCISE 4-12B (a) 1.

Cash ................................................................. Supplies ...................................................

700

Salaries and Wages Expense ......................... Cash .........................................................

700

Service Revenue.............................................. Cash .........................................................

400

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

4,000

700

400

4,000

EXERCISE 4-12B (Continued) 3.

(b) 1.

Accounts Payable ........................................... Supplies................................................... Supplies ........................................................... Accounts Payable ...................................

680

Salaries and Wages Expense .......................... Supplies....................................................

700

Service Revenue .............................................. Cash .................................................................. Accounts Receivable ...............................

400 3,600

Supplies ............................................................ Accounts Payable ....................................

180

680 860 860

700

4,000

180

EXERCISE 4-13B 1. 2.

Accounts Payable ($720 – $270) ............................. Cash ..................................................................

450

Supplies .................................................................... Inventory ........................................................... Cash ..................................................................

650

Dividends ................................................................. Salaries and Wages Expense ..........................

500

450 65 585 500

EXERCISE 4-14B (a)

KEVER MINIATURE GOLF INC. Balance Sheet December 31, 2022 Assets Current assets Cash............................................. Accounts receivable ................... Prepaid insurance....................... Total current assets ........ Property, plant, and equipment Land ............................................. Buildings ..................................... Less: Acc. depr.—buildings...... Equipment .................................. Less: Acc. depr.—equipment .. Total assets .....................

$10,840 9,000 2,700 $ 22,540 38,000 $77,000 19,000 37,500 11,000

58,000 26,500

122,500 $145,040

EXERCISE 4-14B (Continued) KEVER MINIATURE GOLF INC. Balance Sheet (Continued) December 31, 2022 Liabilities and Stockholders’ Equity Current liabilities Current portion of notes payable ...................... Accounts payable .............................................. Interest payable.................................................. Total current liabilities ................................. Long-term liabilities Notes payable .................................................... Total liabilities .............................................. Stockholders’ equity Common stock ................................................... Retained earnings ($7,000 + $9,040*) ............... Total liabilities and stockholders’ equity....

$ 15,000 7,400 1,600 $ 24,000 45,000 69,000 60,000 16,040

76,040 $145,040

*Net income = $15,580 – $540 – $4,400 – $1,600 = $9,040 (b) Current liabilities exceed current assets by $1,460 ($24,000 – $22,540). However, approximately 50% of current assets are in the form of cash. The company’s liquidity appears to be adequate.

EXERCISE 4-15B CL Accounts payable CA Accounts receivable PPE Accumulated depr—equip. PPE Buildings

LTI Stock investments CA Inventory PPE Land LTL Notes payable (due in 3 years)

CA SE CL IA

CA Supplies CA Prepaid insurance PPE Equipment

Cash Common stock Salaries and wages payable Trademarks

EXERCISE 4-16B FOYLE COMPANY Balance Sheet December 31, 2022 (in thousands) Assets Current assets Cash.......................................................... Debt investments ..................................... Accounts receivable ................................ Inventory .................................................. Prepaid insurance.................................... Total current assets ......................... Stock investments ................................... Property, plant, and equipment Equipment ................................................ Less: Accumulated depreciation—equip. Total assets .....................................................

$ 2,300 2,500 1,500 880 620 $ 7,800 185 8,100 4,000

Liabilities and Stockholders’ Equity Current liabilities Notes payable (due in 2022).................... $ 340 Accounts payable .................................... 1,010 Total current liabilities ..................... Long-term liabilities Long-term debt ........................................ 1,560 Notes payable (due after 2022) ............... 250 Total long-term liabilities .................. Total liabilities ................................................. Stockholders’ equity Common stock ......................................... 8,000 Retained earnings.................................... 925 Total liabilities and stockholders’ equity.......

4,100 $12,085

$ 1,350

1,810 3,160 8,925 $12,085

EXERCISE 4-17B (a) HERRERA COMPANY Income Statement For the Year Ended July 31, 2022 Revenues Service revenue ....................................... Rent revenue ........................................... Total revenues ................................. Expenses Salaries and wages expense .................. Depreciation expense ............................. Utilities expense ...................................... Total expense ................................... Net Income ......................................................

$58,000 7,600 $ 65,600 39,000 16,200 3,600 58,800 $ 6,800

HERRERA COMPANY Retained Earnings Statement For the Year Ended July 31, 2022 Beginning balance, August 1, 2021 ............... Plus: Net Income ........................................... Less: Dividends ............................................. Ending balance, July 31, 2022 .......................

$ 5,000 6,800 11,800 3,600 $ 8,200

EXERCISE 4-17B (Continued) (b) HERRERA COMPANY Balance Sheet July 31, 2022 Assets Current assets Cash................................................................ Accounts receivable ...................................... Total current assets ............................... Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation—equip. ... Total assets ...........................................

$13,300 21,200 $34,500 26,500 5,400

Liabilities and Stockholders’ Equity Current liabilities Accounts payable............................................. $ 3,600 Salaries and wages payable ............................ 1,800 Total current liabilities ............................. Long-term liabilities Notes payable ................................................... Total liabilities .......................................... Stockholders’ equity Common stock ................................................. 40,000 Retained earnings ............................................ 8,200 Total liabilities and stockholders’ equity

21,100 $55,600

$ 5,400 2,000 7,400 48,200 $55,600

*EXERCISE 4-18B (a) Dec. 31

Jan. 5

(b) Dec. 31 Jan. 1 Jan. 5

Salaries and Wages Expense ($25,000 X 3/5) ...................................... Salaries and Wages Payable ..........

15,000 15,000

Salaries and Wages Payable ................. Salaries and Wages Expense ($25,000 X 2/5) ...................................... Cash .................................................

15,000

Salaries and Wages Expense ................ Salaries and Wages Payable ..........

15,000

Salaries and Wages Payable ................. Salaries and Wages Expense .........

15,000

Salaries and Wages Expense ................ Cash .................................................

25,000

10,000 25,000 15,000 15,000 25,000

*EXERCISE 4-19B (a) Dec. 31 31 (b) Jan. 1 1

Service Revenue ..................................... Income Summary ............................

100,000

Income Summary ................................... Interest Expense .............................

11,000

Service Revenue ..................................... Accounts Receivable ......................

6,000

Interest Payable ...................................... Interest Expense .............................

2,500

100,000 11,000 6,000 2,500

*EXERCISE 4-19B (Continued) (c)&(e) Accounts Receivable Dec. 31 Balance *29,000 31 Adjusting 6,000 35,000 Jan. 1 Reversing

6,000

*($35,000 – $6,000)

Dec. 31 Closing

Jan. 1

Reversing

Service Revenue 100,000 Dec. 31 Balance 31 Adjusting 100,000 6,000 Jan. 10

94,000* 6,000 100,000 6,000

*($100,000 – $6,000)

Jan. 1

Reversing

Dec. 31 Balance 31 Adjusting Jan. 15

Interest Payable Dec. 31 Adjusting 2,500 Interest Expense *8,500 Dec. 31 Closing 2,500 11,000 3,000 Jan. 1 Reversing

2,500

11,000 11,000 2,500

*($11,000 – $2,500) (d) Jan. 10

(1) Cash ............................................................... Service Revenue ...................................

6,000

(2) Interest Expense ........................................... Cash .......................................................

3,000

6,000

3,000

CHAPTER 5 SOLUTIONS TO EXERCISES—SET B EXERCISE 5-1B 1. 2. 3. 4. 5. 6. 7. 8.

False. Measuring net income for a merchandiser is conceptually the same as measuring net income for a service company. True. False. For a merchandiser, the primary source of revenues is the sale of inventory. False. Interest is an example of an “other expense”. False. The operating cycle of a merchandiser differs from that of a service company. The operating cycle of a merchandiser is ordinarily longer. True. True. False. A perpetual inventory system provides better control over inventories than a periodic system.

EXERCISE 5-2B (a) (1) April 5 (2) April 6 (3) April 7 (4) April 8 (5) April 15

(b) May 4

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

25,000

Inventory ........................................... Cash ..........................................

700

Equipment ........................................ Accounts Payable .....................

29,000

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

3,000

Accounts Payable ($25,000 – $3,000) ......................... Inventory ($22,000 X 2%) .......... Cash ($22,000 – $440)...............

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

25,000 700 29,000 3,000 22,000 440 21,560 22,000 22,000

EXERCISE 5-3B Sept. 6 9 10 12

Inventory (70 X $20) ....................................... Cash ........................................................

1,400

Inventory......................................................... Cash ........................................................

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

Accounts Receivable (40 X $34) ................... Sales Revenue ........................................ Cost of Goods Sold (40 X $21) ...................... Inventory .................................................

1,360

Sales Returns and Allowances ..................... Accounts Receivable ............................. Inventory......................................................... Cost of Goods Sold ................................

Accounts Receivable (20 X $35) ................... Sales Revenue ........................................ Cost of Goods Sold (20 X $21) ...................... Inventory .................................................

700

1,400 70 42 1,360 840 840 34 21 21 700 420 420

EXERCISE 5-4B (a) June 10 11 12 19

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

12,000

Inventory ................................................. Cash .................................................

500

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

700

Accounts Payable ($12,000 – $700) ....... Inventory ($11,300 X 2%) ................ Cash ($11,300 – $226) .....................

11,300

12,000 500 700 226 11,074

EXERCISE 5-4B (Continued) (b) June 10

Accounts Receivable ............................ Sales Revenue ............................... Cost of Goods Sold ............................... Inventory.........................................

12,000

Sales Returns and Allowances ............. Accounts Receivable ..................... Inventory ................................................ Cost of Goods Sold .......................

700

Cash ($11,300 – $226) ........................... Sales Discounts ($11,300 X 2%) ........... Accounts Receivable ($12,000 – $700)..........................

11,074 226

12,000 7,200 7,200 700 300 300

11,300

EXERCISE 5-5B (a) 1.

Accounts Receivable ...................... Sales......................................... Cost of Goods Sold ........................ Inventory ..................................

400,000

Sales Returns and Allowances ...... Accounts Receivable ..............

20,000

Cash ($380,000 – $7,600) ................ Sales Discounts ($380,000 X 2%) ..... Accounts Receivable ($400,000 – $20,000) ............

372,400 7,600

(b) Cash.......................................................................... Accounts Receivable ($400,000 – $20,000) ....

380,000

2. 3.

Dec. 3

Dec. 8 Dec. 13

400,000 240,000 240,000 20,000

380,000 380,000

EXERCISE 5-6B (a)

GRIMMETT COMPANY Income Statement (Partial) For the Year Ended October 31, 2022 Sales revenues Sales revenue ................................................. Less: Sales returns and allowances ........... Sales discounts .................................. Net sales ........................................................

$940,000 $31,000 18,000

49,000 $891,000

Note: Freight-out is a selling expense. (b) (1) Oct. 31

Sales Revenue .............................. Income Summary..................

940,000

Income Summary ......................... Sales Returns and Allowances ........................ Sales Discounts ....................

49,000

(a) Cost of Goods Sold .............................................. Inventory ........................................................

1,200

(b) Sales Revenue ...................................................... Income Summary ..........................................

165,000

Income Summary .................................................. Cost of Goods Sold ....................................... Operating Expenses ...................................... Sales Returns and Allowances..................... Sales Discounts.............................................

140,200

Income Summary ($165,000 – $140,200) ............. Retained Earnings .........................................

24,800

(2)

940,000

31,000 18,000

EXERCISE 5-7B

1,200 165,000 91,200 44,000 3,000 2,000 24,800

EXERCISE 5-8B (a) Cost of Goods Sold .............................................. Inventory ........................................................

1,400

(b) Sales Revenue ...................................................... Income Summary ..........................................

550,000

Income Summary .................................................. Cost of Goods Sold ($332,000 + $1,400) ...... Freight-Out .................................................... Insurance Expense ....................................... Rent Expense ................................................ Salaries and Wages Expense ....................... Sales Discounts ............................................ Sales Returns and Allowances ....................

520,400

Income Summary ($550,000 – $520,400) ............. Retained Earnings .........................................

29,600

1,400

550,000 333,400 11,000 18,000 29,000 95,000 15,000 19,000 29,600

EXERCISE 5-9B (a)

OAKLEY COMPANY Income Statement For the Month Ended March 31, 2022 Sales revenues Sales revenue ................................................ Less: Sales returns and allowances ........... Sales discounts ................................. Net sales ........................................................ Cost of goods sold ............................................... Gross profit ........................................................... Operating expenses Salaries and wages expense ........................ Rent expense ................................................. Freight-out ..................................................... Insurance expense ........................................ Total operating expenses ................. Net income.....................................................

$360,000 $13,000 8,000

21,000 339,000 212,000 127,000

53,000 32,000 7,000 6,000 98,000 $ 29,000

(b) Gross profit rate = $127,000 ÷ $339,000 = 37.46%. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 5-10B (a)

KRUEGER COMPANY Income Statement For the Year Ended December 31, 2022 Net sales .............................................. Cost of goods sold ............................. Gross profit ......................................... Operating expenses............................ Income from operations ..................... Other revenues and gains Interest revenue........................... Other expenses and losses Interest expense .......................... Loss on disposal of equipment ................................. Net income ..........................................

(b)

$1,650,000 922,000 728,000 647,000 81,000 $20,000 $49,000 7,000

56,000 $

(36,000) 45,000

KRUEGER COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Net sales ............................................. Interest revenue.................................. Total revenues ............................ Expenses Cost of goods sold ............................. Operating expenses ........................... Interest expense ................................. Loss on disposal of equipment ......... Total expenses ............................ Net income .................................................

$1,650,000 20,000 $1,670,000 922,000 647,000 49,000 7,000 1,625,000 $ 45,000

EXERCISE 5-11B 1. 2.

3. 4.

Sales Returns and Allowances ........................................ Sales Revenue ...........................................................

205

Supplies ............................................................................ Accounts Payable ............................................................. Cash ........................................................................... Inventory ....................................................................

300 300

Sales Discounts ................................................................ Sales Returns and Allowances ................................

130

Inventory ........................................................................... Cash................................................................................... Freight-Out ................................................................

30 270

205

300 300 130

300

EXERCISE 5-12B (a) $1,000,000 – $670,000 = $330,000. (b) $330,000/$1,000,000 = 33%. The gross profit rate is generally considered to be more useful than the gross profit amount. The rate expresses a more meaningful (qualitative) relationship between net sales and gross profit. The gross profit rate tells how many cents of each sales dollar go to gross profit. The trend of the gross profit rate is closely watched by financial statement users, and is compared with rates of competitors and with industry averages. Such comparisons provide information about the effectiveness of a company’s purchasing function and the soundness of its pricing policies. (c) Income from operations is $130,000 ($330,000 – $200,000), and net income is $120,000 ($130,000 – $10,000). (d) The amount shown for net income is the same in a multiple-step income statement and a single-step income statement. Both income statements report the same revenues and expenses, but in different order. Therefore, net income in Hanlon’s single-step income statement is also $120,000. (e) Inventory is reported as a current asset immediately below accounts receivable. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 5-13B (a) (*missing amount) a.

Sales revenue .............................................................. *Sales returns ............................................................... Net sales.......................................................................

$ 210,000) (10,000) $ 200,000)

Net sales....................................................................... Cost of goods sold ...................................................... *Gross profit..................................................................

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

Gross profit .................................................................. Operating expenses .................................................... *Net income ...................................................................

*Sales revenue .............................................................. Sales returns ................................................................ Net sales.......................................................................

$ 100,000) (5,000) $ 95,000)

Net sales....................................................................... *Cost of goods sold ...................................................... Gross profit ..................................................................

Gross profit .................................................................. *Operating expenses .................................................... Net income ...................................................................

80,000) (50,000) $ 30,000)

95,000) 53,000) 42,000) 42,000) 22,000) 20,000)

) (b) Doty Company Gross profit ÷ Net sales = $80,000 ÷ $200,000 = 40% Ramos Company Gross profit ÷ Net sales = $42,000 ÷ $95,000 = 44.2%

EXERCISE 5-14B (*Missing amount) (a) Sales revenue ...................................................................... Sales returns and allowances ............................................. Net sales ...............................................................................

$ 90,000 2,000* $ 88,000

(b) Net sales ............................................................................... Cost of goods sold .............................................................. Gross profit ..........................................................................

$ 88,000 56,000 $ 32,000*

(c) and (d) Gross profit .......................................................................... Operating expenses ............................................................ Income from operations (c) ................................................. Other expenses and losses ................................................ Net income (d) ......................................................................

$ 32,000 15,000 $ 17,000* 4,000 $ 13,000*

(e) Sales revenue ...................................................................... Sales returns and allowances ............................................. Net sales ...............................................................................

$ 98,000* 5,000 $ 93,000

(f)

Net sales ............................................................................... Cost of goods sold .............................................................. Gross profit ..........................................................................

$ 93,000 60,000* $ 33,000

(g) and (h) Gross profit .......................................................................... Operating expenses (g) ....................................................... Income from operations (h) ................................................ Other expenses and losses ................................................ Net income ...........................................................................

$ 33,000 20,000* $ 13,000* 7,000 $ 6,000

(i)

Sales revenue ...................................................................... Sales returns and allowances ............................................. Net sales ...............................................................................

$127,000 12,000 $115,000*

(j)

$115,000 84,000* $ 31,000

EXERCISE 5-14B (Continued) (k) and (l) Gross profit .......................................................................... Operating expenses............................................................. Income from operations (k) ................................................. Other expenses and losses (l) ............................................ Net income ...........................................................................

$ 31,000 18,000 $ 13,000* 3,000* $ 10,000

*EXERCISE 5-15B Adjusted Trial Balance

Accounts

Debit Cash Inventory Sales Revenue Sales Returns and Allowances Sales Discounts Cost of Goods Sold

Credit

Income Statement Debit

Credit

11,000 93,000

Debit

Credit

11,000 93,000 550,000

12,000 13,000 370,000

Balance Sheet

550,000 12,000 13,000 370,000

*EXERCISE 5-16B LIPPERT COMPANY Worksheet For the Month Ended June 30, 2022 Account Titles Cash Accounts Receivable Inventory Accounts Payable Common Stock Sales Revenue Cost of Goods Sold Operating Expenses Totals Net Income Totals

Adj. Trial Balance Adjustments Trial Balance Dr. Cr. Dr. Cr. Dr. Cr. 4,500 4,500 5,000 5,000 12,000 12,000 2,500 2,700 5,200 8,000 8,000 90,000 90,000 54,000 54,000 25,000 2,700 27,700 100,500 100,500 2,700 2,700 103,200 103,200

Income Statement Dr. Cr.

Balance Sheet Dr. Cr. 4,500 5,000 12,000 5,200 8,000

90,000 54,000 27,700 81,700 8,300 90,000

90,000 90,000

21,500 13,200 8,300 21,500 21,500

*EXERCISE 5-17B Inventory, September 1, 2021 ....................................... Purchases ...................................................................... Less: Purchase returns and allowances .................... Net Purchases ............................................................... Add: Freight-in ............................................................. Cost of goods purchased ............................................. Cost of goods available for sale................................... Inventory, August 31, 2022 ........................................... Cost of goods sold ................................................

$ 35,000 $300,000 4,000 296,000 8,500 304,500 339,500 (45,000) $294,500

*EXERCISE 5-18B (a)

(b)

Sales revenue ....................................... Less: Sales returns and allowances .... Sales discounts ........................ Net sales ............................................... Cost of goods sold Inventory, January 1....................... Purchases ....................................... Less: Purch. rets. and alls. ........... Purch. discounts ................. Add: Freight-in ................................ Cost of goods available for sale .... Inventory, December 31 ................. Cost of goods sold .................. Gross profit .....................................

$650,000 $ 12,000 7,000

19,000 631,000

35,000 $390,000 3,000 8,000

379,000 6,000 420,000 (41,000) 379,000 $252,000

Gross profit $252,000 – Operating expenses = Net income $120,000. Operating expenses = $132,000.

*EXERCISE 5-19B (a) $2,050 (b) $2,120 (c) $2,020 (d) $ 40 (e) $ 60 (f) $ 130

($2,100 – $ 50) ($2,050 + $ 70) ($2,320 – $ 300) ($1,100 – $1,060) ($1,120 – $1,060) ($1,220 – $1,090)

(g) $ 3,250 (h) $ 150 (i) $ 3,750 (j) $ 790 (k) $ 400 (l) $11,410

($ 150 + $ 3,100) ($ 3,250 – $ 3,100) ($ 500 + $ 3,250) ($12,200 – $11,410 from (I)) ($11,200 – $10,800) ($10,800 + $ 610)

*EXERCISE 5-20B (a) 1. 2. 3. 4.

(b)

April 5 April 6 April 7 April 8

April 15

May

Purchases ....................................... Accounts Payable .....................

30,000

Freight-In ......................................... Cash ...........................................

800

Equipment ....................................... Accounts Payable .....................

37,000

Accounts Payable........................... Purchase Returns and Allowances ............................

3,000

Accounts Payable ($30,000 – $3,000)........................ Purchase Discounts ($27,000 X 2%) ....................... Cash ($27,000 – $540) ............... Accounts Payable ($30,000 – $3,000)........................ Cash ...........................................

30,000 800 37,000

3,000 27,000 540 26,460 27,000 27,000

*EXERCISE 5-21B (a) 1. 2. 3. 4.

(b)

April 5 April 6 April 7 April 8

April 15

May

Purchases ....................................... Accounts Payable .....................

35,000

Freight-In......................................... Cash...........................................

1,000

Equipment....................................... Accounts Payable .....................

41,000

Accounts Payable .......................... Purchase Returns and Allowances ............................

5,000

Accounts Payable ($35,000 – $5,000) ....................... Purchase Discounts ($30,000 X 2%) ....................... Cash ($30,000 – $600)............... Accounts Payable ($35,000 – $5,000) ....................... Cash...........................................

35,000 1,000 41,000

5,000 30,000 600 29,400 30,000 30,000

*EXERCISE 5-22B Accounts Cash Inventory Purchases Purchase Returns and Allowances Sales Revenue Sales Returns and Allowances Sales Discounts Rent Expense

Adjusted Trial Balance Debit Credit 12,000 80,000 240,000

Income Statement Debit Credit 80,000 240,000

30,000 430,000 10,000 5,000 42,000

Balance Sheet Debit Credit 12,000 70,000 70,000

30,000 430,000 10,000 5,000 42,000

CHAPTER 6 SOLUTIONS TO EXERCISES—SET B EXERCISE 6-1B Ending inventory—physical count ................................................. 1. Add to inventory: Title passed to Markham when goods were shipped ......................................................................... 2. No effect—title does not transfer to Markham until goods are received ............................................................... 3. No effect—title passes to purchaser upon shipment when terms are FOB shipping point .................................... 4. Add to inventory: Title remains with Markham until purchaser receives goods .................................................... 5. The goods did not arrive prior to year-end. The goods, therefore, cannot be included in the inventory ................... Correct inventory .............................................................................

$255,000 22,000 0 0 42,000 (41,000) $278,000

EXERCISE 6-2B Ending inventory—as reported ....................................................... 1. No effect—title does not pass to Hobson until goods are received (Jan. 3) ................................................. 2. Subtract from inventory: The goods belong to Discland Corporation. Hobson is merely holding them as a consignee ............................................................ 3. Subtract from inventory: Office supplies should be carried in a separate account. They are not considered inventory held for resale .................................. 4. Add to inventory: The goods belong to Hobson until they are shipped (Jan. 1) ............................................. 5. Add to inventory: Gavin ordered goods with a cost of $6,000. Hobson should record the corresponding sales revenue of $10,000. Hobson’s decision to ship extra “unordered” goods does not constitute a sale. The manager’s statement that Gavin could ship the goods back indicates that Hobson knows this over-shipment is not a legitimate sale. The manager acted unethically in an attempt to improve Hobson’s reported income by over-shipping ......................................

$550,000 0 (170,000) (21,000) 19,000

30,000

Subtract from inventory: GAAP require that inventory be valued at the lower of cost or market. Obsolete parts should be adjusted from cost to zero if they have no other use. ............................................................................ Correct inventory ..........................................................................

(27,000) $381,000

EXERCISE 6-3B (a)

FIFO Cost of Goods Sold (#1012) $80 + (#1045) $70 = $150

(b)

It could choose to sell specific units purchased at specific costs if it wished to impact earnings selectively. If it wished to minimize earnings it would choose to sell the units purchased at higher costs—in which case the Cost of Goods Sold would be $150. If it wished to maximize earnings it would choose to sell the units purchased at lower costs—in which case the cost of goods sold would be $135.

(c)

I recommend they use the FIFO method because it produces a more appropriate balance sheet valuation and reduces the opportunity to manipulate earnings. (The answer may vary depending on the method the student chooses.)

EXERCISE 6-4B FIFO Beginning inventory (20 X $120) ...................................... Purchases July 12 (35 X $125) ..................................................... July 19 (15 X $128) ..................................................... July 26 (40 X $130) ..................................................... Cost of goods available for sale ....................................... Less: Ending inventory (22 X $130) ................................ Cost of goods sold ............................................................

$ 2,400 $4,375 1,920 5,200

11,495 13,895 2,860 $11,035

EXERCISE 6-4B (Continued)

Date 7/1 7/12 7/19 7/26

Units 20 35 15 18 88

Proof Unit Cost $120 125 128 130

Total Cost $ 2,400 4,375 1,920 2,340 $11,035

LIFO Cost of goods available for sale ....................................... Less: Ending inventory (20 X $120)................................. (2 X $125)................................. Cost of goods sold ............................................................

Date 7/26 7/19 7/12

Units 40 15 33 88

Proof Unit Cost $130 128 125

$13,895 $2,400 250

2,650 $11,245

Total Cost $ 5,200 1,920 4,125 $11,245

EXERCISE 6-5B FIFO Beginning inventory (40 X $7) .............................................. Purchases May 15 (32 X $10) ........................................................... May 24 (45 X $11) ........................................................... Cost of goods available for sale ........................................... Less: Ending inventory (32 X $11)....................................... Cost of goods sold ................................................................

Date 5/1 5/15 5/24

Units 40 32 13

Proof Unit Cost $ 7 10 11

$ 280 $320 495

815 1,095 352 $ 743

Total Cost $280 320 143 $743

LIFO Cost of goods available for sale ......................................................... Less: Ending inventory (32 X $7) ...................................................... Cost of goods sold ..............................................................................

Date 5/24 5/15 5/1

Units 45 32 8

Proof Unit Cost $11 10 7

$1,095 224 $ 871

Total Cost $495 320 56 $871

EXERCISE 6-6B (a)

FIFO Beginning inventory (250 X $7) ............................... Purchases June 12 (325 X $8) ............................................ June 23 (475 X $9) ............................................ Cost of goods available for sale ............................. Less: Ending inventory (130 X $9) ......................... Cost of goods sold ..................................................

$1,750 $2,600 4,275

LIFO Cost of goods available for sale ............................. Less: Ending inventory (130 X $7) ......................... Cost of goods sold ..................................................

6,875 8,625 1,170 $7,455 $8,625 910 $7,715

Average Cost Cost of Goods Total Units Available for Sale ÷ Available for Sale $8,625 1,050 Ending inventory (130 X $8.2143) Cost of goods sold (920 X $8.2143)

Weighted Average = Unit Cost $8.2143

$1,068 $7,557

EXERCISE 6-6B (Continued) (b) The FIFO method will produce the higher ending inventory because costs have been rising. Under this method, the earliest costs are assigned to cost of goods sold and the latest costs remain in ending inventory. For Tevis Company, the ending inventory under FIFO is $1,170 or (130 X $9) compared to $910 or (130 X $7) under LIFO and $1,068 or (130 x 8.2143) under average-cost. (c) The LIFO method will produce the higher cost of goods sold for Tevis Company. Under LIFO the most recent costs are charged to cost of goods sold and the earliest costs are included in the ending inventory. The cost of goods sold is $7,715 or [$8,625 – (130 X $7)] compared to $7,455 or ($8,625 – $1,170) under FIFO or $7,557 or (920 X 8.2143) under average-cost. (d) The average-cost method uses a weighted-average unit cost, not a simple average of unit costs. EXERCISE 6-7B (a) 1.

FIFO Beginning inventory........................................... Purchases ........................................................... Cost of goods available for sale ....................... Less: Ending inventory (80 X $110) ................. Cost of goods sold .............................................

$ 8,000 33,000 41,000 (8,800) $32,200

LIFO Beginning inventory........................................... Purchases ........................................................... Cost of goods available for sale ....................... Less: Ending inventory (80 X $80) ................... Cost of goods sold .............................................

$ 8,000 33,000 41,000 (6,400) $34,600

AVERAGE Beginning inventory........................................... Purchases ........................................................... Cost of goods available for sale ....................... Less: Ending inventory (80 X $102.50) ............ Cost of goods sold .............................................

$ 8,000 33,000 41,000 (8,200) $32,800

(b) The use of FIFO would result in the highest net income since the earlier lower costs are matched with revenues. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 6-7B (Continued) (c) The use of FIFO would result in inventories approximating current cost in the balance sheet, since the more recent units are assumed to be on hand. (d) The use of LIFO would result in Eaton paying the least taxes in the first year since income will be lower. EXERCISE 6-8B

Beginning inventory............................................ Cost of goods purchased ................................... Cost of goods available for sale......................... Less: Corrected ending inventory ..................... Cost of goods sold .............................................. a

$40,000 + $9,000 = $49,000.

2022 $ 41,000 200,000 241,000 49,000a $192,000

2021 $ 40,000 235,000 275,000 41,000b $234,000

$45,000 - $4,000 = $41,000.

EXERCISE 6-9B (a) Sales revenue .................................................. Cost of goods sold Beginning inventory ................................. Cost of goods purchased ........................ Cost of goods available for sale.............. Ending inventory ($55,000 – $7,000) ....... Cost of goods sold ................................... Gross profit ......................................................

2022 $300,000

2021 $350,000

48,000 186,000 234,000 34,000 200,000 $ 100,000

40,000 217,000 257,000 48,000 209,000 $ 141,000

(b) The cumulative effect on total gross profit for the two years is zero as shown below: Incorrect gross profits: Correct gross profits: Difference

$148,000 + $93,000 = $241,000 $141,000 + $100,000 = 241,000 $ 0

EXERCISE 6-9B (Continued) (c) Dear Mr./Ms. President: Because your ending inventory of December 31, 2021 was overstated by $7,000, your net income for 2021 was overstated by $7,000. For 2022 net income was understated by $7,000. In a periodic system, the cost of goods sold is calculated by deducting the cost of ending inventory from the total cost of goods you have available for sale in the period. Therefore, if this ending inventory figure is overstated, as it was in December 2021, then the cost of goods sold is understated and therefore net income will be overstated by that amount. Consequently, this overstated ending inventory figure goes on to become the next period’s beginning inventory amount and is a part of the total cost of goods available for sale. Therefore, the mistake repeats itself in the reverse. The error also affects the balance sheet at the end of 2021. The inventory reported in the balance sheet is overstated; therefore, total assets are overstated. The overstatement of the 2021 net income results in the Retained Earnings account balance being overstated. The balance sheet at the end of 2022 is correct because the overstatement of the Retained Earnings account at the end of 2021 is offset by the understatement of the 2022 net income and the inventory at the end of 2022 is correct. Thank you for allowing me to bring this to your attention. If you have any questions, please contact me at your convenience. Sincerely,

EXERCISE 6-10B

Lower of Cost or NRV

Cost

NRV

Cameras Minolta Canon Total

$ 900 960 1,860

$1,000 930 1,930

$ 900 930

Light meters Vivitar Kodak Total Total inventory

1,320 1,820 3,140 $5,000

1,440 1,610 3,050 $4,980

1,320 1,610 $4,760

NRV $10,000 19,500 24,000 $53,500

Lower of Cost or NRV: 10,000 19,500 22,500 $52,000

EXERCISE 6-11B

Cameras DVD players iPods Total inventory

Cost $11,000 21,000 22,500 $54,500

EXERCISE 6-12B

Inventory turnover

Days in inventory Gross profit rate

2020

2021

2022

$1,400,000 ($120,000 + $280,000) ÷ 2

$1,440,000 ($280,000 + $200,000) ÷ 2

$1,740,000 ($200,000 + $400,000) ÷ 2

$1,400,000 $200,000

= 7.0 times

$1,440,000 $240,000

= 6.0 times

$1,740,000 $300,000

= 5.8 times

365 7.0

= 52.1 days

365 6.0

= 60.8 days

365 5.8

= 62.9 days

$2,000,000 – $1,400,000 $2,400,000 – $1,440,000 = .30 = .40 $2,000,000 $2,400,000

$3,000,000 – $1,740,000 = .42 $3,000,000

The inventory turnover ratio decreased by approximately 17% from 2020 to 2022 while the days in inventory increased by almost 21% over the same time period. Both of these changes would be considered negative since it’s better to have a higher inventory turnover with a correspondingly lower days in _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

inventory. However, Megan’s Photoshop’s gross profit rate increased by 40% from 2020 to 2022, which is a positive sign. EXERCISE 6-13B (a)

(b)

Brady Company

Perez Company

Inventory Turnover

$280,000 ($55,000 + $75,000)/2 = 4.31 times

$394,000 ($82,000 + $88,000)/2 = 4.64 times

Days in Inventory

365/4.31 = 85 days

365/4.64 = 79 days

Perez Company is moving its inventory more quickly, since its inventory turnover is higher, and its days in inventory is lower.

*EXERCISE 6-14B (1) Date Purchases Jan. 1 8 10 (6 @ $640) $3,840 15

Purchases

Jan. 1 8 10 (6 @ $640) $3,840 15

(2 @ $500) $1,000 (1 @ $500) (3 @ $640) $2,420

(2) Date

FIFO Cost of Goods Sold

LIFO Cost of Goods Sold (2 @ $500) $1,000 (4 @ $640) $2,560

Balance (3 @ $500) $1,500 (1 @ $500) 500 (1 @ $500) (6 @ $640) 4,340 (3 @ $640)

1,920

Balance (3 @ $500) $1,500 (1 @ $500) 500 (1 @ $500) (6 @ $640) 4,340 (1 @ $500) (2 @ $640) 1,780

*EXERCISE 6-15B (Continued) (3)

AVERAGE-COST Date Purchases Cost of Goods Sold Jan. 1 8 (2 @ $500) $1,000 10 (6 @ $640) $3,840 15 (4 @ $620) $2,480

Balance (3 @ $500) $1,500 (1 @ $500) 500 (7 @ $620)* 4,340 (3 @ $620) 1,860

*Average-cost = ($500 + $3,840) ÷ 7 = $620 *EXERCISE 6-15B (a)

The cost of goods available for sale is:

June 1 Inventory 250 @ $7 June 12 Purchase 325 @ $8 June 23 Purchase 475 @ $9 Total cost of goods available for sale Date Purchases June 1 June 12 (325 @ $8) $2,600 June 15

$1,750 2,600 4,275 $8,625

FIFO Cost of Goods Sold

}

(250 @ $7) (175 @ $8)

$1,750 1,400

June 23 (475 @ $9) $4,275 June 27

Balance (250 @ $7) $1,750 (250 @ $7) $4,350 (325 @ $8)

(150 @ $8) (345 @ $9)

1,200 3,105 $7,455

(150 @ $8) (150 @ $8) (475 @ $9)

$1,200

} $5,475

(130 @ $9)

$1,170

Ending inventory: $1,170. Cost of goods sold: $8,625 – $1,170 = $7,455.

*EXERCISE 6-16B (Continued)

Date June 1 June 12

Purchases (325 @ $8) $2,600

June 15 June 23

LIFO Cost of Goods Sold

}

(325 @ $8) (100 @ $7) (475 @ $9) $4,275

June 27

Balance (250 @ $7) $1,750 (250 @ $7) $4,350 (325 @ $8)

$2,600 $ 700

(150 @ $7) (150 @ $7) (475 @ $9)

$1,050

} $5,325 ( 20 @ $7) 140 (130 @ $7) } $ 910 (475 @ $9) $4,275 $7,715

Ending inventory: $910. Cost of goods sold: $8,625 – $910 = $7,715.

Date June 1 June 12 June 15 June 23 June 27

Purchases

Moving-Average Cost of Goods Sold

(325 @ $8) $2,600 (425 @ $7.57)

$3,217

(495 @ $8.65)

$4,282 $7,499

(475 @ $9) $4,275

Balance (250 @ $7) $1,750 (575 @ $7.57) $4,350 (150 @ $7.57) $1,133 (625 @ $8.65) $5,408 (130 @ $8.65) $1,126

Ending inventory: $1,126. Cost of goods sold: $8,625 – $1,126 = $7,499. (b)

FIFO gives the same ending inventory and cost of goods sold values under both the periodic and perpetual inventory system. LIFO and average usually give different ending inventory and cost of goods sold values under the periodic and perpetual inventory systems, due to the Last-in, First-out assumption being applied to a different pool of costs.

(c)

The simple average would be [($7 + $8 + $9) ÷ 3)] or $8. However, the average-cost method uses a weighted-average unit cost that changes each time a purchase is made rather than a simple average.

*EXERCISE 6-16B (a)

Date 7/1 7/5 7/12

FIFO Cost of Goods Sold

Purchases

(10 @ $120) $1,200 (35 @ $125)

$4,375

7/16

(10 @ $120) (30 @ $125) $4,950

7/19

(15 @ $128)

$1,920

7/26

(40 @ $130)

$5,200

7/29

Date 7/1 7/5 7/12

( 5 @ $125) (15 @ $128) (18 @ $130) $4,885

( 5 @ $125) $ 625 ( 5 @ $125) (15 @ $128) $2,545 ( 5 @ $125) (15 @ $128) (40 @ $130) $7,745 (22 @ $130) $2,860

LIFO Cost of Goods Sold

Purchases (35 @ $125)

$4,375

7/19

(15 @ $128)

$1,920

7/26

(40 @ $130)

$5,200

7/16

7/29

Balance (20 @ $120) $2,400 (10 @ $120) $1,200 (10 @ $120) (35 @ $125) $5,575

Balance (20 @ $120) $2,400 (10 @ $120) $1,200 (10 @ $120) $1,200 (10 @ $120) (35 @ $125) $5,575 (35 @ $125) ( 5 @ $120) $4,975 ( 5 @ $120) $ 600 ( 5 @ $120) (15 @ $128) $2,520 ( 5 @ $120) (15 @ $128) (40 @ $130) $7,720 (38 @ $130) $4,940 ( 5 @ $120) (15 @ $128) $2,780 ( 2 @ $130)

*EXERCISE 6-17B (Continued)

Date 7/1 7/5 7/12 7/16 7/19 7/26 7/29

Purchases

Average-Cost Cost of Goods Sold (10 @ $120)

$1,200

(35 @ $125) $4,375 (40 @ $123.889) $4,956* (15 @ $128) $1,920 (40 @ $130) $5,200 (38 @ $128.983) $4,901*

Balance (20 @ $120) $2,400 (10 @ $120) $1,200 (45 @ $123.889*) $5,575 ( 5 @ $123.889*) $ 619 (20 @ $126.95) $2,539 (60 @ $128.983*) $7,739 (22 @ $128.983) $2,838

*Rounded (b) Ending Inventory FIFO Ending Inventory LIFO

(c)

Periodic $2,860 $2,650

Perpetual $2,860 $2,780

FIFO yields the same ending inventory value under both the periodic and perpetual inventory system. LIFO yields different ending inventory values when using the periodic versus perpetual inventory system.

*EXERCISE 6-17B (a)

Sales revenue ...................................................... Cost of goods sold Inventory, November 1 ............................... Cost of goods purchased........................... Cost of goods available for sale ................ Inventory, December 31 ............................. Cost of goods sold ............................ Gross profit ..........................................................

$1,000,000 $140,000 600,000 740,000 (120,000) 620,000 $ 380,000

Gross profit rate $380,000/$1,000,000 = 38%

*EXERCISE 6-17B (Continued) (b) Sales revenue......................................................................... $1,200,000 Less: Estimated gross profit (38% X $1,200,000) ............... 456,000 Estimated cost of goods sold ............................................... $ 744,000 Beginning inventory .............................................................. $ 120,000 Cost of goods purchased ...................................................... 700,000 Cost of goods available for sale ........................................... 820,000 Less: Estimated cost of goods sold .................................... 744,000 Estimated cost of ending inventory ..................................... $ 76,000 *EXERCISE 6-18B (a) Net sales ($105,000 – $5,000) ................................................ Less: Estimated gross profit (40% X $100,000) .................. Estimated cost of goods sold ...............................................

$100,000 40,000 $ 60,000

Beginning inventory .............................................................. Cost of goods purchased ($62,000 – $1,000 + $2,000) ........ Cost of goods available for sale ........................................... Less: Estimated cost of goods sold .................................... Estimated cost of merchandise lost .....................................

$ 30,000 63,000 93,000 60,000 $ 33,000

(b) Net sales ................................................................................. Less: Estimated gross profit (30% X $100,000) .................. Estimated cost of goods sold ...............................................

$100,000 30,000 $ 70,000

Beginning inventory .............................................................. Cost of goods purchased ...................................................... Cost of goods available for sale ........................................... Less: Estimated cost of goods sold .................................... Estimated cost of merchandise lost .....................................

$ 35,000 63,000 98,000 70,000 $ 28,000

*EXERCISE 6-19B Adult’s Department Cost Retail Beginning inventory Goods purchased Goods available for sale Net sales Ending inventory at retail

Cost/retail ratio

$ 40,000 100,000 $140,000

$ 57,000 143,000 200,000 160,000 $ 40,000

$140,000 = 70% $200,000

Estimated cost of ending inventory $40,000 X 70% = $28,000

Kid’s Department Cost Retail $ 50,000 145,000 $195,000

$ 77,000 223,000 300,000 230,000 $ 70,000

$195,000 = 65% $300,000

$70,000 X 65% = $45,500

CHAPTER 7 SOLUTIONS TO EXERCISES—SET B EXERCISE 7-1B 1. Establishment of responsibility. The counter clerk is responsible for handling cash. Other employees are responsible for making the food. 2. Segregation of duties. Employees who make the food do not handle cash. 3. Documentation procedures. The counter clerk uses your order invoice (ticket) in registering the sale on the cash register. The cash register produces a tape of all sales. 4. Physical controls. A cash register is used to record the sale. 5. Independent internal verification. The counter clerk, in handling the food, compares the contents of the bag with the items indicated on the order invoice. 6. Human resource controls. No visible application possible. EXERCISE 7-2B (a)

(b) Recommended Change

Procedure

Weakness

Principle

Inability to establish responsibility for cash with a specific clerk.

Establishment of responsibility.

There should be separate cash drawers and register codes for each clerk.

Cash is not adequately protected from theft.

Physical controls.

Cash should be stored in a safe until it is deposited in bank.

EXERCISE 7-2B (Continued) (a) Procedure

Weakness

Principle

(b) Recommended Change

Cash is not independently counted.

Independent internal verification.

A cashier office supervisor should count cash.

The bookkeeper accountant should not handle cash.

Segregation of duties.

The cashier’s department should make the deposits.

Cashiers do not take vacations.

Human resource controls.

All cashiers should either take vacations or be rotated to other jobs and shifts.

EXERCISE 7-3B (a)

(b) Recommended Change

Procedure

Weakness

Principle

The approval and payment of bills is done by the same individual.

Segregation of duties.

The store manager should approve bills for payment and the treasurer should sign and issue checks.

The bank reconciliation is not independently prepared.

Independent internal verification.

Someone with no other cash responsibilities should prepare the bank reconciliation.

Antiques are not stored in a secure area.

Physical controls. Antiques should be stored in a locked storage area.

EXERCISE 7-3B (Continued) (a)

(b) Recommended Change

Procedure

Weakness

Principle

Checks are not prenumbered.

Documentation procedures.

Checks should be prenumbered and subsequently accounted for.

Filing does not prevent a bill from being paid more than once.

Human resource controls.

Bills should be stamped PAID after payment.

EXERCISE 7-4B (a) Weaknesses

(b) Suggested Improvement

Checks are not prenumbered.

Use prenumbered checks.

The purchasing agent signs checks.

Only the treasurer’s department personnel should sign checks.

Unissued checks are stored in unlocked file cabinet.

Unissued checks should be stored in a locked file cabinet with access restricted to authorized personnel.

Purchasing agent approves and pays for goods purchased.

Purchasing should approve bills for payment by the treasurer.

After payment, the invoice is filed by payment date.

The invoice should be filed by vendor name in paid invoices file.

The purchasing agent records payments in cash disburse-

Only accounting department personnel should record cash

ments journal. (a) Weaknesses

disbursements. (b) Suggested Improvement

The treasurer records the checks in cash disbursements journal.

Same as answer to No. 6.

The treasurer reconciles the bank statement.

An internal auditor should reconcile the bank statement.

(b) To:

Treasurer, Noble Company

From:

Accounting Student

I have reviewed your cash disbursements system and suggest that you make the following improvements: 1.

Noble Company should use prenumbered checks. These should be stored in a locked file cabinet or safe with access restricted to authorized personnel.

The purchasing department should approve bills for payment. The treasurer’s department should prepare and sign the checks. The invoices should be filed by vendor name in a paid invoices file.

Only the accounting department personnel should record cash disbursements.

An internal auditor should reconcile the bank statement.

If you have any questions about implementing these suggestions, please contact me.

EXERCISE 7-5B Procedure 1. 2. 3. 4. 5.

IC good or weak? Good Weak Good Weak Weak

Related internal control principle Establishment of Responsibility Independent Internal Verification Segregation of Duties Segregation of Duties Documentation Procedures

IC good or weak? Weak Good Good Weak Weak

Related internal control principle Human Resource Controls Establishment of Responsibility Segregation of Duties Independent Internal Verification Physical Controls

EXERCISE 7-6B Procedure 1. 2. 3. 4. 5. EXERCISE 7-7B May 1 June 1

July 1

July 10

Petty Cash ...................................................... Cash ......................................................

200.00

Delivery Expense ........................................... Postage Expense ........................................... Miscellaneous Expense ................................. Cash Over and Short ..................................... Cash ........................................................

69.30 75.50 40.40 1.80

Delivery Expense ........................................... Entertainment Expense ................................. Miscellaneous Expense ................................. Cash ........................................................

43.00 98.50 47.00

Petty Cash ...................................................... Cash ......................................................

50.00

200.00

187.00

188.50 50.00

EXERCISE 7-8B Mar. 1 15

Petty Cash................................................................. Cash...................................................................

150

Postage Expense....................................................... Freight-out ................................................................. Miscellaneous Expense ............................................ Travel Expense .......................................................... Cash.................................................................... Cash Over and Short .........................................

35 19 21 20

Petty Cash.................................................................. Cash....................................................................

150

92 3 50

EXERCISE 7-9B (a) Cash balance per bank statement .................. Add: Deposits in transit.................................

$4,714.60 730.00 5,444.60 914.00 $4,530.60

Less: Outstanding checks ............................. Adjusted cash balance per bank .................... Cash balance per books .................................. Less: NSF check ............................................. Bank service charge ............................. Adjusted cash balance per books ..................

$5,190.60 $630.00 30.00

(b) Accounts Receivable ........................................ Cash ...........................................................

630.00

Miscellaneous Expense .................................... Cash ...........................................................

30.00

660.00 $4,530.60

630.00 30.00

EXERCISE 7-10B The outstanding checks are as follows: No. 255 260 264

Amount $ 510 550 350 Total $1,410

EXERCISE 7-11B TIM’S DVD COMPANY Bank Reconciliation July 31

(a)

Cash balance per bank statement .................................... Add: Deposits in transit ..................................................

$2,542 825 3,367 207 $3,160

Less: Outstanding checks ............................................... Adjusted cash balance per bank ...................................... Cash balance per books.................................................... Add: Collection of note receivable ($600 plus accrued interest $36, less collection fee $15) ..........................................

$2,549 621 3,170 10 $3,160

Less: Bank service charge............................................... Adjusted cash balance per books .................................... (b) July 31

Cash ................................................................... Miscellaneous Expense.................................... Notes Receivable ...................................... Interest Revenue .......................................

621 15

Miscellaneous Expense.................................... Cash ...........................................................

600 36 10

EXERCISE 7-12B (a)

MORSE COMPANY Bank Reconciliation September 30 Cash balance per bank statement .......................... Add: Deposits in transit..........................................

$ 9,525 2,581 12,106 1,382 $10,724

Less: Outstanding checks ..................................... Adjusted cash balance per bank ............................ Cash balance per books .......................................... Add: Collection of note receivable ($850 + $34) ........ Interest earned ............................................... Less: NSF check ..................................................... Safety deposit box rent ................................ Adjusted cash balance per books .......................... (b) Sept. 30

30 30 30

$10,094 $884 26 245 35

Cash ....................................................... Notes Receivable ........................... Interest Revenue ............................

884

Cash ....................................................... Interest Revenue ............................

Miscellaneous Expense ........................ Cash ...............................................

Accounts Receivable—J. Jackson ......... Cash ...............................................

245

910 11,004 280 $10,724 850 34 26 35 245

EXERCISE 7-13B (a) Deposits in transit: Deposits per books in July ............................ Less: Deposits per bank in July ................... Deposits in transit, June 30 ................ July receipts deposited in July ..................... Deposits in transit, July 31 ............................

$18,940 $17,200 (1,100) 16,100 $ 2,840

EXERCISE 7-13B (Continued) (b) Outstanding checks: Checks per books in July ................................. Less: Checks clearing bank in July ................ $17,050 Outstanding checks, June 30................ (1,275) July checks cleared in July .............................. Outstanding checks, July 31 ............................

$17,850 15,775 $ 2,075

(c) Deposits in transit: Deposits per bank statement in September .... Add: Deposits in transit, September 30 ......... Total deposits to be accounted for .................. Less: Deposits per books ................................ Deposits in transit, August 31 ..........................

$25,400 1,900 27,300 23,950 $ 3,350

(d) Outstanding checks: Checks clearing bank in September ................ Add: Outstanding checks, September 30 ...... Total checks to be accounted for .................... Less: Cash disbursements per books ............ Outstanding checks, August 31 .......................

$22,800 3,200 26,000 22,300 $ 3,700

EXERCISE 7-14B (a) Cash and cash equivalents should be reported at $37,400. Cash in bank ..................................................................... Cash on hand ................................................................... Petty cash ......................................................................... Highly liquid investments ................................................

$20,000 5,000 400 12,000 $37,400

(b) “Cash in plant expansion fund” should be reported as part of long-term investments (a noncurrent asset). “Receivables from customers” should be reported as accounts receivable in the current assets. “Stock investments” should also be reported in the current assets. (c) Gonzalez should disclose in the financial statements the details about the compensating balances. These are generally minimum cash balances the bank requires the borrower to maintain. They are a restriction on the use of cash that may affect the company’s liquidity. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

CHAPTER 8 SOLUTIONS TO EXERCISES—SET B EXERCISE 8-1B March 1

Accounts Receivable—Lorance Company...... 5,000 Sales Revenue ............................................. 5,000

Sales Returns and Allowances ........................ Accounts Receivable—Lorance Company..................................................

700 700

Cash ................................................................... 4,214 Sales Discounts ................................................ 86 Accounts Receivable—Lorance Company.................................................. 4,300

Accounts Receivable ........................................ Sales Revenue .............................................

600

Accounts Receivable ........................................ Interest Revenue .........................................

600 9

EXERCISE 8-2B (a) Jan. 6 16

(b) Jan. 10 Feb. 12 Mar. 10

Accounts Receivable—Hossfeld...................... 5,500 Sales Revenue.............................................

5,500

Cash ($5,500 – $110) ......................................... 5,390 Sales Discounts (2% X $5,500) ......................... 110 Accounts Receivable—Hossfeld................

5,500

Accounts Receivable—Montoya ...................... 5,500 Sales Revenue.............................................

5,500

Cash ................................................................... 4,000 Accounts Receivable—Montoya ................

4,000

Accounts Receivable—Montoya ...................... Interest Revenue [2% X ($5,500 – $4,000)] ..........................

30 30

EXERCISE 8-3B (a)

Dec. 31

(b) (1) Dec. 31

(2) Dec. 31

Bad Debt Expense ............................ Accounts Receivable—Willie’s .... Bad Debt Expense [($1,800,000 – $60,000) X 1%] ....... Allowance for Doubtful Accounts ................................ Bad Debt Expense ............................ Allowance for Doubtful Accounts [($180,000 X 10%) – $4,300] ... Bad Debt Expense [($1,800,000 – $60,000) X .75%] .... Allowance for Doubtful Accounts ................................ Bad Debt Expense ............................ Allowance for Doubtful Accounts [($180,000 X 6%) + $410] .......

2,900 2,900 17,400 17,400 13,700 13,700

13,050 13,050 11,210 11,210

EXERCISE 8-4B (a) Accounts Receivable 1–30 days 31–60 days 61–90 days Over 90 days

(b) Mar. 31

Amount

Estimated Uncollectible

$62,000 18,000 17,000 13,000

2% 5% 30% 50%

$ 1,240 900 5,100 6,500 $13,740

Bad Debt Expense ........................................ Allowance for Doubtful Accounts ($13,740 – $2,100) ..............................

11,640 11,640

EXERCISE 8-5B Allowance for Doubtful Accounts.................................... Accounts Receivable ................................................

18,100

Accounts Receivable ........................................................ Allowance for Doubtful Accounts ............................

2,900

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

2,900

Bad Debt Expense ............................................................ Allowance for Doubtful Accounts [$28,000 – ($23,000 – $18,100 + $2,900)] ..............

20,200

18,100 2,900 2,900

20,200

EXERCISE 8-6B December 31, 2021 Bad Debt Expense (2% X $600,000) ................................. Allowance for Doubtful Accounts ............................

12,000

May 11, 2022 Allowance for Doubtful Accounts.................................... Accounts Receivable—Aber.....................................

2,500

June 12, 2022 Accounts Receivable—Aber ............................................ Allowance for Doubtful Accounts ............................

2,500

Cash ................................................................................... Accounts Receivable—Aber.....................................

12,000

2,500

2,500 2,500 2,500

EXERCISE 8-7B (a) Mar. 3

(b) May 10

Cash ($770,000 – $23,100) ....................... 746,900 Service Charge Expense (3% X $770,000) .................................... 23,100 Accounts Receivable ....................... Cash ($2,700 – $108) ................................ Service Charge Expense (4% X $2,700) ........................................

770,000

2,592 108

Sales Revenue ..................................

2,700

EXERCISE 8-8B (a) Apr. 2 May 3 June 1

(b) July 4

Accounts Receivable—Ruiz ...................... Sales Revenue ...................................

1,500

Cash........................................................... Accounts Receivable—Ruiz .............

600

Accounts Receivable—Ruiz ...................... Interest Revenue [($1,500 – $600) X 1%] ...................

Cash........................................................... Service Charge Expense (3% X $400) ..... Sales Revenue ...................................

388 12

1,500 600

400

EXERCISE 8-9B (a) Jan. 15 20

Feb. 10

Accounts Receivable ................................ Sales Revenue ...................................

15,000

Cash ($8,500 – $255)................................. Service Charge Expense ($8,500 X 3%) ......................................... Sales Revenue ...................................

8,245

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

8,000

Accounts Receivable ($7,000 X 1%) ........ Interest Revenue ...............................

15,000

255 8,500

8,000 70

EXERCISE 8-10B (a) Nov. 1 Dec. 11 16 31

Notes Receivable ............................................. Cash ..........................................................

20,000

Notes Receivable ............................................. Sales Revenue .........................................

9,000

Notes Receivable ............................................. Accounts Receivable—DeLong ..............

8,000

Interest Receivable .......................................... Interest Revenue* ....................................

470

20,000 9,000 8,000 470

*Calculation of interest revenue: Hawkins’ note: $20,000 X 12% X 2/12 = $400 Eminem’s note: 9,000 X 8% X 20/360 = 40 DeLong’s note: 8,000 X 9% X 15/360 = 30 Total accrued interest $470 EXERCISE 8-11B May 1

Dec. 31

May 1

2021 Notes Receivable ............................................. Accounts Receivable—John ................... Fosdick ................................................. Interest Receivable .......................................... Interest Revenue ($60,000 X 10% X 8/12) ......................... 2022 Cash ................................................................. Notes Receivable ..................................... Interest Receivable .................................. Interest Revenue ($60,000 X 10% X 4/12) .........................

60,000 60,000 4,000 4,000

66,000 60,000 4,000 2,000

EXERCISE 8-12B 4/1/22 7/1/22 12/31/22

4/1/23

Notes Receivable ............................................ Accounts Receivable—Gates .................

30,000

Notes Receivable ............................................ Cash .........................................................

50,000

Interest Receivable ......................................... Interest Revenue ($30,000 X 12% X 9/12) ........................

2,700

Interest Receivable ......................................... Interest Revenue ($50,000 X 10% X 6/12) ........................

2,500

Cash ................................................................. Notes Receivable..................................... Interest Receivable .................................. Interest Revenue ($30,000 X 12% X 3/12 = $900) ............

33,600

Accounts Receivable—Hatfield...................... Notes Receivable..................................... Interest Receivable .................................. Interest Revenue ($50,000 X 10% X 3/12 = $1,250) .........

53,750

30,000 50,000

2,700

2,500 30,000 2,700 900 50,000 2,500 1,250

EXERCISE 8-13B (a)

June 1

(b) Dec. 1

Notes Receivable ...................................... Cash .................................................... Accounts Receivable— Ice Inc. .................................................... Notes Receivable ................................ Interest Revenue ($38,000 X 9% X 1/2) ........................ (To record the dishonor of Ice Inc. note with expectation of collection) Allowance for Doubtful Accounts ............. Notes Receivable ................................ (To record the dishonor of Ice Inc. note with no expectation of collection)

38,000 38,000 39,710 38,000 1,710

38,000 38,000

EXERCISE 8-14B (a) Beginning accounts receivable ................................ Net credit sales.......................................................... Cash collections ........................................................ Accounts written off.................................................. Ending accounts receivable .....................................

$ 220,000 2,000,000 (1,820,000) (50,000) $ 350,000

(b) $2,000,000/[($220,000 + $350,000)/2] = 7.02 times (c) 365/7.02 = 52.0 days

CHAPTER 9 SOLUTIONS TO EXERCISES—SET B EXERCISE 9-1B (a) Under the historical cost principle, the acquisition cost for a plant asset includes all expenditures necessary to acquire the asset and make it ready for its intended use. For example, the cost of factory machinery includes the purchase price, freight costs paid by the purchaser, insurance costs during transit, and installation costs. (b) 1. 2. 3. 4. 5. 6. 7. 8.

Equipment Equipment Land Land Improvements Equipment License Expense Prepaid Insurance Equipment

EXERCISE 9-2B 1. 2. 3. 4. 5. 6. 7. 8. 9.

Equipment Equipment Equipment Land Improvements Prepaid Insurance Land Land Improvements Buildings Land

EXERCISE 9-3B (a) Cost of land Cash paid .......................................................................... Net cost of removing warehouse ($6,400 – $1,200) ........................................................... Attorney’s fee ................................................................... Real estate broker’s fee ................................................... Total ...........................................................................

$75,000 5,200 800 3,800 $84,800

(b) The architect’s fee ($5,800) should be debited to the Buildings account. The cost of the driveways and parking lot ($11,000) should be debited to Land Improvements. EXERCISE 9-4B 1. True. 2. False. Depreciation enables companies to properly match the expense of using buildings and equipment to the revenues they help earn. 3. True. 4. False. Depreciation applies to three classes of plant assets: land improvements, buildings, and equipment. 5. True. 6. True. 7. False. Recognizing depreciation on an asset does not result in an accumulation of cash for replacement of the asset. 8. False. The balance in accumulated depreciation represents the total cost that has been charged to expense. 9. False. Depreciation expense is reported on the income statement, and accumulated depreciation is reported as a deduction from plant assets on the balance sheet. 10. True.

EXERCISE 9-5B (a) Depreciation cost per unit is $1.80 per mile [($188,000 – $8,000) ÷ 100,000]. (b)

Computation

End of Year

Year

Annual Units of Depreciation Depreciation Activity X Cost /Unit = Expense

2022 2023 2024 2025

27,000 34,000 24,000 15,000

$1.80 1.80 1.80 1.80

$48,600 61,200 43,200 27,000

Accumulated Depreciation

Book Value

$ 48,600 109,800 153,000 180,000

$139,400 78,200 35,000 8,000

EXERCISE 9-6B (a) Straight-line method:  $145,000 – $25,000    = $24,000 per year. 5

2022 depreciation = $24,000 X 3/12 = $6,000. (b) Units-of-activity method:

 $145,000 – $25,000    = $6.00 per hour. 20,000   2022 depreciation = 3,400 hours X $6.00 = $20,400. (c) Declining-balance method: 2022 depreciation = $145,000 X 40% X 3/12 = $14,500. Book value January 1, 2023 = $145,000 – $14,500 = $130,500. 2023 depreciation = $130,500 X 40% = $52,200. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 9-7B (a) (1)

2022: ($50,000 – $4,000)/8 = $5,750 2023: ($50,000 – $4,000)/8 = $5,750

(2)

($50,000 – $4,000)/100,000 = $0.46 per mile 2022: 15,000 X $0.46 = $6,900 2023: 12,000 X $0.46 = $5,520

(3)

2022: $50,000 X 25% = $12,500 2023: ($50,000 – $12,500) X 25% = $9,375

(b) (1) (2)

Depreciation Expense .......................................... Accumulated Depreciation—Equipment ...........

5,750 5,750

Equipment ............................................................. Less: Accumulated Depreciation— Equipment .................................................

$50,000 5,750 $44,250

EXERCISE 9-8B (a) Type of Asset Book value, 1/1/22 Less: Salvage value Depreciable cost Revised useful life in years Revised annual depreciation (b) Dec. 31

Building $859,000 45,000 $814,000

Warehouse $162,000 12,000 $150,000

$ 18,500

$ 10,000

Depreciation Expense ............................. Accumulated Depreciation— Buildings ......................................

18,500 18,500

EXERCISE 9-9B Jan.

June 30

Dec. 31

Accumulated Depreciation—Equipment .......... Machinery....................................................

75,000

Depreciation Expense ........................................ Accumulated Depreciation— Equipment ($35,000 X 1/5 X 6/12) ..........

3,500

Cash .................................................................... Accumulated Depreciation—Equipment .......... ($35,000 X 3/5 = $21,000; $21,000 + $3,500) Gain on Disposal of Plant Assets [$12,500 – ($35,000 – $24,500)] .............. Equipment ...................................................

12,500 24,500

Depreciation Expense ........................................ Accumulated Depreciation—Equipment [($40,000 – $4,000) X 1/6] ........................

6,000

Loss on Disposal of Plant Assets ..................... Accumulated Depreciation—Equipment [($40,000 – $4,000) X 5/6] ............................... Equipment ...................................................

10,000

75,000

3,500

2,000 35,000

6,000

30,000 40,000

EXERCISE 9-10B (a)

(b)

Cash............................................................................. Accumulated Depreciation—Equipment [($70,000 – $10,000) X 3/5] ...................................... Equipment .......................................................... Gain on Disposal of Plant Assets ..................... Depreciation Expense [($70,000 – $10,000) X 1/5 X 4/12] ........................... Accumulated Depreciation—Equipment .......... Cash............................................................................. Accumulated Depreciation—Equipment ($36,000 + $4,000) .................................................... Equipment .......................................................... Gain on Disposal of Plant Assets .....................

38,000 36,000 70,000 4,000 4,000 4,000 38,000 40,000 70,000 8,000

(c) Cash ........................................................................... Accumulated Depreciation—Equipment .................. Loss on Disposal of Plant Assets ............................ Equipment ........................................................... (d) Depreciation Expense [($70,000 – $10,000) X 1/5 X 9/12] .......................... Accumulated Depreciation—Equipment ........... Cash ........................................................................... Accumulated Depreciation—Equipment ($36,000 + $9,000)................................................... Loss on Disposal of Plant Assets ............................ Equipment ...........................................................

23,000 36,000 11,000 70,000 9,000 9,000 23,000 45,000 2,000 70,000

EXERCISE 9-11B (a) Dec. 31

Depletion Expense .................................. Accumulated Depletion (100,000 X $.75) ............................

Cost Units estimated Depletion cost per unit [(1) ÷ (2)]

75,000 75,000

(1) $900,000 (2) 1,200,000 tons $.75

(b) The costs pertaining to the unsold units are reported in current assets as part of inventory (20,000 X $.75 = $15,000). EXERCISE 9-12B Dec. 31

Amortization Expense ................................. Patents ($120,000 X 1/5 X 8/12) ............

16,000 16,000

Note: No entry is made to amortize goodwill because it has an indefinite life.

EXERCISE 9-13B 1/2/22 4/1/22

7/1/22 9/1/22

Patents .......................................................... Cash .......................................................

840,000

Goodwill ........................................................ Cash ....................................................... (Part of the entry to record purchase of another company)

450,000

Franchises .................................................... Cash .......................................................

330,000

Research and Development Expense ......... Cash .......................................................

210,000

12/31/22 Amortization Expense ($840,000 ÷ 7) + [($330,000 ÷ 10) X 1/2] .... Patents ............................................... Franchises .........................................

840,000 450,000

330,000 210,000 136,500 120,000 16,500

Ending balances, 12/31/22: Patents = $720,000 ($840,000 – $120,000). Goodwill = $450,000 Franchises = $313,500 ($330,000 – $16,500). R&D expense = $210,000 EXERCISE 9-14B Asset turnover =

$5,000,000 = 2.5 times $2,000,000

*EXERCISE 9-15B (a) Equipment (new) ....................................................... Accumulated Depreciation—Equipment (old) ........ Loss on Disposal of Plant Assets............................ Equipment (old) ................................................. Cash ................................................................... Cost of old trucks Less: Accumulated depreciation Book value Fair value of old trucks Loss on disposal

$74,000 42,000 32,000 25,000 $ 7,000

Fair value of old trucks Cash paid Cost of new trucks

$25,000 29,000 $54,000

(b) Equipment (new) ....................................................... Accumulated Depreciation—Equipment (old) ........ Gain on Disposal ............................................... Equipment (old) ................................................. Cash ................................................................... Cost of old machine Less: Accumulated depreciation Book value Fair value of old machine Gain on disposal

$20,000 14,000 6,000 8,000 $ 2,000

Fair value of old machine Cash paid Cost of new machine

$ 8,000 17,000 $25,000

54,000 42,000 7,000 74,000 29,000

25,000 14,000 2,000 20,000 17,000

*EXERCISE 9-16B (a) Equipment (new) ....................................................... Loss on Disposal of Plant Assets ............................ Accumulated Depreciation—Equipment (old) ......... Equipment (old) ................................................. Cost of old truck Less: Accumulated depreciation Book value Fair value of old truck Loss on disposal

8,000 2,000 25,000 35,000

$35,000 25,000 10,000 8,000 $ 2,000

(b) Equipment (new) ....................................................... Accumulated Depreciation—Equipment (old) ......... Equipment (old) ................................................. Gain on Disposal of Plant Assets ..................... Cost of old truck Less: Accumulated depreciation Book value Fair value of old truck Gain on Disposal

$21,000 16,000 5,000 8,000 $ 3,000

Cost of new delivery truck*

$ 8,000

8,000 16,000 21,000 3,000

*Fair value of old truck

CHAPTER 10 SOLUTIONS TO EXERCISES - SET B EXERCISE 10-1B July 1, 2022 Cash....................................................................... Notes Payable ................................................

50,000

November 1, 2022 Cash....................................................................... Notes Payable ................................................

60,000

50,000

60,000

December 31, 2022 Interest Expense ($50,000 X 7% X 6/12)........................................ Interest Payable .............................................

1,750

Interest Expense ($60,000 X 8% X 2/12)........................................ Interest Payable .............................................

800

February 1, 2023 Notes Payable ....................................................... Interest Payable .................................................... Interest Expense ................................................... Cash ................................................................

60,000 800 400

April 1, 2023 Notes Payable ....................................................... Interest Payable .................................................... Interest Expense ................................................... Cash ................................................................

50,000 1,750 875

1,750

800

61,200

52,625

EXERCISE 10-2B (a) June 1 Cash.......................................................... Notes Payable ...................................

90,000

(b) June 30 Interest Expense ...................................... Interest Payable [($90,000 X 8%) X 1/12] ................

600

(c) Dec. 1 Notes Payable .......................................... Interest Payable ($90,000 X 8% X 6/12)........................... Cash ...................................................

90,000

600

3,600 93,600

(d) $3,600

EXERCISE 10-3B Apr. 10

VELEZ COMPANY Cash ............................................................... Sales Revenue........................................ Sales Taxes Payable .............................. HAMPTON COMPANY Cash ............................................................... Sales Revenue ($26,500 ÷ 1.06)............. Sales Taxes Payable ($26,500 – $25,000) .............................

31,800 30,000 1,800

26,500 24,000 1,500

EXERCISE 10-4B (a) Nov. 30

(b) Dec. 31

Cash ........................................................... 432,000 Unearned Subscription Revenue (12,000 X $36) ................................

432,000

Unearned Subscription Revenue ............. Subscription Revenue ($432,000 X 1/12)............................

36,000

Unearned Subscription Revenue ............. 108,000 Subscription Revenue ($432,000 X 3/12) ............................

108,000

EXERCISE 10-5B (a)

Net pay = Gross pay – FICA taxes – Federal income tax Net pay = $1,780 – $143 – $318 Net pay = $1,319

(b) Salaries and Wages Expense .................................... FICA Taxes Payable............................................ Federal Income Taxes Payable .......................... Salaries and Wages Payable ..............................

1,780

(c) Salaries and Wages Payable ..................................... Cash.....................................................................

1,319

143 318 1,319

1,319

EXERCISE 10-6B Payroll Tax Expense .................................................. FICA Taxes Payable............................................ Federal Unemployment Taxes Payable ............. State Unemployment Taxes Payable .................

619.29 341.96 35.76 241.57

EXERCISE 10-7B 1. 2. 3. 4. 5. 6. 7.

True. True. False. Unsecured bonds are also known as debenture bonds. True. True. True. True.

EXERCISE 10-8B (a) Jan. 1

(b) July 1

Cash....................................................... Bonds Payable ..............................

500,000

Interest Expense ................................... Cash ($500,000 X 6% X 1/2) ..........

30,000

Interest Expense ................................... Interest Payable.............................

30,000

500,000

30,000

EXERCISE 10-9B (a) Jan. 1

(b) Dec. 31

Cash....................................................... Bonds Payable ..............................

200,000

Interest Expense ................................... Interest Payable ($200,000 X 6%) .

12,000

Interest Payable .................................... Cash ...............................................

12,000

200,000

12,000 12,000

EXERCISE 10-10B (a) (1)

(2)

Cash ................................................................ Discount on Bonds Payable.......................... Bonds Payable ........................................

388,000 12,000 400,000

Annual interest payments ($24,000* X 5).............................................. Plus: Bond discount ..................................... Total cost of borrowing .................................

$120,000 12,000 $132,000

*($400,000 X .06) OR Principal at maturity ...................................... Annual interest payments ($24,000 X 5) ............................................... Cash to be paid to bondholders ................... Cash received from bondholders ................. Total cost of borrowing ................................. (b) (1)

(2)

Cash ................................................................ Bonds Payable ........................................ Premium on Bonds Payable ................... Annual interest payments ($24,000 X 5) ............................................... Less: Bond premium .................................... Total cost of borrowing .................................

$400,000 120,000 520,000 388,000 $132,000 420,000 400,000 20,000 $120,000 20,000 $100,000

OR Principal at maturity ...................................... Annual interest payments ($24,000 X 5) ............................................... Cash to be paid to bondholders ................... Cash received from bondholders ................. Total cost of borrowing .................................

$400,000 120,000 520,000 420,000 $100,000

EXERCISE 10-11B (a) Jan. 1

(b) Jan

Interest Payable .................................... Cash ...............................................

128,000

Bonds Payable ...................................... Loss on Bond Redemption .................. Cash ($600,000 X 1.02) ..................

600,000 12,000

Interest Expense ................................... Interest Payable ($1,000,000 X 8%)

80,000

128,000

612,000

80,000

EXERCISE 10-12B 1.

June 30

Bonds Payable ..................................... Loss on Bond Redemption ($133,900 – $117,500) ...................... Discount on Bonds Payable ($130,000 – $117,500) ............... Cash ($130,000 X 103%) ..............

130,000

Bonds Payable ..................................... Premium on Bonds Payable ............... Gain on Bond Redemption ($151,000 – $145,500) ............... Cash ($150,000 X 97%) ................

150,000 1,000

16,400 12,500 133,900

5,500 145,500

EXERCISE 10-13B

Dec. 31

2022 Issuance of Note Cash ............................................................. Mortgage Payable ................................ 2023 First Installment Payment Interest Expense ($250,000 X 8%) ....................................... Mortgage Payable ........................................ Cash ...................................................... 2024 Second Installment Payment Interest Expense [($250,000 – $20,000) X 8%] .................... Mortgage Payable ........................................ Cash ......................................................

250,000 250,000

20,000 20,000 40,000

18,400 21,600 40,000

EXERCISE 10-14B Long-term liabilities Lease liability, due after 2023 .................. Bonds payable, due 2026 ............................... $180,000 Add: Premium on bonds payable ................. 30,000 Total long-term liabilities ........................

$89,500 210,000 $299,500

Note: Interest Payable is a current liability

EXERCISE 10-15B

Income before interest and taxes Interest ($2,760,000 X 10%) Income before taxes Income tax expense (30%) Net income Outstanding shares Earnings per share

Plan One Issue Stock $900,000 — 900,000 270,000 $630,000 150,000 $4.20

Plan Two Issue Bonds $900,000 276,000 624,000 187,200 $436,800 90,000 $4.85

EXERCISE 10-16B (a) Current ratio 2021 $10,795 ÷ $5,897 = 1.83:1 2022 $12,215 ÷ $6,959 = 1.76:1 Working capital 2021 $10,795 – $5,897 = $4,898 million 2022 $12,215 – $6,959 = $5,256 million (b) Current ratio $12,015 ÷ $6,759 = 1.78:1 Working capital $12,015 – $6,759 = $5,256 million It would make its current ratio increase slightly, but its working capital would remain the same.

*EXERCISE 10-17B 2022 (a) Jan. 1

(b) Dec. 31

2023 (c) Jan. 1 2042 (d) Jan. 1

Cash ($400,000 X 103%) ....................... Premium on Bonds Payable ......... Bonds Payable ...............................

412,000

Interest Expense ................................... Premium on Bonds Payable ($12,000 X 1/20) ................................. Interest Payable ($400,000 X 9%) .

35,400

Interest Payable ................................... Cash ..............................................

36,000

Bonds Payable ..................................... Cash ..............................................

400,000

12,000 400,000

600 36,000

36,000

400,000

*EXERCISE 10-18B (a) Dec. 31

(b) Dec. 31

(d) Dec. 31

2021 Cash ...................................................... Discount on Bonds Payable................ Bonds Payable ............................. 2022 Interest Expense .................................. Discount on Bonds Payable ($60,000 ÷ 10) ............................ Interest Payable ($800,000 X 11%) 2031 Bonds Payable ..................................... Cash ..............................................

740,000 60,000 800,000 94,000 6,000 88,000 800,000 800,000

*EXERCISE 10-19B 2022 (a) Jan. 1

(b) Dec. 31

Cash....................................................... Discount on Bonds Payable ................ Bonds Payable .............................. Interest Expense ($375,076 X 10%) ............................... Discount on Bonds Payable ......... Interest Payable ($400,000 X 9%) .

375,076 24,924 400,000

37,508 1,508 36,000

2023 (c) Jan. 1

Interest Payable .................................... Cash ...............................................

36,000 36,000

*EXERCISE 10-20B 2022 (a) Jan. 1

(b) Dec. 31

Cash......................................................... Premium on Bonds Payable ........... Bonds Payable ................................ Interest Expense ($340,775 X 8%) ................................... Premium on Bonds Payable .................. Interest Payable ($300,000 X 10%) .........................

340,775 40,775 300,000

27,262 2,738 30,000

2023 (c) Jan. 1

Interest Payable ...................................... Cash .................................................

30,000 30,000

(b), (c)

Semiannual Interest Periods Issue date 1 2

(A) Interest to Be Paid (5% X $300,000)

15,000 15,000

(B) Interest Expense to Be Recorded (C) (D) (4.0% X Preceding Premium Unamortized (E) Bond Carrying Value) Amortization Premium Bond (E X .04) (A) – (B) (D) – (C) Carrying Valu

13,631 13,576

1,369 1,424

40,775 39,406 37,982

340,775 339,406 337,982

*EXERCISE 10-20B (Continued)

_________________________________________________________________________________________________________________ Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Financial and Managerial Accounting, 2e, Solutions Exercises: Set B (Instructor Use Only)

CHAPTER 11 SOLUTIONS TO EXERCISES – SET B EXERCISE 11-1B 1.

True.

False. Most of the largest U.S. corporations are publicly held corporations.

True.

False. The net income of a corporation is taxed as a separate entity.

False. Creditors have no legal claim on the personal assets of the owners of a corporation if the corporation does not pay its debts.

False. The transfer of stock from one owner to another does not require the approval of either the corporation or other stockholders; it is entirely at the discretion of the stockholder.

False. The board of directors of a corporation manages the corporation for the stockholders, who legally own the corporation.

True.

10.

False. Corporations are subject to more state and federal regulations than partnerships or proprietorships.

EXERCISE 11-2B 1.

True.

False. Corporation management (separation of ownership and management), government regulations, and additional taxes are the major disadvantages of a corporation.

False. When a corporation is formed, organization costs are expensed as incurred.

True.

False. The number of issued shares is always less than or equal to the number of authorized shares.

False. No journal entry is required for the authorization of capital stock.

False. Publicly held corporations usually issue stock indirectly through an investment banking firm.

EXERCISE 11-2B (Continued) 8.

True.

False. The market value of common stock has no relationship with the par value.

10.

False. Paid-in capital is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.

EXERCISE 11-3B (a) Jan. 10 July 1

(b) Jan. 10

July 1

Cash (80,000 X $5) .................................. Common Stock ................................

400,000

Cash (50,000 X $7) .................................. Common Stock (50,000 X $5).......... Paid-in Capital in Excess of Par—Common Stock (50,000 X $2).................................

350,000

Cash (80,000 X $5) .................................. Common Stock (80,000 X $1).......... Paid-in Capital in Excess of Stated Value—Common Stock (80,000 X $4).................................

400,000

Cash (50,000 X $7) .................................. Common Stock (50,000 X $1).......... Paid-in Capital in Excess of Stated Value—Common Stock (540,000 X $6)...............................

350,000

400,000 250,000 100,000

80,000 320,000 50,000 300,000

EXERCISE 11-4B (a) Cash .......................................................................... Common Stock (1,000 X $5) ............................. Paid-in Capital in Excess of Par— Common Stock..............................................

50,000 5,000 45,000

EXERCISE 11-4B (Continued) (b)

Cash...................................................................... Common Stock (1,000 X $5) ......................... Paid-in Capital in Excess of Stated Value—Common Stock ............................

50,000

(c) Cash ......................................................................... Common Stock .............................................

50,000

(d)

Organization Expense ......................................... Common Stock (1,000 X $5) ......................... Paid-in Capital in Excess of Par— Common Stock .........................................

50,000

Land ...................................................................... Common Stock (1,000 X $5) ......................... Paid-in Capital in Excess of Par— Common Stock .........................................

50,000

(e)

5,000 45,000 50,000 5,000 45,000 5,000 45,000

EXERCISE 11-5B (a)

Cash ........................................................................ 2,100,000 Preferred Stock (100,000 X $20) ...................... 2,000,000 Paid-in Capital in Excess of Par— Preferred Stock ............................................. 100,000

(b)

Total Dividend ........................................................ Less: Preferred Stock Dividend ($2,000,000 X 7%) ....................................... Common Stock Dividends .....................................

$ 500,000

Total Dividend ........................................................ Less: Preferred Stock Dividend [($2,000,000 X 7%) X 3] ............................... Common Stock Dividends .....................................

$ 500,000

(c)

140,000 $ 360,000

420,000 $ 80,000

EXERCISE 11-6B 1.

Land ........................................................................ Common Stock (5,000 X $20) ........................ Paid-in Capital in Excess of Par— Common Stock ...........................................

125,000

Land (20,000 X $14)................................................ Common Stock (20,000 X $10)....................... Paid-in Capital in Excess of Par— Common Stock (20,000 X $4).....................

280,000

100,000 25,000 200,000 80,000

EXERCISE 11-7B Treasury Stock .......................................................... Cash....................................................................

250,000

Cash (2,000 X $54) ..................................................... Treasury Stock (2,000 X $50) ............................ Paid-in Capital from Treasury Stock ................

108,000

Cash (2,000 X $49) ..................................................... Paid-in Capital from Treasury Stock………………... Treasury Stock (2,000 X $50) ............................

98,000 2,000

Cash (1,000 X $38) ..................................................... Paid-in Capital from Treasury Stock ........................ Retained Earnings ..................................................... Treasury Stock (1,000 X $50) ............................

38,000 6,000 6,000

250,000 100,000 8,000

100,000

50,000

EXERCISE 11-8B Mar.

June 12

July 11

Nov. 28

Organization Expense .................................. Common Stock (5,000 X $4) ................. Paid-in Capital in Excess of Par— Common Stock ..................................

30,000

Cash............................................................... Common Stock (60,000 X $4) ............... Paid-in Capital in Excess of Par— Common Stock ..................................

370,000

Cash (1,000 X $112) ...................................... Preferred Stock (1,000 X $100) ............. Paid-in Capital in Excess of Par— Preferred Stock (1,000 X $12) ...........

112,000

Treasury Stock.............................................. Cash .......................................................

70,000

20,000 10,000 240,000 130,000 100,000 12,000 70,000

EXERCISE 11-9B (a) Mar. 1 July 1

Sept. 1

(b) Sept. 1

Treasury Stock (50,000 X $14) .............. Cash ................................................

700,000

Cash (10,000 X $15) ............................... Treasury Stock (10,000 X $14) ...... Paid-in Capital from Treasury Stock (10,000 X $1) ....................

150,000

Cash (8,000 X $12) ................................. Paid-in Capital from Treasury Stock .................................................. Retained Earnings………………………. Treasury Stock (8,000 X $14) ........

96,000

Cash (8,000 X $10) ................................. Paid-in Capital from Treasury Stock .................................................. Retained Earnings ................................. Treasury Stock (8,000 X $14) ........

80,000

700,000 140,000 10,000

10,000 6,000 112,000

10,000 22,000 112,000

EXERCISE 11-10B (a) Feb. 1

July 1

Cash (20,000 X $52) ............................ Preferred Stock (20,000 X $50) ... Paid-in Capital in Excess of Par—Preferred Stock (20,000 X $2) .................

1,040,000

Cash (12,000 X $56) ............................ Preferred Stock (12,000 X $50) .......................... Paid-in Capital in Excess of Par—Preferred Stock (12,000 X $6) .................

672,000

1,000,000 40,000

600,000 72,000

(b) Preferred Stock Date Explanation Feb. 1 July 1

Ref.

Debit

Credit 1,000,000 600,000

Balance 1,000,000 1,600,000

Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Credit Feb. 1 40,000 July 1 72,000

Balance 40,000 112,000

(c) Preferred stock—listed first in paid-in capital under capital stock. Paid-in Capital in Excess of Par—Preferred Stock—listed first under additional paid-in capital.

EXERCISE 11-11B (a) Common stock outstanding is 590,000 shares. (Issued shares 600,000 less treasury shares 10,000.) (b) The stated value of the common stock is $2 per share. (Common stock issued $1,200,000 ÷ 600,000 shares.) (c) The par value of the preferred stock is $100 per share. (Preferred stock $400,000 ÷ 4,000 shares.) (d) The dividend rate is 7.5%, or ($30,000 ÷ $400,000). (e) The Retained Earnings balance is still $1,858,000. Cumulative dividends in arrears are only disclosed in the notes to the financial statements.

EXERCISE 11-12B May 2

15 31

Cash (10,000 X $13) ....................................... Common Stock (10,000 X $10) .............. Paid-in Capital in Excess of Par— Common Stock (10,000 X $3) ............

130,000

Cash (10,000 X $60) ....................................... Preferred Stock (10,000 X $50) ............. Paid-in Capital in Excess of Par— Preferred Stock (10,000 X $10)..........

600,000

Treasury Stock .............................................. Cash........................................................

15,000

Cash (500 X $16) ............................................ Treasury Stock (500 X $15) ................... Paid-in Capital from Treasury Stock (500 X $1) .................................

8,000

100,000 30,000 500,000 100,000 15,000 7,500 500

EXERCISE 11-13B (a) June 15 July 10 Dec. 15

Cash Dividends (115,000 X $1) .............. Dividends Payable ..........................

115,000

Dividends Payable .................................. Cash .................................................

115,000

Cash Dividends (117,000 X $1.20) ......... Dividends Payable ..........................

140,400

115,000 115,000 140,400

(b) In the retained earnings statement, dividends of $255,400 will be deducted. In the balance sheet, Dividends Payable of $140,400 will be reported as a current liability.

EXERCISE 11-14B (a) Stock Dividends (14,000* X $18) ............................ Common Stock Dividends Distributable (14,000 X $10) .............................................. Paid-in Capital in Excess of Par— Common Stock (14,000 X $8)......................

252,000 140,000 112,000

*[($1,000,000 ÷ $10) + 40,000] X 10%. (b) Stock Dividends (24,000* X $20) ............................ Common Stock Dividends Distributable (24,000 X $5) ................................................ Paid-in Capital in Excess of Par— Common Stock (24,000 X $15)....................

480,000 120,000 360,000

*[($1,000,000 ÷ 5) + 40,000] X 10%.

EXERCISE 11-15B

Before Action

After Stock Dividend

After Stock Split

$ 200,000 0 200,000 900,000

$ 212,000 4,800 216,800 883,200

$ 200,000 0 200,000 900,000

$1,100,000

Outstanding shares

20,000

21,200

40,000

Par value per share

$10.00

$5.00

Stockholders’ equity Paid-in capital Common stock In excess of par-com.stock Total paid-in capital Retained earnings Total stockholders’ equity

EXERCISE 11-16B 1. 2.

Dec. 31 31

Retained Earnings .......................... Interest Expense .....................

50,000

Stock Dividends ............................. Dividends Payable .......................... Common Stock Dividends Distributable ........................ Paid-in Capital in Excess of Par—Common Stock ......

8,000 10,000

Common Stock ............................... Retained Earnings ..................

2,000,000

50,000

10,000 8,000 2,000,000

EXERCISE 11-17B LADD CORPORATION Retained Earnings Balance December 31, 2022 Balance, January 1 ...................................................

$505,000

Add: Net income.....................................................

320,000 825,000

Less: Cash dividends ............................................. Stock dividends ............................................ Balance, December 31 .............................................

$120,000 60,000

180,000 $645,000

EXERCISE 11-18B PITTS COMPANY Retained Earnings Balance December 31, 2022 Balance, January 1, as reported .................................

$330,000

Add: Net income ........................................................

280,000 610,000

Less: Cash dividends .................................................

$120,0001

Stock dividends................................................ Balance, December 31 ................................................

180,0002

(200,000 X $.60/sh)

300,000 $310,000

(200,000 X .06 X $15/sh)

EXERCISE 11-19B

Account Common Stock ................................. Preferred Stock................................. Treasury Stock ................................. Paid-in Capital in Excess of Par— Preferred Stock ............................. Paid-in Capital in Excess of Stated Value—Common Stock ...... Paid-in Capital from Treasury Stock ............................................. Retained Earnings ............................

Paid-in Capital Capital Retained Stock Additional Earnings Other X X X X X X X

EXERCISE 11-20B BERRY INC. Balance Sheet (Partial) December 31, 2022 Stockholders’ equity Paid-in capital Capital stock 8% Preferred stock, $5 par value, 40,000 shares authorized, 30,000 shares issued .................. Common stock, no par, $1 stated value, 400,000 shares authorized, 300,000 shares issued and 290,000 outstanding ............ Common stock dividends distributable ................................ Total capital stock................... Additional paid-in capital In excess of par— preferred stock ........................... In excess of stated value— common stock ............................ Total additional paid-in capital .................................. Total paid-in capital ................ Retained earnings (see Note R) .................... Total paid-in capital and retained earnings ................ Less: Treasury stock (10,000 common shares) ................................................ Total stockholders’ equity......

$ 150,000

$ 300,000 30,000

330,000 480,000

344,000 1,400,000 1,744,000 2,224,000 700,000 2,924,000 74,000 $2,850,000

Note R: Retained earnings is restricted for plant expansion, $150,000.

EXERCISE 11-21B DELTA COMPANY Balance Sheet (Partial) December 31, 2022 Paid-in capital Capital stock Preferred stock ................................................ Common stock................................................. Total capital stock ..................................... Additional paid-in capital In excess of par—preferred stock .................. In excess of par—common stock ................... Total additional paid-in capital ................. Total paid-in capital ..................................................... Retained earnings ....................................................... Total paid-in capital and retained earnings ............... Less: Treasury stock.................................................. Total stockholders’ equity ..........................................

$125,000 400,000 $ 525,000 75,000 120,000 195,000 720,000 454,000* 1,174,000 45,000 $ 1,129,000

*$350,000 + $150,000 – $46,000

EXERCISE 11-22B (a)

HAMILTON CORPORATION Income Statement For the Year Ended December 31, 2022 ____________________________________________________________ Net sales ................................................................. Cost of goods sold ................................................. Gross profit ............................................................. Operating expenses ............................................... Income from operations ......................................... Interest expense ..................................................... Income before income taxes ................................. Income tax expense (30% X $91,000) .................... Net income ..............................................................

(b)

$ 600,000 350,000 250,000 150,000 100,000 9,000 91,000 27,300 $ 63,700

Net income – preferred dividends $63,700 – $20,000 = = 21.9% Average common stockholders’ equity $200,000

*EXERCISE 11-23B (a)

ALUMINUM COMPANY OF AMERICA Stockholders’ equity (in millions of dollars) Paid-in capital Capital stock Preferred stock, $100 par value, $3.75 dividend, cumulative, 557,740 shares authorized, 557,649 shares issued and

*EXERCISE 11-23B (Continued) 546,024 shares outstanding ....................... Common stock, $1 par value, 1,800,000,000 shares authorized, 924,600,000 issued and 844,800,000 shares outstanding ..................................... Total capital stock ................................... Additional paid-in capital ....................................... Total paid-in capital ................................. Retained earnings .......................................................... Total paid-in capital and retained earnings ............................................... Less: Treasury stock .................................................... Total stockholders’ equity ......................

(b)

Total Stockholder’s Equity – Par Value Preferred Stock No. of Common Shares Outstanding

$12,077 - $55 844.8

925 980 6,101 7,081 7,824 14,905 2,828 $12,077 $14.23 =

*EXERCISE 11-24B Total stockholders’ equity Less: Preferred stock equity Par value Call price (10,000 X $65) Dividends in arrears (10,000 X $5) Common stock equity Common shares outstanding Book value per share

(a) $3,300,000

(b) $3,300,000

($500,000)

$2,800,000

(650,000) (50,000) $2,600,000

200,000

$14

$13

CHAPTER 12 SOLUTIONS TO EXERCISES—SET B EXERCISE 12-1B 1. (a) Cash ......................................................................... Land ................................................................. Gain on Disposal of Plant Assets ..................

16,000 12,000 4,000

(b) The cash receipt ($16,000) is reported in the investing section. The gain ($4,000) is deducted from net income in the operating section. 2. (a) Cash ......................................................................... Common Stock ................................................

25,000 25,000

(b) The cash receipt ($25,000) is reported in the financing section. 3. (a) Depreciation Expense ............................................ 20,000 Accumulated Depreciation—Equipment .......

20,000

(b) Depreciation expense ($20,000) is added to net income in the operating section. 4. (a) Salaries and Wages Expense ................................ 12,000 Cash ................................................................

12,000

(b) Salaries and wages expense is not reported separately on the statement of cash flows. It is part of the computation of net income in the income statement, and is included in the net income amount on the statement of cash flows. 5. (a) Equipment ............................................................... 12,000 Common Stock ............................................... Paid-in Capital in Excess of Par— Common Stock ...........................................

1,000 11,000

(b) The issuance of common stock for equipment ($12,000) is reported as a noncash financing and investing activity at the bottom of the statement of cash flows. _________________________________________________________________________________________________________________ Copyright © 2020 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 11e, Solutions Exercises: Set B (Instructor Use Only)

EXERCISE 12-1B (Continued) 6. (a) Cash ....................................................................... Loss on Disposal of Plant Assets ........................ Accumulated Depreciation—Equipment .............. Equipment ..............................................

2,000 1,000 7,000 10,000

(b) The cash receipt ($2,000) is reported in the investing section. The loss ($1,000) is added to net income in the operating section. EXERCISE 12-2B NAPOLI COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income .............................................................. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ..................................... Loss on sale of equipment ............................. Decrease in accounts receivable ................... Decrease in prepaid expenses ....................... Increase in accounts payable ......................... Net cash provided by operating activities .......

$155,000 $25,000 5,000 10,000 4,000 12,000

56,000 $211,000

EXERCISE 12-3B HALLIDAY INC. Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income .......................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ................................. Increase in accounts receivable................. Decrease in inventory ................................. Increase in prepaid expenses .................... Increase in accrued expenses payable...... Decrease in accounts payable ................... Net cash provided by operating activities ....

$123,000 $14,000) (16,000) 19,000) (5,000) 10,000) (12,000)

10,000 $133,000

EXERCISE 12-4B CARPENTER CORP Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ........................................................ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ............................... Loss on sale of equipment ....................... Net cash provided by operating activities................................................. Cash flows from investing activities Sale of equipment ............................................. Purchase of equipment .................................... Construction of equipment .............................. Net cash used by investing activities ......

$ 57,000)

$ 23,000) 5,000)

85,000) 11,000* (70,000) (58,000) (117,000)

Cash flows from financing activities Payment of cash dividends.............................. *Cost of equipment sold................................... *Accumulated depreciation .............................. *Book value ....................................................... *Loss on sale of equipment ............................. *Cash proceeds ................................................

28,000)

(19,000) $ 46,000) (30,000) 16,000) (5,000) $ 11,000)

EXERCISE 12-5B (a)

MANFIELD CORPORATION Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income .......................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ................................. Loss on sale of land .................................... Decrease in accounts receivable ............... Decrease in accounts payable ................... Net cash provided by operating activities ........

$ 27,630) $ 5,000 ) 2,100 2,200 (13,730 )

Cash flows from investing activities Sale of land ......................................................... Cash flows from financing activities Issuance of common stock ................................ Payment of dividends ......................................... Net cash used by financing activities ............... Net increase in cash ................................................. Cash at beginning of period ..................................... Cash at end of period ...............................................

(4,430) 23,200 3,900

$ 6,000 (24,500 ) (18,500) 8,600 ) 10,700 ) $ 19,300

(b) $23,200 – $0 – $24,500 = ($1,300)

EXERCISE 12-6B HAMPTON COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense.......................... Increase in accounts receivable ......... Decrease in inventory ......................... Decrease in accounts payable............ Net cash provided by operating activities ........................................... Cash flows from investing activities Sale of land .................................................. Purchase of equipment............................... Net cash used by investing activities ........................................... Cash flows from financing activities Issuance of common stock ........................ Redemption of bonds ................................. Payment of cash dividends ........................ Net cash used by financing activities ........................................... Net increase in cash ........................................... Cash at beginning of period .............................. Cash at end of period .........................................

$ 93,000)

$29,000) (9,000) 14,000) (8,000)

26,000) 119,000)

25,000) (50,000) (25,000) 52,000) (50,000) (35,000) (33,000) 61,000) 22,000) $ 83,000)

EXERCISE 12-7B (a)

PINKSTON CORPORATION Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ........................... Loss on sale of equipment ................... Increase in accounts payable .............. Increase in accounts receivable .......... Net cash provided by operating activities .....

$ 28,300)

$ 5,200* 4,500** 8,500) (1,900)

Cash flows from investing activities Sale of equipment ....................................... Purchase of investments ............................ Net cash used by investing activities ...........

4,300) (7,000)

Cash flows from financing activities Issuance of common stock ......................... Retirement of bonds .................................... Payment of dividends .................................. Net cash used by financing activities ............

$15,000) (20,000) (26,400)

Net increase in cash ........................................... Cash at beginning of period ............................... Cash at end of period ......................................... *[$14,000 – ($10,000 – $1,200)]

) 16,300) 44,600)

(2,700)

(31,400) 10,500 ) 17,700 $ 28,200

**[$4,300 – ($10,000 – $1,200)]

(b) $44,600 – $0 – $26,400 = $18,200

*EXERCISE 12-8B Revenues .................................................................. Deduct: Increase in accounts receivable .............. Cash receipts from customers* ....................... Operating expenses ................................................. Deduct: Increase in accounts payable................... Cash payments for operating expenses** ...... Net cash provided by operating activities .............. **

$172,000) (60,000) $112,000 88,000) (23,000) (65,000) $ 47,000

Accounts Receivable Balance, Beginning of year 0 Revenues for the year 172,000 Cash receipts for year Balance, End of year 60,000

** Payments for the year

Accounts Payable Balance, Beginning of year 65,000 Operating expenses for year Balance, End of year

112,000

0 88,000 23,000

*EXERCISE 12-9B (a) Cash payments to suppliers Cost of goods sold .................................. Less: Increase in accounts payable....... Cost of purchases ................................... Less: Decrease in inventory ................... Cash payments to suppliers ..................

$5,178.0 million 15.6 $5,162.4 million 5.3 $5,157.1 million

(b) Cash payments for operating expenses Operating expenses exclusive of depreciation .................................... $9,509.5 million ($10,725.7 – $1,216.2) Add: Increase in prepaid expenses ....... $ 42.2) Less: Increase in accrued expenses payable ........................ (199.8) (157.6) Cash payments for operating expenses ... $9,351.9 million

*EXERCISE 12-10B Cash flows from operating activities Cash receipts from Customers .................................................. Dividend revenue .......................................

$210,000* 18,000* $228,000*

Less cash payments: To suppliers for merchandise ................... For operating expenses ............................. For salaries and wages .............................. For interest ................................................. For income taxes ........................................ Net cash provided by operating activities ...

105,000 28,000 58,000 10,000 8,000

209,000* $ 19,000*

*$48,000 + $162,000

*EXERCISE 12-11B Cash payments for rentals Rent expense ..................................................... Add: Increase in prepaid rent .......................... Cash payments for rent .....................................

$ 60,000* 3,100* $ 63,100*

Cash payments for salaries Salaries expense ................................................ Add: Decrease in salaries payable .................. Cash payments for salaries ..............................

$ 49,000* 2,000* $ 51,000*

Cash receipts from customers Revenue from sales ........................................... Add: Decrease in accounts receivable ............ Cash receipts from customers..........................

$150,000* 9,000* $159,000*

*EXERCISE 12-12B ABERNATHY COMPANY Worksheet Statement of Cash Flows For the Year Ended December 31, 2022 Balance Sheet Accounts

Reconciling Items

Balance 12/31/21

Debit

Credit

Balance 12/31/22

Debits Cash Accounts receivable Inventory Land Equipment Total

22,000 76,000 189,000 100,000 200,000 587,000

(k) (a)

(f)

21,000 9,000 (b) (e)

9,000 20,000

(d)

19,000

(i) (j)

30,000 105,000

(a)

9,000

(c)

13,000

(f)

30,000

(g) (h)

40,000 70,000

30,000

43,000 85,000 180,000 80,000 230,000 618,000

Credits Accumulated depreciation—equipment Accounts payable Bonds payable Common stock Retained earnings Total

42,000 47,000 200,000 164,000 134,000 587,000

13,000 70,000

(g)

40,000

(j)

105,000

(b)

9,000

(d)

19,000

(e)

20,000

61,000 34,000 130,000 194,000 199,000 618,000

Statement of Cash Flow Effects Operating activities Net income Increase in accounts receivable Decrease in inventory Decrease in accounts payable Depreciation expense Investing activities Sale of land Purchase of equipment Financing activities Payment of dividends Redemption of bonds Issuance of common stock Totals Increase in cash Totals

(i)

30,000 366,000 366,000

345,000 (k) 21,000 366,000

CHAPTER 13 SOLUTIONS TO EXERCISES—SET B EXERCISE 13-1B PLANO COMPANY Partial Income Statement For the Year Ended December 31, 2022 Income from continuing operations ....................................... Discontinued operations Loss from operation of division, net of $6,000 tax savings.......................................... Gain on disposal of division, net of $18,000 income taxes ..................................... Net income ................................................................................

$400,000 (14,000) 42,000 $428,000

EXERCISE 13-2B ORTIZ CORPORATION Partial Income Statement For the Year Ended December 31, 2022 Income from continuing operations ....................................... Discontinued operations Loss from operation of division, net of $1,000 tax savings.......................................... Gain on disposal of division, net of $4,000 income taxes ....................................... Net income ................................................................................ Other comprehensive income Unrealized loss on available for sale securities, net of $8,000 income taxes ....................................... Comprehensive income ...........................................................

Weygandt, Financial Accounting, 11e

$250,000 (4,000) 16,000 262,000 (32,000) $230,000

(For Instructor Use Only)

13-1

EXERCISE 13-3B VATTEN INC. Condensed Balance Sheet December 31 Increase or (Decrease) Amount Percentage

2022

2021

Assets Current assets Plant assets (net) Total assets

$128,000 410,000 $538,000

$ 80,000 360,000 $440,000

($48,000 50,000 ($98,000

(60.0%) (13.9%) (22.3%)

Liabilities Current liabilities Long-term liabilities Total liabilities

$ 91,000 144,000 $235,000

$ 65,000 90,000 $155,000

($26,000 54,000 $80,000

(40.0%) (60.0%) (51.6%)

138,000 165,000

115,000 170,000

23,000 (5,000)

(20.0%) (2.9%)

303,000

285,000

18,000

( 6.3%)

$538,000

$440,000

($98,000

(22.3%)

Stockholders’ Equity Common stock, $1 par Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity

13-2

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

EXERCISE 13-4B POISSON CORPORATION Condensed Income Statement For the Years Ended December 31

Sales revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income before income taxes Income tax expense Net income

2022 Amount Percent $800,000 100.0% 532,000 66.5% 268,000 33.5% 100,000 12.5% 72,000 9.0% 172,000 21.5% 96,000 12.0% 28,000 3.5% $ 68,000 8.5%

Weygandt, Financial Accounting, 11e

2021 Amount Percent $600,000 100.0% 408,000 68.0% 192,000 32.0% 72,000 12.0% 48,000 8.0% 120,000 20.0% 72,000 12.0% 21,600 3.6% $ 50,400 8.4%

(For Instructor Use Only)

13-3

EXERCISE 13-5B (a)

NIKE INC. Condensed Balance Sheet May 31 ($ in millions)

Assets Current assets Property, plant, and equipment (net) Other assets Total assets Liabilities and stockholders’ equity Current liabilities Long-term liabilities Stockholders’ equity Total liabilities and stockholders’ equity

13-4

Percentage Increase Change (Decrease) from 2021

2022

2021

$ 8,839

$ 8,076

$ 763

9.4%

1,891 1,713 $12,443

1,678 934 $10,688

213 779 $1,755

12.7% 83.4% 16.4%

$ 3,321

$ 2,584

$ 737

28.5%)

1,297

1,079

218

20.2%

7,825

7,025

800

11.4%)

$12,443

$10,688

$1,755

16.4%

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

EXERCISE 13-5B (Continued) (b)

NIKE INC. Condensed Balance Sheet May 31, 2022 $ (in millions)

Percent

Assets Current assets Property, plant, and equipment (net) Other assets Total assets

$ 8,839 1,891 1,713 $12,443

71.0% 15.2% 13.8% 100.0%

Liabilities and stockholders’ equity Current liabilities Long-term liabilities Stockholders’ equity Total liabilities and stockholders’ equity

$ 3,321 1,297 7,825 $12,443

26.7% 10.4% 62.9% 100.0%

EXERCISE 13-6B (a)

RICO CORPORATION Condensed Income Statement For the Years Ended December 31 Increase or (Decrease) During 2022 Net sales Cost of goods sold Gross profit Operating expenses Net income

2022 $572,000 477,000 95,000 60,000 $ 35,000

2021 $520,000 450,000 70,000 45,000 $ 25,000

Weygandt, Financial Accounting, 11e

Amount $52,000 27,000 25,000 15,000 $10,000

Percentage 10.0% 6.0% (35.7%) (33.3%) (40.0%)

(For Instructor Use Only)

13-5

EXERCISE 13-6B (Continued) (b)

RICO CORPORATION Condensed Income Statements For the Years Ended December 31

Net sales Cost of goods sold Gross profit Operating expenses Net income

2022 $ Percent $572,000 100.0% 477,000 83.4% 95,000 16.6% 60,000 10.5% $ 35,000 6.1%

2021 $ Percent $520,000 100.0% 450,000 86.5% 70,000 13.5% 45,000 8.7% $ 25,000 4.8%

EXERCISE 13-7B Current ratio = 2.39:1 ($5,054 ÷ $2,114) Current cash debt coverage = .83 ($1,542 ÷ $1,857.5a) Accounts receivable turnover = 4.6 times ($8,758 ÷ $1,888.5b) Average collection period = 79.3 days (365 days ÷ 4.6) Inventory turnover = 6.3 times ($5,628 ÷ $899c) Days in inventory = 57.9 days (365 days ÷ 6.3) a

($2,114 + $1,601) ÷ 2 ($2,035 + $1,742) ÷ 2 c ($898 + $900) ÷ 2 b

EXERCISE 13-8B Current ratio as of February 1, 2022 = 2.00:1 ($80,000 ÷ $40,000). Feb. 3 7 11 14 18

13-6

2.00 No change in total current assets or liabilities. 1.43 ($57,000 ÷ $40,000). 1.43 No change in total current assets or liabilities. 1.61 ($45,000 ÷ $28,000). 1.41 ($45,000 ÷ $32,000).

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

EXERCISE 13-9B (a) Current ratio =

= 3.1:1

(b) Accounts receivable turnover =

$340,000 = 5.0 times $68,000 (1)

(1) (c)

Average collection period = 365 days ÷ 5.0 = 73 days

(d) Inventory turnover = (2)

$150,000 = 2.6 times $57,500 (2)

$65,000 + $50,000 2

(e)

Days in inventory = 365 days ÷ 2.6 = 140.4 days

(f)

Cash debt coverage =

$43,000 = .28 times $160,000 + $150,000 2

(g) Current cash debt coverage =

$43,000 = .78 times $60,000 + $50,000 2

(h) Free cash flow = $43,000 – $25,000 – $10,000 = $8,000

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

13-7

EXERCISE 13-10B (a) Profit margin

= 2.5%

(b) Asset turnover

= 1.68 times

= 4.2%

(d) Return on common stockholders’ equity

= 12.1%

(e) Gross profit rate

= 30.3%

EXERCISE 13-11B (a) Earnings per share

$87,000 $92,000 – $5,000 = = $2.29 38,000  36,000 + 40,000    2

(b) Price-earnings ratio

$12 = 5.2 times $2.29

$21,000 – $5,000 = 17.4% $92,000

(d) Times interest earned

13-8

$132,000 $92,000 + $16,000 + $24,000 = = 8.3 times $16,000 $16,000

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

EXERCISE 13-12B (a) Inventory turnover = 4.0 =

4.0 X $190,000 = Cost of goods sold Cost of goods sold = $760,000. (b) Accounts receivable turnover = 11.2 =

11.2 X $99,250 = Net sales (credit) = $1,111,600. (c) Return on common stockholders’ equity = 20% =

.20 X $507,250 = Net income = $101,450. (d) Return on assets = 16% =

Average assets =

= $634,062.50

Total assets (Dec. 31, 2013) + $605,000 = $634,062.50 2 Total assets (Dec. 31, 2014) = ($634,062.50 X 2) – $605,000 = $663,125.

Weygandt, Financial Accounting, 11e

(For Instructor Use Only)

13-9

CHAPTER 1 Accounting in Action PROBLEM 1-1B (a)

TAYLOR MADE TRAVEL AGENCY

Cash 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Accounts Accounts + Receivable + Supplies + Equipment = Payable +

+$8,000 + 8,000 + –400 + 7,600 + –2,500 + 5,100 +000,000 + 5,100 + –500 + 4,600 –+2,000 + 6,600 + + –200 + 6,400 + + –300 + 6,100 + +–2,000 + 4,100 + –+5,700 +$9,800 +

= + + + +$6,500 + 6,500 + 0,000 + 6,500 + 0,000 + 6,500 + 0,000 + 6,500 –5,700 + $800

+ + + + +

+$500 + 500 +0000 + 500 +0000 + 500 +0000 + 500 +0000 + 500 + +$500

$13,600

+ + + + + +

+$2,500

Stockholders’ Equity Retained Earnings + Revenues – Expenses – Dividends

+$8,000 8,000

+$2,500 + 2,500 +00,000 + 2,500 +00,000 + 2,500 +00,000 + 2,500 +00,000 + 2,500 +00,000 + 2,500 +00,000 + 2,500

Common Stock

8,000

– –

$ 400 400

– – –

400 300 700

–

700

(a)

+ = = = = = =

8,000 +$300 + 300 +0000 + 300 +0000 + 300 +0000 + 300 +–300 + 0 +0000

+ +000,000 + +

8,000 8,000

–$8,500 + 8,500

700 – –

$200 200 200

–

700

700 2,000 2,700

–

8,000

– – –

–

200

$8,000

–

$2,700

–

$200

8,000

+ + +

= + +$

(b)

+ 8,500 +000,000 + + 8,500 + 8,500 + +$8,500

(d)

(e)

$13,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 1-1B (Continued) Key to Retained Earnings Column (a) Rent Expense (b) Advertising Expense (c) Service Revenue

(d) Dividends (e) Salaries and Wages Expense

(b) Service revenue ....................................................................... Expenses Salaries and wages ........................................ $2,000 Rent .................................................................. Advertising ...................................................... 300 Net income ...............................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$8,500 400 2,700 $5,800

PROBLEM 1-2B (a)

Randy Coburn, ATTORNEY AT LAW Accounts Notes Accounts Common Retained Cash + Receivable + Supplies + Equipment = Payable + Payable + Stock + Earnings + Revenues – Expenses – Dividends

Bal.

$4,000 +

$1,500

+1,400

–1,400

5,400 +

100

–2,700

+3,000

+4,900

5,700 +

5,000

–400

00,000

5,300 +

5,000

100

$400

0000 +

00,000

2,700 +

400

5,000

4,200

6,000

$6,000

6,000

1,500

$ 700 000,000

–2,700

700 000,000

6,000

700

00,000 =

1,500

2,100

+1,000 +

00,000 =

00,000

0000 +

$4,200

00,000

0000 +

00,000 +

0000 +

$5,000

+$7,900 +

6,000

+600

700 +

7,900

000,000 700 +

7,900

–4,150

–$3,000 –900 00,000

1,150 +

5,000

–450

00,000

700 +

5,000

+2,000

00,000

2,700 +

5,000

0000 +

400

00,000 +

0000 +

400

2,100

00,000 +

0000 +

6,000

$5,000

$400

6,000

700 +

7,900

–

4,150

6,000

700 +

7,900

–

4,150

–

450

7,900

–

4,150

–

450

–

$450

–$450

00,000 =

2,100

00,000

+$2,000

00,000

6,000

= + 2,000 +

2,100

+180

8. $2,700 +

–250

00,000

$6,000

= +$2,000 +

$2,280

000,000 6,000

–180 $6,000

$14,100

$ 700 +

$14,100

Key to changes in Retained Earnings (a)

Service revenue

(d)

Advertising expense

(b)

Salaries expense

(e)

Dividends

700 +

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B (f) Utilities expense

$7,900

–

$4.330

PROBLEM 1-2B (Continued) (b)

RANDY COBURN, ATTORNEY AT LAW Income Statement For the Month Ended August 31, 2022 Revenues Service revenue ............................................ Expenses Salaries and wages expense........................ Rent expense ................................................ Advertising expense ..................................... Utilities expense ........................................... Total expenses ...................................... Net income ............................................................

$7,900 $3,000 900 250 180 4,330 $3,570

RANDY COBURN, ATTORNEY AT LAW Retained Earnings Statement For the Month Ended August 31, 2022 Retained earnings, August 1 ................................ Add: Net income.................................................. Less: Dividends .................................................... Retained earnings, August 31 ..............................

$ 700 3,570 4,270 450 $3,820

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

RANDY COBURN, ATTORNEY AT LAW Balance Sheet August 31, 2022 Assets Cash ........................................................................... Accounts receivable ................................................. Supplies ..................................................................... Equipment ................................................................. Total assets .......................................................

$ 2,700 5,000 400 6,000 $14,100

Liabilities and Stockholders’ Equity Liabilities Notes payable .................................................... Accounts payable .............................................. Total liabilities ............................................ Stockholders’ equity Common stock .................................................. Retained earnings ............................................. Total liabilities and stockholders’ equity ...

$2,000 2,280 $ 4,280 6,000 3,820

9,820 $14,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 1-3B

(a)

BLUSHE COSMETICS CO. Income Statement For the Month Ended June 30, 2022 Revenues Service revenue ........................................... Expenses Utilities expense .......................................... Gasoline expense ........................................ Advertising expense .................................... Utilities expense .......................................... Total expenses ..................................... Net income ...........................................................

$5,300 $1,200 600 500 300 2,600 $2,700

BLUSHE COSMETICS CO. Retained Earnings Statement For the Month Ended June 30, 2022 Retained Earnings, June 1 .................................. Add: Net income ...............................................

0 2,700 2,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

Less: Dividends ................................................. Retained Earnings, June 30 ...............................

800 $1,900

BLUSHE COSMETICS CO. Balance Sheet June 30, 2022 Assets Cash ......................................................................................... Accounts receivable ............................................................... Supplies ................................................................................... Equipment ............................................................................... Total assets .....................................................................

$8,000 4,000 1,300 25,000 $38,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 1-3B (Continued) BLUSHE COSMETICS CO. Balance Sheet (Continued) June 30, 2022 Liabilities and Stockholders’ Equity Liabilities Notes payable ...................................................... Accounts payable ................................................ Total liabilities .............................................. Stockholders’ equity Common stock ..................................................... Retained earnings................................................ Total liabilities and stockholders’ equity ...

(b)

$13,000 1,400 $14,400 22,000 1,900

23,900 $38,300

BLUSHE COSMETICS CO. Income Statement For the Month Ended June 30, 2022 Revenues Service revenue ($5,300 + $800) ................. Expenses Utilities expense ..........................................

$6,100 $1,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

Gasoline expense ($600 + $100) ................. Advertising expense ................................... Utilities expense .......................................... Total expenses ..................................... Net income ..........................................................

700 500 300 2,700 $3,400

BLUSHE COSMETICS CO. Retained Earnings Statement For the Month Ended June 30, 2022 Retained earnings, June 1 .................................. Add: Net income ............................................... Less: Dividends ................................................. Retained earnings, June 30 ................................

0 3,400 3,400 800 $2,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 1-4B (a)

RODD CONSULTING Assets Accounts

Date

Cash

May 1

+$ 8,000

Notes

Common

Retained Earnings

Stock

+ Revenues – Expenses – Dividends

+$8,000 =

8,000

8,000 +

–800

May 2

–$ 800

7,200 May 3

+$500 7,200 + +

May 9

–

500

8,000 +

500

8,000

800 –90

7,110 +

500

+3,000

+050

10,110 +

500

8,000 +

500

8,000 +

890

3,000

–

890

3,000

–

890 –

700

–

890 –

700

+$3,000

9,410 + May 15

+$3,500 9,410 +

+3,500 +

500

8,000 +

6,500

–

–2,100

3,500

500

8,000 +

6,500

–

2,990 –

700

6,810 +

3,500

500

8,000 +

6,500

–

2,990 –

700

+2,500

–2,500

9,310 +

1,000

500

–0–

8,000 +

6,500

–

2,990 –

700

14,310 +

1,000

500

5,000

–0–

8,000 +

6,500

–

2,990 –

700

14,310 +

1,000

500

2,600

5,000

2,600

8,000 +

6,500

–

2,990 –

700

+ $500

$2,600

$5,000 +

$2,600

$8,000 +

7,310 + –500

May 20 May 23 +

(d) (e)

3,500

–2,100

May 17

(b)

–

–700

May 12

(a)

800

+$ 500

500

–90

May 5

(f)

–500

–0– +

+5,000

+ +$5,000

May 29 May 30

Accounts

+ Receivable + Supplies + Equipment = Payable + Payable

8,000

May 26

Stockholders’ Equity

Liabilities

+$2,600

+2,600

–150

(g)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$18,260

$6,500

–

$3,140 –

$700

PROBLEM 1-4B (Continued) Key to Retained Earnings Column (a) (b) (c) (d) (b)

Rent Expense Advertising Expense Service Revenue Dividends

(e) Service Revenue (f) Salaries and Wages Expense (g) Utilities Expense

RODD CONSULTING Income Statement For the Month Ended May 31, 2022 Revenues Service revenue ($3,000 + $3,500)................ Expenses Salaries and wages expense ........................ Rent expense ................................................. Utilities expense ............................................ Advertising expense ..................................... Total expenses....................................... Net income ............................................................

(c)

$6,500 $2,100 800 150 90 3,140 $3,360

RODD CONSULTING Balance Sheet May 31, 2022 Assets Cash................................................................................ Accounts receivable ...................................................... Supplies ......................................................................... Equipment ...................................................................... Total assets ............................................................

$14,160 1,000 500 2,600 $18,260

Liabilities and Stockholders’ Equity Liabilities Notes payable ......................................................... $5,000 Accounts payable .................................................. 2,600 Total liabilities................................................. Stockholders’ equity Common stock ....................................................... 8,000 Retained earnings ($3,360 – $700) ........................ 2,660 Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$ 7,600 10,660

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set B

Total liabilities and stockholders’ equity ......

$18,260

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set B

PROBLEM 1-5B

(a)

(b)

Chico Company (a) $28,000 (b) 95,000 (c) 7,000

Harpo Company (d) $44,000 (e) 38,000 (f) 6,000

Groucho Company (g) $129,000 (h) 80,000 (i) 408,000

Zeppo Company (j) $ 50,000 (k) 240,000 (l) 445,000

CHICO COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Retained earnings, January 1 ............................. Add: Net income ................................................ Less: Dividends .................................................. Retained earnings December 31.........................

0 15,000 15,000 10,000 $ 5,000

(c) The sequence of preparing financial statements is income statement, retained earnings statement, and balance sheet. The interrelationship of the retained earnings statement to the other financial statements results from the fact that net income from the income statement is reported in the retained earnings statement and ending retained earnings reported in the retained earnings statement is the amount reported for retained earnings on the balance sheet.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set B

CHAPTER 2 The Recording Process

PROBLEM 2-1B

Date Mar. 1

Account Titles and Explanation Ref. Cash......................................................... Common Stock ............................... (Issued shares of stock for cash)

Debit 60,000

Land ......................................................... Buildings ................................................. Equipment ............................................... Cash ................................................ (Purchased Arnie’s Golf Land)

26,000 8,000 4,000

Advertising Expense .............................. Cash ................................................ (Paid for advertising)

1,600

Prepaid Insurance .................................. Cash ................................................ (Paid for one-year insurance policy)

3,800

Equipment ............................................... Accounts Payable .......................... (Purchased equipment on account)

1,050

Cash......................................................... Service Revenue............................. (Received cash for services provided)

420

Cash......................................................... Unearned Service Revenue ........... (Received cash for coupon

1,800

J1 Credit 60,000

38,000

1,600

3,800

1,050

420

1,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

books sold) PROBLEM 2-1B (Continued) Date Mar. 25

Account Titles and Explanation Dividends ............................................. Cash ............................................. (Declared and paid cash dividend)

Ref.

Debit 800

Credit 800

Salaries and Wages Expense ............. Cash ............................................. (Paid salaries)

280

Accounts Payable ............................... Cash ............................................. (Paid creditor on account)

1,050

Cash ..................................................... Service Revenue.......................... (Received cash for services provided)

200

280

1,050

200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-2B (a) Date

Account Titles and Explanation

Ref.

Debit

Apr. 1

Cash........................................................ Common Stock .............................. (Issued shares of stock for cash)

101 311

40,000 40,000

No entry—not a transaction.

Rent Expense ......................................... Cash ............................................... (Paid monthly office rent)

729 101

1,700

Supplies ................................................. Accounts Payable ......................... (Purchased supplies on account from Jennings Company)

126 201

5,200

Accounts Receivable............................. Service Revenue............................ (Billed clients for services provided)

112 400

6,600

Cash........................................................ Unearned Service Revenue .......... (Received cash for future service)

101 209

1,200

Cash........................................................ Service Revenue............................ (Received cash for services provided)

101 400

2,100

Salaries and Wages Expense ............... Cash ............................................... (Paid monthly salary)

726 101

2,400

J1 Credit

1,700

5,200

6,600

1,200

2,100

2,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-2B (Continued) Date

Account Titles and Explanation

Ref.

Debits

Apr. 30

Accounts Payable .............................. Cash ............................................ (Paid Jennings Company on account)

201 101

2,200

Credit 2,200

(b) Cash Date Apr. 1 2 11 20 30 30

Explanation

Accounts Receivable Date Explanation Apr. 10 Supplies Date Explanation Apr. 3 Accounts Payable Date Explanation Apr. 3 30 Unearned Service Revenue Date Explanation Apr. 11

Ref. J1 J1 J1 J1 J1 J1

Ref. J1

Ref. J1 J1

Ref. J1

Debit 40,000

Credit 1,700

1,200 2,100 2,400 2,200

Debit 6,600

Debit 5,200

Debit

Credit

No. 112 Balance 6,600

Credit

No. 126 Balance 5,200

Credit 5,200

No. 201 Balance 5,200 3,000

2,200

Debit

No. 101 Balance 40,000 38,300 39,500 41,600 39,200 37,000

Credit 1,200

No. 209 Balance 1,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-2B (Continued) Common Stock Date Explanation Apr. 1

Ref. J1

Service Revenue Date Explanation Apr. 10 20

Ref. J1 J1

Salaries and Wages Expense Date Explanation Apr. 30 Rent Expense Date Explanation Apr. 2

(c)

Ref. J1

Debit

Debit 2,400

Debit 1,700

Credit 40,000

No. 311 Balance 40,000

Credit 6,600 2,100

No. 400 Balance 6,600 8,700

Credit

No. 726 Balance 2,400

Credit

No. 729 Balance 1,700

ALICIA HIRAM, DENTIST Trial Balance April 30, 2022 Cash..................................................................... Accounts Receivable .......................................... Supplies .............................................................. Accounts Payable ............................................... Unearned Service Revenue................................ Common Stock ................................................... Service Revenue ................................................. Salaries and Wages Expense ............................ Rent Expense ......................................................

Debit $37,000 6,600 5,200

Credit

$ 3,000 1,200 40,000 8,700 2,400 1,700 $52,900

$52,900

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-3B (a) Trans. 1.

Account Titles and Explanation

Debit

Cash ................................................... Common Stock .........................

50,000 50,000

No entry—Not a transaction.

Prepaid Rent ...................................... Cash ..........................................

24,000

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

28,000

Prepaid Insurance ............................. Cash ..........................................

2,640

Supplies ............................................. Cash ..........................................

750

Supplies ............................................. Accounts Payable.....................

1,300

Cash ................................................... Accounts Receivable ........................ Service Revenue .......................

6,000 12,000

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

400

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

3,200

Utilities Expense................................ Accounts Payable.....................

260

10.

11.

Credit

24,000

5,000 23,000

2,640

750

1,300

18,000

400

3,200

260

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-3B (Continued) Trans. 12.

Account Titles and Explanation

Debit

Salaries and Wages Expense........... Cash ...........................................

5,600

Credit 5,600

(b) (1)

(8) (10)

(8)

(6) (7)

(5)

(3)

Cash 50,000 (3) (4) (5) (6) 6,000 (9) 3,200 (12) 20,810

(4) 24,000 5,000 2,640 750 400 (9) 5,600

Accounts Receivable 12,000 (10) 3,200 8,800

Prepaid Rent 24,000 24,000

Accounts Payable (4) 23,000 (7) 1,300 400 (11) 260 24,160

Common Stock (1)

Service Revenue (8)

Supplies 750 1,300 2,050

Prepaid Insurance 2,640 2,640

Equipment 28,000 28,000

50,000 50,000

18,000 18,000

Salaries and Wages Expense (12) 5,600 5,600

(11)

Utilities Expense 260 260

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-3B (Continued) (c)

HILLSBOROUGH SERVICES Trial Balance May 31, 2022 Cash ................................................................ Accounts Receivable ..................................... Supplies .......................................................... Prepaid Insurance .......................................... Prepaid Rent................................................... Equipment ...................................................... Accounts Payable .......................................... Common Stock .............................................. Service Revenue ............................................ Salaries and Wages Expense ........................ Utilities Expense ............................................

Debit $20,810 8,800 2,050 2,640 24,000 28,000

Credit

$24,160 50,000 18,000 5,600 260 $92,160

$92,160

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-4B

ZOOP CO. Trial Balance June 30, 2022 Cash ($3,960 + $270) .................................................. Accounts Receivable ($2,648 – $270) ....................... Supplies ($800 – $620) ............................................... Equipment ($3,000 + $620) ........................................ Accounts Payable ($2,666 – $309 – $390)................. Unearned Service Revenue ....................................... Common Stock ........................................................... Dividends ($800 + $600) ............................................. Service Revenue ($2,367 + $684) .............................. Salaries and Wages Expense ($3,400 + $700 – $600) Utilities Expense ........................................................

Debit $ 4,230 2,378 180 3,620

Credit

$ 1,967 2,200 9,000 1,400 3,051 3,500 910 $16,218

$16,218

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-5B (a) & (c) Cash Date Mar. 1 2 9 10 12 20 20 31 31 31

Explanation Balance

J1 J1 J1 J1 J1 J1 J1 J1 J1

Accounts Receivable Date Explanation Mar. 31 Land Date Mar. 1

Ref.

Explanation Balance

Buildings Date Explanation Mar. 1 Balance Equipment Date Explanation Mar. 1 Balance

Ref. J1

Ref.

375 9,000

No. 101 Balance 8,000 7,000 11,000 7,600 7,150 12,550 9,950 7,450 7,825 16,825

Debit 375

Credit

No. 112 Balance 375

Credit

No. 140 Balance 22,000

Credit

No. 145 Balance 10,000

Credit

No. 157 Balance 8,000

Debit

Credit 1,000

4,000 3,400 450 5,400 2,600 2,500

Debit

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-5B (Continued) Accounts Payable Date Explanation Mar. 1 Balance 2 10 Common Stock Date Explanation Mar. 1 Balance Service Revenue Date Explanation Mar. 9 20 31 Rent Revenue Date Explanation Mar. 31 Advertising Expense Date Explanation Mar. 12

Ref. J1 J1

Ref.

Ref. J1 J1 J1

Ref. J1

Debit

Credit 2,500

3,400

Debit

Debit 450

Credit

No. 201 Balance 6,000 8,500 5,100 No. 311 Balance 42,000

Credit 4,000 5,400 9,000

No. 400 Balance 4,000 9,400 18,400

Credit 750

No. 429 Balance 750

Credit

No. 610 Balance 450

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-5B (Continued) Salaries and Wages Expense Date Explanation Mar. 31 Rent Expense Date Explanation Mar. 2 20

Ref. J1

Ref. J1 J1

Debit 2,500

Debit 3,500 2,600

Credit

No. 726 Balance 2,500

Credit

No. 729 Balance 3,500 6,100

(b) J1 Date

Account Titles and Explanation

Ref.

Debit

Mar. 2

Rent Expense........................................ Accounts Payable ........................ Cash ............................................. (Rented films for cash and on account)

729 201 101

3,500 2,500 1,000

No entry.

Cash ...................................................... Service Revenue .......................... (Received cash for services provided)

101 400

4,000

Accounts Payable ($2,500 + $900) ......... Cash ............................................. (Paid creditors on account)

201 101

3,400

610 101

450

No entry.

Advertising Expense ............................ Cash ............................................. (Paid advertising expense)

Credit

4,000

3,400

450

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-5B (Continued) Date 20

Mar. 31

Account Titles and Explanation Cash ...................................................... Service Revenue .......................... (Received cash for services provided)

Ref. 101 400

Debit 5,400

Rent Expense ........................................ Cash ............................................. (Paid film rental)

729 101

2,600

Salaries and Wages Expense .............. Cash ............................................. (Paid salaries expense)

726 101

2,500

Cash....................................................... Accounts Receivable............................ Rent Revenue .............................. (15% X $5,000) (Received cash and balance on account for concession revenue)

101 112 429

375 375

Cash....................................................... Service Revenue .......................... (Received cash for services provided)

101 400

9,000

Credit 5,400

2,600

2,500

750

9,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 2-5B (Continued) (d)

HART THEATER Trial Balance March 31, 2022 Cash................................................................. Accounts Receivable...................................... Land.................................................................. Buildings .......................................................... Equipment ........................................................ Accounts Payable............................................ Common Stock ................................................ Service Revenue .............................................. Rent Revenue .................................................. Advertising Expense ....................................... Salaries and Wages Expense ......................... Rent Expense ...................................................

Debit $16,825 375 22,000 10,000 8,000

Credit

$ 5,100 42,000 18,400 750 450 2,500 6,100 $66,250

$66,250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

CHAPTER 3 Adjusting the Accounts PROBLEM 3-1B

(a) Date 2022 June 30

30 30

Account Titles and Explanation

Ref.

Debit

Supplies Expense ............................ Supplies ($2,000 – $750) ....................

631

1,250

Utilities Expense .............................. Accounts Payable ...................

732 201

150

Insurance Expense .......................... Prepaid Insurance ($3,000 ÷ 12 months)...........

722

250

Unearned Service Revenue............. Service Revenue .....................

209 400

2,800

Salaries and Wages Expense ......... Salaries and Wages Payable ................................. ($725 x 4 days)

726

2,900

Depreciation Expense ..................... Accumulated Depreciation— Equipment ...........................

711

Accounts Receivable....................... Service Revenue .....................

112 400

126

J3 Credit

1,250 150

130

250 2,800

212

2,900 250

158

250 1,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

1,700

PROBLEM 3-1B (Continued) (b) Cash Date 2022 June 30

No. 101 Explanation

Ref.

Debit

Credit

Balance

Accounts Receivable Date Explanation 2022 June 30 Balance 30 Adjusting

7,150

Ref.

Debit

Credit

1,700

No. 126 Explanation Balance Adjusting

Prepaid Insurance Date Explanation 2022 June 30 Balance 30 Adjusting Equipment Date Explanation 2022 June 30 Balance

Ref.

Debit

Ref.

Debit

Ref.

Debit

Credit

Balance

1,250

2,000 750

Credit

No. 130 Balance

250

3,000 2,750

Credit

No. 157 Balance 15,000

Accumulated Depreciation—Equipment Date 2022 June 30

No. 112 Balance 6,000 7,700

Supplies Date 2022 June 30 30

Balance

Explanation

Ref.

Adjusting

No. 158 Debit

Credit

Balance

250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-1B (Continued) Accounts Payable Date 2022 June 30 30

Explanation Balance Adjusting

No. 201 Ref.

Debit

Credit

Balance

150

6,250 6,400

Unearned Service Revenue Date 2022 June 30 30

Explanation Balance Adjusting

Salaries and Wages Payable Date Explanation 2022 June 30 Adjusting

No. 209 Ref.

Ref.

Debit

Credit

2,800

4,000 1,200

Debit

Credit

No. 212 Balance

2,900

Common Stock Date 2022 June 30

Explanation

No. 311 Ref.

Debit

Credit

Balance

20,000

Service Revenue Date 2022 June 30 30 30

Balance

Explanation Balance Adjusting Adjusting

No. 400 Ref.

J3 J3

Debit

Credit

Balance

2,800 1,700

7,900 10,700 12,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-1B (Continued) Supplies Expense Date Explanation 2022 June 30 Adjusting Depreciation Expense Date Explanation 2022 June 30 Adjusting Insurance Expense Date Explanation 2022 June 30 Adjusting Salaries and Wages Expense Date Explanation 2022 June 30 Balance 30 Adjusting

Ref.

Debit

1,250

Ref.

Debit

No. 711 Balance

250

Ref.

Debit

No. 722 Balance

250

Debit

No. 726 Balance

Ref.

Credit

4,000 6,900

2,900

Rent Expense Date 2022 June 30

Explanation

No. 729 Ref.

Debit

Credit

Balance

1,000

Utilities Expense Date 2022 June 30

No. 631 Balance

No. 732

Explanation

Ref.

Debit

Adjusting

150

Credit

Balance

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

150

PROBLEM 3-1B (Continued) (c)

ELSNER COMPANY Adjusted Trial Balance June 30, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Equipment........................................................... Accumulated Depreciation— Equipment ....................................................... Accounts Payable .............................................. Unearned Service Revenue ............................... Salaries and Wages Payable ............................. Common Stock ................................................... Service Revenue................................................. Supplies Expense............................................... Depreciation Expense ........................................ Insurance Expense ............................................. Salaries and Wages Expense ............................ Rent Expense ..................................................... Utilities Expense.................................................

Debit $ 7,150 7,700 750 2,750 15,000

Credit

250 6,400 1,200 2,900 20,000 12,400

1,250 250 250 6,900 1,000 150 $43,150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$43,150

PROBLEM 3-2B

(a) Date Aug. 31 31 31

31 31 31 31

Account Titles and Explanation Insurance Expense ($300 X 3) ........... Prepaid Insurance......................

Ref. 722 130

Debit 900

Supplies Expense ($3,300 – $800)......... Supplies .....................................

631 126

2,500

620

2,100

Depreciation Expense ($6,000 X 1/4) + ($2,400 X 1/4) ........ Accumulated Depreciation— Buildings ................................ Accumulated Depreciation— Equipment ..............................

J1 Credit 900 2,500

144

1,500

150

600

Unearned Rent Revenue .................... Rent Revenue .............................

208 429

4,800

Salaries and Wages Expense ............ Salaries and Wages Payable .....

726 212

400

Accounts Receivable ......................... Rent Revenue .............................

112 429

4,000

Interest Expense ................................. Interest Payable [($80,000 X 9%) X 1/12] ..........

718

600

4,800 400 4,000

230

600

(b) Cash Date Explanation Aug. 31 Balance

Ref.

Debit

Credit

No. 101 Balance 19,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) Accounts Receivable Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 4,000

Credit

No. 112 Balance 4,000

Supplies Date Explanation Aug. 31 Balance 31 Adjusting Prepaid Insurance Date Explanation Aug. 31 Balance 31 Adjusting Land Date Explanation Aug. 31 Balance Buildings Date Explanation Aug. 31 Balance

No. 126 Ref.

Debit

Ref.

2,500

Debit

Ref.

Credit

Credit 900

Debit

Balance 3,300 800 No. 130 Balance 6,000 5,100

Credit

No. 140 Balance 25,000

Credit

No. 143 Balance 125,000

Accumulated Depreciation—Buildings Date Explanation Aug. 31 Adjusting Equipment Date Explanation Aug. 31 Balance

Ref. J1

Ref.

No. 144 Debit

Debit

Credit 1,500

Balance 1,500

Credit

No. 149 Balance 26,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) Accumulated Depreciation—Equipment Date Explanation Ref. Aug. 31 Adjusting J1

Debit

Credit 600

Accounts Payable Date Explanation Aug. 31 Balance Unearned Rent Revenue Date Explanation Aug. 31 Balance 31 Adjusting

No. 201 Ref.

Debit

Ref.

Debit

4,800

Credit

Salaries and Wages Payable Date Explanation Aug. 31 Adjusting Interest Payable Date Explanation Aug. 31 Adjusting Mortgage Payable Date Explanation Aug. 31 Balance

Balance 6,500 No. 208 Balance 7,400 2,600 No. 212

Ref. J1

Ref.

Debit

Credit 400

Balance 400

Credit 600

No. 230 Balance 600

Credit

Common Stock Date Explanation Aug. 31 Balance

No. 150 Balance 600

No. 275 Balance 80,000 No. 311

Ref.

Debit

Credit

Balance 100,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) Dividends Date Explanation Aug. 31 Balance Rent Revenue Date Explanation Aug. 31 Balance 31 Adjusting 31 Adjusting Depreciation Expense Date Explanation Aug. 31 Adjusting

Ref.

Interest Expense Date Explanation Aug. 31 Adjusting Insurance Expense Date Explanation Aug. 31 Adjusting

Debit

J1 J1

Ref. J1

Maintenance and Repairs Expense Date Explanation Ref. Aug. 31 Balance Supplies Expense Date Explanation Aug. 31 Adjusting

Debit

Ref. J1

Credit

Credit 4,800 4,000

Debit 2,100

Debit

Debit 2,500

Debit 600

Debit 900

No. 332 Balance 5,000 No. 429 Balance 80,000 84,800 88,800

Credit

No. 620 Balance 2,100

Credit

No. 622 Balance 3,600

Credit

No. 631 Balance 2,500

Credit

No. 718 Balance 600

Credit

No. 722 Balance 900

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) Salaries and Wages Expense Date Explanation Aug. 31 Balance 31 Adjusting Utilities Expense Date Explanation Aug. 31 Balance

Ref.

Debit

400

Ref.

Debit

Credit

No. 726 Balance 51,000 51,400

Credit

No. 732 Balance 9,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) (c)

MAQUOKETA RIVER RESORT Adjusted Trial Balance August 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Land .................................................................... Buildings ............................................................. Accumulated Depreciation—Buildings ............. Equipment........................................................... Accumulated Depreciation—Equipment .......... Accounts Payable .............................................. Unearned Rent Revenue .................................... Salaries and Wages Payable ............................. Interest Payable .................................................. Mortgage Payable............................................... Common Stock ................................................... Dividends ............................................................ Rent Revenue ..................................................... Depreciation Expense ........................................ Maintenance and Repairs Expense ................... Supplies Expense............................................... Interest Expense................................................. Insurance Expense ............................................. Salaries and Wages Expense ............................ Utilities Expense.................................................

Debit $ 19,600 4,000 800 5,100 25,000 125,000

Credit

1,500

26,000 600 6,500 2,600 400 600 80,000 100,000 5,000 88,800 2,100 3,600 2,500 600 900 51,400 9,400 $281,000

$281,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) (d)

MAQUOKETA RIVER RESORT Income Statement For the Three Months Ended August 31, 2022 Revenues Rent revenue ................................................. Expenses Salaries and wages expense ........................ Utilities expense ............................................ Maintenance and repairs expense ............... Supplies expense .......................................... Depreciation expense ................................... Insurance expense ........................................ Interest expense ............................................ Total expenses ....................................... Net income ............................................................

$88,800 $51,400 9,400 3,600 2,500 2,100 900 600 70,500 $18,300

MAQUOKETA RIVER RESORT Retained Earnings Statement For the Three Months Ended August 31, 2022 Retained earnings, June 1.................................... Add: Net income .................................................. Less: Dividends ................................................... Retained earnings, August 31 ..............................

0 18,300 18,300 5,000 $13,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-2B (Continued) MAQUOKETA RIVER RESORT Balance Sheet August 31, 2022 Assets Cash................................................................... Accounts receivable ......................................... Supplies ............................................................ Prepaid insurance............................................. Land ................................................................... Buildings ........................................................... Less: Accum. depreciation—buildings .......... Equipment ......................................................... Less: Accum. depreciation—equipment ........ Total assets ........................................

$ 19,600 4,000 800 5,100 25,000 $125,000 1,500 26,000 600

123,500 25,400 $203,400

Liabilities and Stockholders’ Equity Liabilities Accounts payable ..................................... Mortgage payable...................................... Unearned rent revenue ............................. Interest payable ......................................... Salaries and wages payable ..................... Total liabilities.................................... Stockholders’ equity Common stock .......................................... Retained earnings ..................................... Total liabilities and Stockholders’ equity ..............................................

$100,000 13,300

6,500 80,000 2,600 600 400 90,100 113,300

$203,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-3B

(a) Dec. 31 31 31 31

31 31 31

(b)

Accounts Receivable ............................. Service Revenue .............................

3,500

Unearned Service Revenue ................... Service Revenue .............................

1,300

Supplies Expense ................................... Supplies ...........................................

3,800

Depreciation Expense ............................ Accumulated Depreciation— Equipment ....................................

4,000

Interest Expense ..................................... Interest Payable ..............................

150

Insurance Expense ................................. Prepaid Insurance ...........................

850

Salaries and Wages Expense ................ Salaries and Wages Payable ..........

2,100

3,500 1,300 3,800

4,000 150 850 2,100

DELGADO ADVERTISING AGENCY Income Statement For the Year Ended December 31, 2022 Revenues Service revenue ................................................ Expenses Salaries and wages expense ........................... Depreciation expense ...................................... Rent expense .................................................... Supplies expense ............................................. Insurance expense ........................................... Interest expense ............................................... Total expenses .......................................... Net income ...............................................................

$63,400 $12,100 4,000 4,000 3,800 850 500 25,250 $38,150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-3B (Continued) DELGADO ADVERTISING AGENCY Retained Earnings Statement For the Year Ended December 31, 2022 Retained Earnings, January 1 ................................................. Add: Net income ..................................................................... Less: Dividends ...................................................................... Retained Earnings, December 31 ...........................................

$ 5,500 38,150 43,650 12,000 $31,650

DELGADO ADVERTISING AGENCY Balance Sheet December 31, 2022 Assets Cash....................................................................... Accounts receivable ............................................. Supplies ................................................................ Prepaid insurance................................................. Equipment ............................................................. Less: Accumulated depreciation— equipment .................................................. Total assets ............................................

$11,000 23,500 4,800 2,500 $60,000 32,000

28,000 $69,800

Liabilities and Stockholders’ Equity Liabilities Notes payable ................................................ Accounts payable ......................................... Unearned service revenue............................ Salaries and wages payable ......................... Interest payable ............................................. Total liabilities........................................ Stockholders’ equity Common stock .............................................. Retained Earnings ......................................... Total liabilities and Stockholders’ equity ..................................................

$ 5,000 5,000 5,900 2,100 150 18,150 $20,000 31,650

51,650 $69,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-3B (Continued) (c) I = P X R X T $150 = $5,000 X R X 1/2 $150 = $2,500R R = $150 $2,500 R = 6%

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-4B

Dec. 31

Salaries and Wages Expense .................. Salaries and Wages Payable ............ [5 X $900 X 2/5 = $1,800 [3 X $700 X 2/5 = 840 $2,640]

2,640

Unearned Rent Revenue .......................... Rent Revenue .................................... [5 X $5,000 X 2 = $50,000) (4 X $8,500 X 1 = 34,000) $84,000]

84,000

Insurance Expense ................................... Prepaid Insurance ............................. [($9,000 ÷ 3) = $3,000 (($7,800 ÷ 2 x 11/12) = 3,575 $6,575]

6,575

Interest Expense ....................................... Interest Payable ($120,000 X 9% X 7/12) ..................

6,300

2,640

84,000

6,575

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

6,300

PROBLEM 3-5B

(a), (c) & (e) Cash Date Sept.

No. 101 Explanation 1 Balance 8 10 12 20 22 25 29

Accounts Receivable Date Explanation Sept. 1 Balance 10 27

Supplies Date Explanation Sept. 1 Balance 17 30 Adjusting

Equipment Date Explanation Sept. 1 Balance 15

Ref. J1 J1 J1 J1 J1 J1 J1

Ref. J1 J1

Debit

Credit 1,400

1,200 3,400 4,500 500 1,750 650

Debit

Credit 1,200

4,100

Ref.

Debit

J1 J1

1,200

Credit

1,900

Ref.

Debit

3,000

Credit

Balance 4,880 3,480 4,680 8,080 3,580 3,080 1,330 1,980

No. 112 Balance 3,520 2,320 6,420

No. 126 Balance 2,000 3,200 1,300

No. 153 Balance 15,000 18,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-5B (Continued) Accumulated Depreciation—Equipment Date Explanation Ref. Sept. 1 Balance 30 Adjusting J1

Accounts Payable Date Explanation Sept. 1 Balance 15 17 20

Unearned Service Revenue Date Explanation Sept. 1 Balance 29 30 Adjusting

Salaries and Wages Payable Date Explanation Sept. 1 Balance 8 30 Adjusting

Common Stock Date Explanation Sept. 1 Balance Retained Earnings Date Explanation

Ref. J1 J1 J1

Ref. J1 J1

Debit

100

Debit

4,500

Debit

Credit 650

1,450

Debit

J1 J1

500

Ref.

Credit 3,000 1,200

Ref.

Credit

300

Debit

Credit

No. 154 Balance 1,500 1,600

No. 201 Balance 3,400 6,400 7,600 3,100

No. 209 Balance 1,400 2,050 600

No. 212 Balance 500 0 300

No. 311 Balance 10,000 No. 320 Balance

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

Sept.

1 Balance

8,600

PROBLEM 3-5B (Continued) Service Revenue Date Explanation Sept. 12 27 30 Adjusting

Depreciation Expense Date Explanation Sept. 30 Adjusting

Ref. J1 J1 J1

Ref. J1

Debit

Debit 100

Credit 3,400 4,100 1,450

Credit

Supplies Expense Date Explanation Sept. 30 Adjusting

Salaries and Wages Expense Date Explanation Sept. 8 25 30 Adjusting

Rent Expense Date Explanation Sept. 22

No. 407 Balance 3,400 7,500 8,950

No. 615 Balance 100

No. 631 Ref. J1

Ref. J1 J1 J1

Ref. J1

Debit 1,900

Debit 900 1,750 300

Debit 500

Credit

Balance 1,900

No. 726 Balance 900 2,650 2,950

No. 729 Balance 500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-5B (Continued) (b)

General Journal J1

Date Sept. 8

10 12 15 17 20 22 25 27 29

Account Titles Salaries and Wages Payable ................ Salaries and Wages Expense ............... Cash ................................................

Ref. 212 726 101

Debit 500 900

Cash ....................................................... 101 Accounts Receivable ..................... 112

1,200

Cash ....................................................... 101 Service Revenue ............................ 407

3,400

Equipment ............................................. 153 Accounts Payable .......................... 201

3,000

Supplies ................................................. 126 Accounts Payable .......................... 201

1,200

Accounts Payable ................................. 201 Cash ................................................ 101

4,500

Rent Expense ........................................ 729 Cash ................................................ 101

500

Salaries and Wages Expense ............... 726 Cash ................................................ 101

1,750

Accounts Receivable ............................ 112 Service Revenue ............................ 407

4,100

Cash ....................................................... 101 Unearned Service Revenue............. 209

650

Credit

1,400 1,200 3,400 3,000 1,200 4,500 500 1,750 4,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

650

PROBLEM 3-5B (Continued) (d) & (f)

PERCY EQUIPMENT REPAIR Trial Balances September 30, 2022

Cash ........................................... Accounts Receivable ................ Supplies ..................................... Equipment.................................. Accumulated Depreciation— Equipment ............................... Accounts Payable ..................... Unearned Service Revenue ...... Salaries and Wages Payable .... Common Stock Retained Earnings ..................... Service Revenue........................ Depreciation Expense ............... Supplies Expense...................... Salaries and Wages Expense ... Rent Expense ............................

(e) 1. Sept. 30

Before Adjustment Dr. Cr. $ 1,980 6,420 3,200 18,000

After Adjustment Dr. Cr. $ 1,980 6,420 1,300 18,000

$ 1,500 3,100 2,050 -010,000 8,600 7,500

$ 1,600 3,100 600 300 10,000 8,600 8,950

100 1,900 2,650 2,950 500 500 $32,750 $32,750 $33,150 $33,150

Supplies Expense ........................ Supplies ($3,200 – $1,300) ......

631 126

1,900

Salaries and Wages Expense ..... Salaries and Wages Payable ................................

726

300

Depreciation Expense ................. Accumulated Depreciation— Equipment ..........................

615

Unearned Service Revenue .........

209

1,900

212

300 100

154

100 1,450

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

Service Revenue ...................

407

1,450

PROBLEM 3-5B (Continued) (g)

PERCY EQUIPMENT REPAIR Income Statement For the Month Ended September 30, 2022 Revenues Service revenue.................................................. Expenses Salaries and wages expense ............................. Supplies expense ............................................... Rent expense ...................................................... Depreciation expense ........................................ Total expenses............................................ Net income .................................................................

$8,950 $2,950 1,900 500 100 5,450 $3,500

PERCY EQUIPMENT REPAIR Retained Earnings Statement For the Month Ended September 30, 2022 Retained Earnings, September 1 ............................................ Add: Net income .................................................................... Retained Earnings, September 30 ..........................................

$8,600 3,500 $12,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 3-5B (Continued) PERCY EQUIPMENT REPAIR Balance Sheet September 30, 2022 Assets Cash ....................................................................... Accounts receivable ............................................. Supplies ................................................................. Equipment ............................................................. Less: Accumulated depreciation— equipment .............................................. Total assets ...................................................

$ 1,980 6,420 1,300 $18,000 1,600

16,400 $26,100

Liabilities and Stockholders’ Equity Liabilities Accounts payable......................................... Unearned service revenue ........................... Salaries and wages payable ........................ Total liabilities ....................................... Stockholders’ equity Common stock .............................................. Retained earnings ......................................... Total liabilities and Stockholders’ equity ...................................................

$ 3,100 600 300 4,000 $10,000 12,100

22,100 $26,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

CHAPTER 4 Completing the Accounting Cycle SOLUTIONS TO PROBLEMS

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-1B (a)

PEVNICK INC. Worksheet For the Quarter Ended March 31, 2022 Account Titles

Cash Accounts Receivable Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Common Stock Dividends Service Revenue Salaries and Wages Expense Travel Expense Rent Expense Miscellaneous Expense Totals Supplies Expense Depreciation Expense Accumulated Depreciation—Equipment Interest Expense Interest Payable Insurance Expense Totals Net Income Totals

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Dr.

Cr.

11,400 5,620 1,050 2,400 30,000

Cr.

(e) 2,030 (a) (d)

770 600

Cr.

11,400 7,650 280 1,800 30,000

10,000 12,350 20,000

600 13,620

(e) 2,030

Cr.

11,400 7,650 280 1,800 30,000 10,000 12,350 20,000

600

2,200 1,300 1,200 200 55,970

Cr.

600 15,650

15,650

2,200 1,300 1,200 200

770 800

55,970 (a) (b)

770 800

(c)

300

(d)

600 4,500

(b)

800

800 300

(c)

300 4,500

800 300

300 600 59,100

59,100

300 600 7,370 8,280 15,650

15,650

51,730

15,650

51,730

43,450 8,280 51,730

Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Accrued Interest on note; (d) Insurance Expired; (e) Service Revenue Accrued.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-1B (Continued) (b)

PEVNICK INC. Income Statement For the Quarter Ended March 31, 2022 Revenues Service revenue............................................... Expenses Salaries and wages expense .......................... Travel expense ................................................ Rent expense ................................................... Depreciation expense ..................................... Supplies expense ............................................ Insurance expense .......................................... Interest expense .............................................. Miscellaneous expense .................................. Total expenses......................................... Net income ..............................................................

$15,650 $2,200 1,300 1,200 800 770 600 300 200 7,370 $ 8,280

PEVNICK INC. Retained Earnings Statement For the Quarter Ended March 31, 2022 Retained Earnings, January 1 ................................ Add: Net income ................................................... Less: Dividends ..................................................... Retained Earnings, March 31 .................................

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

0 8,280 8,280 600 $7,680

PROBLEM 4-1B (Continued) PEVNICK INC. Balance Sheet March 31, 2022 Assets Current assets Cash ............................................................... Accounts receivable ..................................... Supplies ......................................................... Prepaid insurance ......................................... Total current assets ............................... Property, plant, and equipment Equipment ..................................................... Less: Accumulated depreciation— equipment .......................................... Total assets ............................................

$11,400 7,650 280 1,800 $21,130 30,000 800

29,200 $50,330

Liabilities and Stockholders’ Equity Current liabilities Notes payable ................................................ Accounts payable.......................................... Interest payable ............................................. Total current liabilities........................... Stockholders’ equity Common stock .............................................. Retained earnings ......................................... Total liabilities and stockholders’ equity .................................................. (c) Mar. 31 31

31 31

$10,000 12,350 300 $22,650 20,000 7,680

$50,330

Supplies Expense ................................ Supplies ........................................

770

Depreciation Expense ......................... Accumulated Depreciation— Equipment .................................

800

Interest Expense .................................. Interest Payable............................

300

Insurance Expense .............................. Prepaid Insurance ........................

600

27,680

770

800 300

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

600

PROBLEM 4-1B (Continued) Mar. 31

(d) Mar. 31

31 31

Accounts Receivable ........................ Service Revenue ...............................

2,030

Service Revenue ............................... Income Summary ..............................

15,650

Income Summary...................................... Travel Expense.................................. Salaries and Wages Expense ........... Rent Expense .................................... Insurance Expense ........................... Depreciation Expense....................... Supplies Expense ............................. Interest Expense ............................... Miscellaneous Expense ....................

7,370

Income Summary...................................... Retained Earnings ............................

8,280

Retained Earnings .................................... Dividends...........................................

600

2,030

15,650 1,300 2,200 1,200 600 800 770 300 200 8,280

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

600

PROBLEM 4-2B

(a)

GREENWOOD COMPANY Partial Worksheet For the Year Ended December 31, 2022

Account No. Titles 101 112 126 130 157 158 200 201 212 230 311 320 332 400 610 631 711 722 726 905

Cash Accounts Receivable Supplies Prepaid Insurance Equipment Acc. Depr.—Equip. Notes Payable Accounts Payable Salaries and Wages Payable Interest Payable Common Stock Retained earnings Dividends Service Revenue Advertising Expense Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Interest Expense Totals Net Income Totals

Adjusted Trial Balance Dr. Cr.

Income Statement Dr. Cr.

18,800 16,200 2,300 4,400 46,000

Balance Sheet Dr. Cr. 18,800 16,200 2,300 4,400 46,000

20,000 20,000 8,000

2,600 1,000 15,000 11,000

12,000

12,000 87,800

87,800

10,000 3,700 8,000 4,000

39,000 1,000 165,400 165,400

39,000 1,000 65,700 22,100 87,800

87,800

99,700

87,800

99,700

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

77,600 22,100 99,700

PROBLEM 4-2B (Continued) (b)

GREENWOOD COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Service revenue............................................. Expenses Salaries and wages expense ........................ Advertising expense ..................................... Depreciation expense ................................... Insurance expense ........................................ Supplies expense .......................................... Interest expense ............................................ Total expenses....................................... Net income ............................................................

$87,800 $39,000 10,000 8,000 4,000 3,700 1,000 65,700 $22,100

GREENWOOD COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Retained Earnings, January 1 ................................................ Add: Net income ................................................................... Less: Dividends ..................................................................... Retained Earnings, December 31 ..........................................

$11,000 22,100 33,100 12,000 $21,100

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-2B (Continued) GREENWOOD COMPANY Balance Sheet December 31, 2022 Assets Current assets Cash ............................................................... Accounts receivable ..................................... Supplies ......................................................... Prepaid insurance ......................................... Total current assets ............................... Property, plant, and equipment Equipment...................................................... Less: Accumulated depreciation— equipment .......................................... Total assets ............................................

$18,800 16,200 2,300 4,400 $41,700 46,000 20,000

26,000 $67,700

Liabilities and Stockholders’ Equity Current liabilities Notes payable ................................................ Accounts payable.......................................... Salaries and wages payable ......................... Interest payable ............................................. Total current liabilities........................... Long-term liabilities Notes payable ................................................ Total liabilities ........................................ Stockholders’ equity Common stock .............................................. Retained earnings ......................................... Total liabilities and stockholders’ equity ...................................................

$5,000 8,000 2,600 1,000 $16,600 15,000 31,600 15,000 21,100

36,100 $67,700

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-2B (Continued) (c) General Journal Date Account Titles and Explanation Dec. 31 Service Revenue ................................. Income Summary .......................

Ref. 400 350

Debit 87,800

31 Income Summary ................................ Advertising Expense.................. Supplies Expense ...................... Depreciation Expense................ Insurance Expense .................... Salaries and Wages Expense .... Interest Expense ........................

350 610 631 711 722 726 905

65,700

31 Income Summary ................................ Retained Earnings......................

350 320

22,100

31 Retained Earnings............................... Dividends ....................................

320 332

12,000

J14 Credit 87,800 10,000 3,700 8,000 4,000 39,000 1,000 22,100 12,000

(d) Date Jan. 31 Dec. 31 31

Explanation Balance Closing entry Closing entry

Date Explanation Dec. 31 Balance 31 Closing entry

Retained Earnings Ref. Debit J14 J14 Dividends Ref. J14

Credit 11,000 22,100

No. 320 Balance 11,000 33,100 21,100

Credit

No. 332 Balance 12,000 0

12,000

Debit 12,000

12,000

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-2B (Continued)

Credit 87,800

No. 350 Balance 87,800 22,100 0

Credit 87,800

87,800

No. 400 Balance 87,800 0

Date Explanation Dec. 31 Balance 31 Closing entry

Advertising Expense Ref. Debit 10,000 J14

Credit

No. 610 Balance 10,000 0

Date Explanation Dec. 31 Balance 31 Closing entry

Supplies Expense Ref. Debit 3,700 J14

Date Explanation Dec. 31 Balance 31 Closing entry

Depreciation Expense Ref. Debit 8,000 J14

Date Dec. 31 31

Insurance Expense Ref. Debit 4,000 J14

Date Dec. 31 31 31

Explanation Closing entry Closing entry Closing entry

Date Explanation Dec. 31 Balance 31 Closing entry

Explanation Balance Closing entry

Income Summary Ref. Debit J14 J14 65,700 J14 22,100

Service Revenue Ref. Debit J14

10,000

Credit 3,700

Credit 8,000

Credit 4,000

No. 631 Balance 3,700 0 No. 711 Balance 8,000 0 No. 722 Balance 4,000 0

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-2B (Continued) Salaries and Wages Expense Date Explanation Ref. Debit Dec. 31 Balance 39,000 31 Closing entry J14

Date Explanation Dec. 31 Balance 31 Closing entry

(e)

Interest Expense Ref. Debit 1,000 J14

Credit 39,000

Credit 1,000

No. 726 Balance 39,000 0 No. 905 Balance 1,000 0

GREENWOOD COMPANY Post-Closing Trial Balance December 31, 2022 Cash..................................................................... Accounts Receivable .......................................... Supplies .............................................................. Prepaid Insurance............................................... Equipment ........................................................... Accumulated Depreciation— Equipment ....................................................... Notes Payable ..................................................... Accounts Payable ............................................... Salaries and Wages Payable .............................. Interest Payable .................................................. Common Stock ................................................... Retained Earnings ..............................................

Debit $18,800 16,200 2,300 4,400 46,000

$87,700

Credit

$20,000 20,000 8,000 2,600 1,000 15,000 21,100 $87,700

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-3B (a)

NIHO COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Service revenue .......................................... Expenses Salaries and wages expense ..................... Maintenance and repairs expense ............ Utilities expense ......................................... Depreciation expense ................................ Insurance expense ..................................... Total expenses .................................... Net loss...............................................................

$45,000 $35,200 4,400 4,000 2,800 1,200 47,600 $ (2,600)

NIHO COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Retained Earnings, January 1 ........................... Less: Net loss ................................................... Dividends ................................................ Retained Earnings, December 31 .....................

$14,000 $2,600 7,200

9,800 $4,200

NIHO COMPANY Balance Sheet December 31, 2022 Assets Current assets Cash ............................................................ Accounts receivable .................................. Prepaid insurance ...................................... Total current assets ............................ Property, plant, and equipment Equipment................................................... Less: Accumulated depreciation— equipment ....................................... Total assets .........................................

$5,200 7,500 1,800 $14,500 33,000 8,600

24,400 $38,900

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

PROBLEM 4-3B (Continued) NIHO COMPANY Balance Sheet (Continued) December 31, 2022 Liabilities and Stockholders’ Equity Current liabilities Accounts payable ....................................... Salaries and wages payable ....................... Total current liabilities ........................ Stockholders’ equity Common stock ............................................ Retained earnings ....................................... Total liabilities and stockholders’ equity ................................................

$11,700 3,000 $14,700 20,000 4,200

24,200 $38,900

(b) General Journal Date Account Titles Dec. 31 Service Revenue ................................. Income Summary .......................

Ref. 400 350

Debit 45,000

Income Summary ............................... Maintenance and Repairs Expense .................................. Depreciation Expense ............... Insurance Expense.................... Salaries and Wages Expense ... Utilities Expense........................

350

47,600

Retained Earnings .............................. Income Summary ......................

320 350

2,600

Retained Earnings .............................. Dividends ...................................

320 332

7,200

Credit 45,000

622 711 722 726 732

4,400 2,800 1,200 35,200 4,000

2,600

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

7,200

PROBLEM 4-3B (Continued) (c) 12/31 12/31

12/31 Bal.

12/31

Retained Earnings No. 320 2,600 12/31 Bal. 14,000 7,200 12/31 Bal. 4,200

Dividends 7,200 12/31

Income Summary 47,600 12/31 12/31 47,600

No. 332 7,200

No. 350 45,000 2,600 47,600

Service Revenue No. 400 45,000 12/31 Bal. 45,000

(d)

Maintenance and Repairs Expense 12/31 Bal. 4,400 12/31

No. 622 4,400

Depreciation Expense No. 711 12/31 Bal. 2,800 12/31 2,800

Insurance Expense 12/31 Bal. 1,200 12/31

No. 722 1,200

Salaries and Wages Expense 12/31 Bal. 35,200 12/31

No. 726 35,200

Utilities Expense 12/31 Bal. 4,000 12/31

No. 732 4,000

NIHO COMPANY Post-Closing Trial Balance December 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Prepaid Insurance .............................................. Equipment .......................................................... Accumulated Depreciation—Equipment .......... Accounts Payable .............................................. Salaries and Wages Payable ............................. Common Stock .................................................. Retained Earnings ............................................. Totals ..........................................................

Debit $ 5,200 7,500 1,800 33,000

$47,500

Credit

$ 8,600 11,700 3,000 20,000 4,200 $47,500

Weygandt, Financial Accounting 11e, Solutions Problems: Set B

(a)

AVALON AMUSEMENT PARK Worksheet For the Year Ended September 30, 2022 Account Titles

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Dr.

Cr.

41,400 18,600 31,900 80,000 120,000

Cr. (a) 16,400 (b) 21,000

36,200 14,600 3,700 50,000 60,000 49,700

(d)

(c)

6,000

(d)

2,700

Cr.

41,400 2,200 10,900 80,000 120,000

42,200 14,600 1,000 50,000 60,000 49,700

14,000 277,500

14,000 280,200

280,200

105,000

30,500 9,400 16,900 18,000 6,000 491,700 491,700

3,000 4,000

30,500 9,400 16,900 21,000 10,000

(b) 21,000 (a) 16,400

21,000 16,400

(e) (f)

(f) (c)

4,000

6,000

4,000 6,000

(e) 53,100

3,000 53,100

Cr.

41,400 2,200 10,900 80,000 120,000 42,200 14,600 1,000 50,000 60,000 49,700

2,700

14,000

Cr.

3,000 504,700 504,700

4,000 6,000 236,200 280,200 44,000 280,200 280,200

268,500 268,500

3,000 224,500 44,000 268,500

Key: (a) Supplies Used; (b) Expired Insurance; (c) Depreciation Expensed; (d) Ticket Revenue Recognized; (e) Accrued Property Taxes; (f) Accrued Interest Payable.

Weygandt, Financial and Managerial Accounting, 2e, Solutions Problems: Set B

PROBLEM 4-4B

Cash Supplies Prepaid Insurance Land Equipment Accumulated Depreciation— Equipment Accounts Payable Unearned Ticket Revenue Mortgage Payable Common Stock Retained Earnings Dividends Ticket Revenue Salaries and Wages Expense Maintenance and Repairs Expense Advertising Expense Utilities Expense Property Tax Expense Interest Expense Totals Insurance Expense Supplies Expense Interest Payable Depreciation Expense Property Taxes Payable Totals Net Income Totals

Trial Balance

PROBLEM 4-4B (Continued) (b)

AVALON AMUSEMENT PARK Balance Sheet September 30, 2022 Assets Current assets Cash ............................................. Supplies ....................................... Prepaid insurance ....................... Total current assets ............. Property, plant, and equipment Land ............................................. Equipment.................................... Less: Accum. depreciation— equipment ........................ Total assets ..........................

$41,400 2,200 10,900 $ 54,500 80,000 $120,000 42,200

77,800

157,800 $212,300

Liabilities and Stockholders’ Equity Current liabilities Mortgage payable (due in 2018) .............. Accounts payable........................ Interest payable ........................... Property taxes payable ............... Unearned ticket revenue .................................... Total current liabilities......... Long-term liabilities Mortgage payable ........................ Total liabilities ...................... Stockholders’ equity Common stock ............................ Retained Earnings ($49,700 + $44,000 – $14,000) ........ Total liabilities and stockholders’ equity ........

$15,000 14,600 4,000 3,000 1,000 $ 37,600 35,000 72,600 60,000 79,700

139,700 $212,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-4B (Continued) (c) Sept. 30 30 30

30 30 30 (d) Sept. 30 30

30 30

Supplies Expense ................................ Supplies ........................................

16,400

Insurance Expense .............................. Prepaid Insurance ........................

21,000

Depreciation Expense.......................... Accumulated Depreciation— Equipment ..................................

6,000

Unearned Ticket Revenue ................... Ticket Revenue .............................

2,700

Property Tax Expense ......................... Property Taxes Payable ...............

3,000

Interest Expense .................................. Interest Payable ............................

4,000

Ticket Revenue..................................... Income Summary .........................

280,200

Income Summary ................................. Salaries and Wages Expense ...... Maintenance and Repairs Expense ..................................... Insurance Expense ....................... Property Tax Expense .................. Supplies Expense ......................... Utilities Expense ........................... Interest Expense ........................... Advertising Expense .................... Depreciation Expense ..................

236,200

Income Summary ................................. Retained Earnings ........................

44,000

Retained Earnings ............................... Dividends ......................................

14,000

16,400 21,000

6,000 2,700 3,000 4,000 280,200 105,000 30,500 21,000 21,000 16,400 16,900 10,000 9,400 6,000 44,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

14,000

PROBLEM 4-4B (Continued) (e)

AVALON AMUSEMENT PARK Post-Closing Trial Balance September 30, 2022 Cash .................................................................... Supplies .............................................................. Prepaid Insurance .............................................. Land .................................................................... Equipment .......................................................... Accumulated Depreciation—Equipment .......... Accounts Payable .............................................. Interest Payable ................................................. Property Taxes Payable..................................... Unearned Ticket Revenue ................................. Mortgage Payable .............................................. Common Stock .................................................. Retained Earnings .............................................

Debit $ 41,400 2,200 10,900 80,000 120,000

$254,500

Credit

$ 42,200 14,600 4,000 3,000 1,000 50,000 60,000 79,700 $254,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B

(a) Date Mar. 1 1

3 5 14 18 20 21 28 31 31

General Journal Account Titles and Explanation Cash .................................................... Common Stock ..........................

Ref. 101 311

Debit 10,000

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

157 101 201

6,000

Supplies .............................................. Accounts Payable .....................

126 201

1,200

Prepaid Insurance .............................. Cash ...........................................

130 101

1,200

Accounts Receivable ......................... Service Revenue .......................

112 400

4,800

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

201 101

2,000

Salaries and Wages Expense ............ Cash ...........................................

726 101

1,800

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

101 112

1,400

Accounts Receivable ......................... Service Revenue .......................

112 400

4,500

Gasoline Expense .............................. Cash ...........................................

633 101

500

Dividends ............................................ Cash ...........................................

332 101

700

J1 Credit 10,000 3,000 3,000 1,200 1,200 4,800 2,000 1,800 1,400 4,500 500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

700

PROBLEM 4-5B (Continued) SHAW’S CARPET CLEANERS Worksheet For the Month Ended March 31, 2022

(b) & (c)

Account Titles Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Common Stock Dividends Service Revenue Gasoline Expense Salaries and Wages Expense Totals Depreciation Expense Accum. Depr.—Equipment Insurance Expense Supplies Expense Salaries and Wages Payable Totals Net Income Totals

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Dr.

Cr.

2,200 7,900 1,200 1,200 6,000

(a)

Cr.

500 (d) (c)

950 100

Cr.

2,200 8,400 250 1,100 6,000

2,200 10,000

700 9,300

(a) (e)

550

(b)

300

500

Cr.

2,200 8,400 250 1,100 6,000 2,200 10,000

700 500 1,800 21,500

Cr.

700 9,800

500 2,350

9,800 500 2,350

21,500 300 (b) (c) (d)

300 100 950

100 950 (e) 2,400

300 300

550 2,400

22,850

300 100 950

550 22,850

4,200 5,600 9,800

9,800

18,650

9,800

18,650

550 13,050 5,600 18,650

Key: (a) Service Revenue Earned; (b) Depreciation Expensed; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B (Continued) (a), (e) & (f)

Date Mar. 1 1 5 18 20 21 31 31

Date Mar. 14 21 28 31

Date Mar. 3 31

Date Mar. 5 31

Date Mar. 1

Explanation

Adjusting

Explanation Adjusting

Explanation

Cash Ref. J1 J1 J1 J1 J1 J1 J1 J1

Debit 10,000

3,000 1,200 2,000 1,800 1,400 500 700

Accounts Receivable Ref. Debit J1 4,800 J1 J1 4,500 J2 500 Supplies Ref. J1 J2

Debit 1,200

Credit 1,400

Credit 950

Prepaid Insurance Ref. Debit J1 1,200 J2 Equipment Ref. J1

Credit

Debit 6,000

Credit 100

Credit

No. 101 Balance 10,000 7,000 5,800 3,800 2,000 3,400 2,900 2,200 No. 112 Balance 4,800 3,400 7,900 8,400 No. 126 Balance 1,200 250 No. 130 Balance 1,200 1,100 No. 157 Balance 6,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B (Continued)

Date Mar. 31

Date Mar. 1 3 18

Accumulated Depreciation—Equipment Explanation Ref. Debit Credit Adjusting J2 300

Explanation

Accounts Payable Ref. Debit J1 J1 J1 2,000

Date Mar. 31

Salaries and Wages Payable Explanation Ref. Debit Adjusting J2

Date Mar. 1

Common Stock Ref. Debit J1

Date Mar. 31 31

Date Mar. 31 31 31

Explanation

Explanation Closing Closing

Explanation Closing

Explanation Closing Closing Closing

Retained Earnings Ref. Debit J3 J3 700 Dividends Ref. J1 J3

Debit 700

Income Summary Ref. Debit J3 J3 4,200 J3 5,600

Credit 3,000 1,200

No. 158 Balance 300 No. 201 Balance 3,000 4,200 2,200

Credit 550

No. 212 Balance 550

Credit 10,000

No. 311 Balance 10,000

Credit 5,600

Credit 700

Credit 9,800

No. 320 Balance 5,600 4,900 No. 332 Balance 700 0 No. 350 Balance 9,800 5,600 0

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B (Continued)

Date Mar. 14 28 31 31

Date Mar. 31 31

Adjusting Closing

Service Revenue Ref. Debit J1 J1 J2 J3 9,800

Explanation Adjusting Closing

Supplies Expense Ref. Debit J2 950 J3

Explanation

Explanation Closing

Gasoline Expense Ref. Debit J1 500 J3

Explanation Adjusting Closing

Depreciation Expense Ref. Debit J2 300 J3

Date Mar. 31 31

Explanation Adjusting Closing

Insurance Expense Ref. Debit J2 100 J3

Date Mar. 20 31 31

Salaries and Wages Expense Explanation Ref. Debit J1 1,800 Adjusting J2 550 Closing J3

Date Mar. 31 31

Credit 4,800 4,500 500

No. 400 Balance 4,800 9,300 9,800 0

Credit

No. 631 Balance 950 0

950

Credit 500

Credit 300

Credit 100

Credit

2,350

No. 633 Balance 500 0 No. 711 Balance 300 0 No. 722 Balance 100 0 No. 726 Balance 1,800 2,350 0

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B (Continued) (d)

SHAW’S CARPET CLEANERS Income Statement For the Month Ended March 31, 2022 Revenues Service revenue ............................................. Expenses Salaries and wages expense ........................ Supplies expense .......................................... Gasoline expense .......................................... Depreciation expense ................................... Insurance expense ........................................ Total expenses ....................................... Net income ............................................................

$9,800 $2,350 950 500 300 100 4,200 $5,600

SHAW’S CARPET CLEANERS Retained Earnings Statement For the Month Ended March 31, 2022 Retained Earnings, March 1 ................................. Add: Net income .................................................

0 5,600 5,600 700 $4,900

Less: Dividends ................................................... Retained Earnings, March 31 ...............................

SHAW’S CARPET CLEANERS Balance Sheet March 31, 2022 Assets Current assets Cash ............................................................... Accounts receivable ..................................... Supplies ......................................................... Prepaid insurance ......................................... Total current assets ...............................

$2,200 8,400 250 1,100 $11,950

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 4-5B (Continued) SHAW’S CARPET CLEANERS Balance Sheet (Continued) March 31, 2022 Assets (Continued) Property, plant, and equipment Equipment ....................................................... Less: Accumulated depreciation— equipment ............................................ Total assets ..............................................

$6,000 300

5,700 $17,650

Liabilities and Stockholders’ Equity Current liabilities Accounts payable ........................................... Salaries and wages payable ........................... Total current liabilities ............................ Stockholders’ equity Common stock ................................................ Retained earnings ........................................... Total liabilities and stockholders’ equity .....................................................

$2,200 550 $ 2,750 10,000 4,900

14,900 $17,650

(e) Date Mar. 31 31

31 31 31

General Journal Account Titles and Explanation Accounts Receivable ......................... Service Revenue .......................

Ref. 112 400

Debit 500

Depreciation Expense ....................... Accumulated Depreciation— Equipment .............................

711

300

Insurance Expense ............................ Prepaid Insurance .....................

722 130

100

Supplies Expense .............................. Supplies .....................................

631 126

950

Salaries and Wages Expense ............ Salaries and Wages Payable ....

726 212

550

J2 Credit 500

158

300 100 950

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

550

PROBLEM 4-5B (Continued) (f) General Journal Date Account Titles and Explanation Mar. 31 Service Revenue................................. Income Summary ....................... 31

31 31

Ref. 400 350

Debit 9,800

Income Summary ............................... Salaries and Wages Expense ... Depreciation Expense ............... Insurance Expense .................... Supplies Expense ...................... Gasoline Expense ......................

350 726 711 722 631 633

4,200

Income Summary ............................... Retained Earnings .....................

350 320

5,600

Retained Earnings .............................. Dividends ...................................

320 332

700

(g)

9,800 2,350 300 100 950 500 5,600 700

SHAW’S CARPET CLEANERS Post-Closing Trial Balance March 31, 2022

Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Equipment .......................................................... Accumulated Depreciation—Equipment .......... Accounts Payable .............................................. Salaries and Wages Payable ............................. Common Stock .................................................. Retained Earnings ............................................. 000,000

J3 Credit

Debit $ 2,200 8,400 250 1,100 6,000

Credit

$17,950

300 2,200 550 10,000 4,900 $17,950

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

CHAPTER 5 Accounting for Merchandising Operations SOLUTIONS TO PROBLEMS PROBLEM 5-1B (a) July 1 3

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

1,800

Accounts Receivable ................................... Sales Revenue ......................................

2,000

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

1,200

Accounts Payable......................................... Inventory ($1,800 X .02) ..................................... Cash .......................................................

1,800

Cash .............................................................. Sales Discounts ............................................ Accounts Receivable ............................

1,980 20

Accounts Receivable ................................... Sales Revenue ......................................

1,800

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

1,080

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

1,900

1,800 2,000 1,200

36 1,764

2,000 1,800 1,080

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

1,900

20 21

30 31

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

300

Cash............................................................... Sales Discounts ............................................ Accounts Receivable ............................

1,782 18

Accounts Receivable .................................... Sales Revenue .......................................

2,250

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

1,350

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

1,600

Sales Returns and Allowances ..................... Accounts Receivable ............................

200

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

120

300

1,800 2,250 1,350 1,600 200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

120

PROBLEM 5-2B

(a) Date Apr. 2 4

6 11

14 16 18 20

General Journal Account Titles and Explanation Inventory ............................................. Accounts Payable.......................

Ref. 120 201

Debit 6,900

Accounts Receivable ......................... Sales Revenue ............................ Cost of Goods Sold ............................ Inventory .....................................

112 401 505 120

6,500

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

201 120

500

Accounts Payable ($6,900 – $500) ...... Inventory ..................................... ($6,400 X 1%) Cash ............................................

201 120

6,400

Cash .................................................... Sales Discounts ($6,500 X 1%) .......... Accounts Receivable .................

101 414 112

6,435 65

Inventory ............................................. Cash ............................................

120 101

3,800

Cash .................................................... Inventory .....................................

101 120

500

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

120 201

4,500

Inventory ............................................. Cash ............................................

120 101

100

J1 Credit 6,900 6,500

3,900 3,900 500 64

101

6,336

6,500 3,800 500 4,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

100

PROBLEM 5-2B (Continued)

Date Apr. 23

26 27

General Journal Account Titles and Explanation Cash .................................................... Sales Revenue ............................ Cost of Goods Sold ............................ Inventory .....................................

Ref. 101 401 505 120

Debit 7,400

Inventory ............................................. Cash.............................................

120 101

2,300

Accounts Payable .............................. Inventory ..................................... ($4,500 X 2%) Cash.............................................

201 120

4,500

Sales Returns and Allowances.......... Cash............................................. Inventory ............................................. Cost of Goods Sold ....................

412 101 120 505

Accounts Receivable ......................... Sales Revenue ............................ Cost of Goods Sold ............................ Inventory .....................................

112 401 505 120

3,700

J1 Credit 7,400

4,120 4,120 2,300 90

101

4,410 90 30 30 3,700 2,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

2,800

PROBLEM 5-2B (Continued) (b) Cash Date Apr.

1 11 13 14 16 20 23 26 27 29

Explanation Balance

Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit

Credit 6,336

6,435 3,800 500 100 7,400 2,300 4,410 90

Accounts Receivable Date Apr.

Explanation 4 13 30

No. 112 Ref. J1 J1 J1

Debit 6,500

Credit 6,500

3,700

Inventory Date Apr.

No. 101 Balance 9,000 2,664 9,099 5,299 5,799 5,699 13,099 10,799 6,389 6,299

Balance 6,500 0 3,700 No. 120

Explanation 2 4 6 11 14 16 18 20 23 26 27 29 30

Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit 6,900

Credit 3,900 500 64

3,800 500 4,500 100 4,120 2,300 90 30 2,800

Balance 6,900 3,000 2,500 2,436 6,236 5,736 10,236 10,336 6,216 8,516 8,426 8,456 5,656

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-2B (Continued) Accounts Payable Date Explanation Apr. 2 6 11 18 27 Common Stock Date Explanation Apr. 1 Balance

Ref. J1 J1 J1 J1 J1

Ref.

Debit

Credit 6,900

500 6,400 4,500 4,500

Debit

Credit

Sales Revenue Date Apr.

Explanation 4 23 30

Sales Returns and Allowances Date Explanation Apr. 29

Explanation

No. 311 Balance 9,000 No. 401

Ref. J1 J1 J1

Ref. J1

Debit

Debit 90

Credit 6,500 7,400 3,700

Balance 6,500 13,900 17,600

Credit

No. 412 Balance 90

Sales Discounts Date Apr. 13

No. 201 Balance 6,900 6,400 0 4,500 0

No. 414 Ref. J1

Ref. J1 J1 J1 J1

Debit 65

Debit 3,900 4,120

Credit

30 2,800

Balance 65 No. 505 Balance 3,900 8,020 7,990 10,790

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-2B (Continued)

(c)

ROSE DISTRIBUTING COMPANY Income Statement (Partial) For the Month Ended April 30, 2022 Sales Sales revenue ..................................................... Less: Sales returns and allowances ................ Sales discounts ...................................... Net sales ............................................................. Cost of goods sold .................................................... Gross profit ................................................................

$17,600 $90 65

155 17,445 10,790 $ 6,655

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-3B

(a)

MACKEY DEPARTMENT STORE Income Statement For the Year Ended December 31, 2022

Sales Sales revenue .................................... Less: Sales returns and allowances .............................. Net sales ............................................. Cost of goods sold ................................... Gross profit ............................................... Operating expenses Salaries and wages expense..... Depreciation expense ................. Sales commissions expense ..... Utilities expense ......................... Insurance expense ..................... Property tax expense.................. Total operating expenses .... Income from operations ........................... Other revenues and gains Interest revenue ................................. Other expenses and losses Interest expense ................................ Net income ................................................

$728,000 8,000 720,000 412,700 307,300 $108,000 23,700 14,500 12,000 7,200 4,800 170,200 137,100 4,000 12,000

8,000 $ 129,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-3B (Continued) MACKEY DEPARTMENT STORE Retained Earnings Statement For the Year Ended December 31, 2022 Retained Earnings, January 1 ...................................................... Add: Net income .......................................................................... Less: Dividends ............................................................................ Retained Earnings, December 31 .................................................

$ 64,600 129,100 193,700 28,000 $165,700

MACKEY DEPARTMENT STORE Balance Sheet December 31, 2022 Assets Current assets Cash..................................................... Accounts receivable ........................... Inventory ............................................. Prepaid insurance............................... Total current assets .................... Property, plant, and equipment Buildings ............................................. Less: Accumulated depreciation— buildings .................................. Equipment ........................................... Less: Accumulated depreciation— equipment ................................ Total assets .................................

$ 23,800 50,300 75,000 2,400 $151,500 $290,000 52,500 110,000

237,500

42,900

67,100

304,600 $456,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-3B (Continued) MACKEY DEPARTMENT STORE Balance Sheet (Continued) December 31, 2022 Liabilities and Stockholders’ Equity Current liabilities Accounts payable .................................................... $ 80,300 Mortgage payable (due next year) .......................... 25,000 Interest payable ....................................................... 9,000 Property taxes payable ............................................ 4,800 Sales commissions payable ................................... 4,300 Total current liabilities ..................................... $123,400 Long-term liabilities Mortgage payable .................................................... 55,000 Total liabilities .................................................. 178,400 Stockholders’ equity Common Stock ........................................................ 112,000 Retained Earnings ................................................... 165,700 277,700 Total liabilities and stockholders’ equity........ $456,100

(b) Dec. 31

31 31 31

Depreciation Expense ............................. Accumulated Depreciation— Buildings....................................... Accumulated Depreciation— Equipment ....................................

23,700

Insurance Expense .................................. Prepaid Insurance ............................

7,200

Interest Expense ...................................... Interest Payable................................

9,000

Property Tax Expense ............................. Property Taxes Payable ...................

4,800

10,400 13,300 7,200 9,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

4,800

PROBLEM 5-3B (Continued) 31 31 (c) Dec. 31

31 31

Sales Commissions Expense ............... Sales Commissions Payable .........

4,300

Utilities Expense .................................... Accounts Payable ..........................

1,000

Sales Revenue ....................................... Interest Revenue.................................... Income Summary ...........................

728,000 4,000

Income Summary................................... Sales Returns and Allowances....... Cost of Goods Sold ....................... Salaries and Wages Expense ........ Sales Commissions Expense........ Property Tax Expense ................... Utilities Expense ............................ Depreciation Expense.................... Insurance Expense ........................ Interest Expense ............................

602,900

Income Summary................................... Retained Earnings .........................

129,100

Retained Earnings ................................. Dividends........................................

28,000

4,300 1,000

732,000 8,000 412,700 108,000 14,500 4,800 12,000 23,700 7,200 12,000 129,100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

28,000

PROBLEM 5-4B (a) Date Apr. 4 6 8

10 11 13

14 15 18

General Journal Account Titles and Explanation Inventory ............................................... Accounts Payable .........................

Ref. 120 201

Debit 840

Inventory ............................................... Cash...............................................

120 101

Accounts Receivable ........................... Sales Revenue ..............................

112 401

1,150

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

505 120

790

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

201 120

Inventory ............................................... Cash...............................................

120 101

420

Accounts Payable ($840 – $40) ........... Inventory ....................................... ($800 X 2%) Cash...............................................

201 120

800

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

120 201

900

Cash ...................................................... Inventory .......................................

101 120

Accounts Receivable ........................... Sales Revenue ..............................

112 401

900

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

505 120

540

J1 Credit 840 40 1,150 790 40 420 16

101

784 900 50 900

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

540

PROBLEM 5-4B (Continued)

Date Apr. 20 21

27 30

General Journal Account Titles and Explanation Cash ..................................................... Accounts Receivable ...................

Ref. 101 112

Debit 600

Accounts Payable ............................... Inventory ($900 X 3%) .................. Cash..............................................

201 120 101

900

Sales Returns and Allowances........... Accounts Receivable ...................

412 112

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

101 112

710

J1 Credit 600 27 873 40 710

(b) Cash Date Apr. 1 6 11 13 15 20 21 30

No. 101 Explanation Balance

Accounts Receivable Date Explanation Apr. 8 18 20 27 30

Ref. J1 J1 J1 J1 J1 J1 J1

Ref. J1 J1 J1 J1 J1

Debit

Credit 40 420 784

50 600 873 710

Debit 1,150 900

Credit

600 40 710

Balance 2,500 2,460 2,040 1,256 1,306 1,906 1,033 1,743

No. 112 Balance 1,150 2,050 1,450 1,410 700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-4B (Continued) Inventory Date Explanation Apr. 1 Balance 4 6 8 10 11 13 14 15 18 21

Accounts Payable Date Explanation Apr. 4 10 13 14 21

Common Stock Date Explanation Apr. 1 Balance

Sales Revenue Date Explanation Apr. 8 18

Ref.

Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

840 40

Ref. J1 J1 J1 J1 J1

Ref.

Ref. J1 J1

Credit

790 40 420 16 900 50 540 27

Debit

Credit 840

40 800 900 900

Debit

Credit

Credit 1,150 900

No. 120 Balance 1,700 2,540 2,580 1,790 1,750 2,170 2,154 3,054 3,004 2,464 2,437

No. 201 Balance 840 800 0 900 0

No. 311 Balance 4,200

No. 401 Balance 1,150 2,050

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 5-4B (Continued) Sales Returns and Allowances Date Explanation Apr. 27

Ref. J1

Debit 40

Credit

Cost of Goods Sold Date Apr. 8 18

Explanation

(c)

No. 412 Balance 40 No. 505

Ref. J1 J1

Debit 790 540

Credit

Balance 790 1,330

DIAZ TENNIS SHOP Trial Balance April 30, 2022 Cash ........................................................................ Accounts Receivable ............................................. Inventory ................................................................. Common Stock ....................................................... Sales Revenue ........................................................ Sales Returns and Allowances.............................. Cost of Goods Sold ................................................

Debit $1,743 700 2,437

Credit

$4,200 2,050 40 1,330 $6,250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$6,250

*PROBLEM 5-5B

ROSHEK DEPARTMENT STORE Income Statement (Partial) For the Year Ended December 31, 2022 Sales Sales revenue .......................... Less: Sales returns and allowances .................... Net sales ................................... Cost of goods sold Inventory, January 1 ................ Purchases ................................ Less: Purchase returns and allowances ............. Purchase discounts ..... Net purchases .......................... Add: Freight-in ........................ Cost of goods purchased ......... Cost of goods available for sale ............................... Inventory, December 31 .......... Cost of goods sold ........... Gross profit .....................................

$725,000 11,000 714,000 $ 40,500 $447,000 $ 6,400 12,000

18,400 428,600 5,600 434,200 474,700 65,000 409,700 $304,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 5-6B (a) Cost of goods sold: Beginning inventory Plus: Purchases Cost of goods available Less: Ending inventory Cost of goods sold

2023

2022

2021

$ 13,000 146,000 159,000 (11,300) $147,700

$ 11,300 145,000 156,300 (14,700) $141,600

$ 14,700 129,000 143,700 (12,200) $131,500

2023 $239,000 147,700 $ 91,300

2022 $237,000 141,600 $ 95,400

2021 $235,000 131,500 $103,500

2023 $ 20,000 146,000 135,000 $ 31,000

2022 $ 31,000 145,000 161,000 $ 15,000

2021 $ 15,000 129,000 127,000 $ 17,000

(b) Sales revenue Less: CGS Gross profit (c) Beginning accounts payable Plus: Purchases Less: Payments to suppliers Ending accounts payable (d) Gross profit rate

38.2%

40.3%

44.0%

1$91,300 ÷

2$95,400 ÷

3$103,500 ÷

$239,000

$237,000

$235,000

No. Even though sales declined in 2023 from each of the two prior years, the gross profit rate increased. This means that cost of goods sold declined more than sales did, reflecting better purchasing power or control of costs. Therefore, in spite of declining sales, profitability, as measured by the gross profit rate, actually improved.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 5-7B (a) General Journal Date Account Titles and Explanation Apr. 4 Purchases ........................................................ Accounts Payable ....................................

Debit 740

740

6 Freight-in .......................................................... Cash ..........................................................

8 Accounts Receivable....................................... Sales Revenue..........................................

900

10 Accounts Payable ............................................ Purchase Returns and Allowances.........

11 Purchases ........................................................ Cash ..........................................................

300

13 Accounts Payable ($740 – $40)....................... Purchase Discounts ($700 X 3%) ............ Cash ..........................................................

700

14 Purchases ........................................................ Accounts Payable ....................................

700

15 Cash ................................................................. Purchase Returns and Allowances.........

17 Freight-In .......................................................... Cash ..........................................................

18 Accounts Receivable....................................... Sales Revenue..........................................

1,000

20 Cash ................................................................. Accounts Receivable ...............................

500

21 Accounts Payable ............................................ Purchase Discounts ($700 X 2%) ............ Cash ..........................................................

700

Credit

60 900 40 300 21 679 700 50 30 1,000 500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

14 686

*PROBLEM 5-7B (Continued) Date Account Titles and Explanation Debit Apr. 27 Sales Returns and Allowances ..................... 25 Accounts Receivable ............................. 30 Cash ................................................................ Accounts Receivable .............................

Credit 25

550 550

(b) Cash 4/1 Bal. 2,500 4/6 4/15 50 4/11 4/20 500 4/13 4/30 550 4/17 4/21 4/30 Bal. 1,845

60 300 679 30 686

4/10 4/13 4/21

Accounts Payable 40 4/4 700 4/14 700 4/30 Bal.

Accounts Receivable 4/8 900 4/20 500 4/18 1,000 4/27 25 4/30 550 4/30 Bal. 825 Inventory 4/1 Bal. 1,700 4/30 Bal. 1,700 Sales Returns and Allowances 4/27 25 4/30 Bal. 25 Purchases 4/4 740 4/11 300 4/14 700 4/30 Bal. 1,740

4,200 4,200

Sales Revenue 4/8 4/18 4/30 Bal.

900 1,000 1,900

Freight-In 60 30 90

Common Stock 4/1 Bal. 4/30 Bal.

Purchase Discounts 4/13 4/21 4/30 Bal.

4/6 4/17 4/30 Bal.

740 700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

21 14 35

4/15 4/30 Bal.

50 90

*PROBLEM 5-7B (Continued) (c)

EVERETT TENNIS SHOP Trial Balance April 30, 2022 Cash ....................................................................... Accounts Receivable............................................. Inventory ................................................................ Common Stock ...................................................... Sales Revenue ....................................................... Sales Returns and Allowances ............................. Purchases .............................................................. Purchase Returns and Allowances ...................... Purchase Discounts .............................................. Freight-In ................................................................

Debit $1,845 825 1,700

Credit

$4,200 1,900 25 1,740 90 35 90 $6,225

$6,225

EVERETT TENNIS SHOP Income Statement (Partial) For the Month Ended April 30, 2022 Sales Sales revenue .............................. Less: Sales returns and allowances........................ Net sales ...................................... Cost of goods sold Inventory, April 1 ......................... Purchases .................................... Less: Purchase returns and allowances ................ Purchase discounts ......... Net purchases.............................. Add: Freight-in ............................ Cost of goods purchased ........... Cost of goods available for sale................................... Inventory, April 30 ....................... Cost of goods sold ............... Gross profit......................................... Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$1,900 25 1,875 $1,700 $1,740 $90 35

125 1,615 90 1,705 3,405 2,296

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

1,109 $ 766

CHAPTER 6 Inventories SOLUTIONS TO PROBLEMS PROBLEM 6-1B

(a)

The goods should not be included in inventory as they were shipped FOB shipping point and shipped February 26. Title to the goods transfers to the customer February 26. Weber should have recorded the transaction in the Sales and Accounts Receivable accounts.

(b)

The amount should not be included in inventory as they were shipped FOB destination and not received until March 2. The seller still owns the inventory. No entry is recorded.

(c)

Include $500 in inventory.

(d)

Include $400 in inventory.

(e)

$750 should be included in inventory as the goods were shipped FOB shipping point.

(f)

The sale will be recorded on March 2. The goods should be included in inventory at the end of February at their cost of $250.

(g)

The damaged goods should not be included in inventory. They should be recorded in a loss account since they are not saleable.

PROBLEM 6-2B

(a) Date March 1 5 13 21 26

COST OF GOODS AVAILABLE FOR SALE Explanation Units Unit Cost Beginning Inventory 1,500 $ 7 Purchase 3,000 8 Purchase 4,500 9 Purchase 4,000 10 Purchase 2,500 11 Total 15,500

(b)

Total Cost $ 10,500 24,000 40,500 40,000 27,500 $142,500

FIFO (1)

Ending Inventory Unit Date Units Cost March 26 2,500 $11 21 1,000 10 3,500*

Total Cost $27,500 10,000 $37,500

(2) Cost of Goods Sold Cost of goods available for sale $142,500 Less: Ending inventory 37,500 Cost of goods sold $105,000

*15,500 – 12,000 = 3,500 Proof of Cost of Goods Sold Unit Total Date Units Cost Cost March 1 1,500 $ 7 $ 10,500 5 3,000 8 24,000 13 4,500 9 40,500 21 3,000 10 30,000 12,000 $105,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-2B (Continued) LIFO (1)

Ending Inventory Unit Date Units Cost March 1 1,500 $7 5 2,000 8 3,500

Total Cost $10,500 16,000 $26,500

(2) Cost of Goods Sold Cost of goods available for sale $142,500 Less: Ending inventory 26,500 Cost of goods sold $116,000

Proof of Cost of Goods Sold Unit Total Date Units Cost Cost March 26 2,500 $11 $27,500 21 4,000 10 40,000 13 4,500 9 40,500 5 1,000 8 8,000 12,000 $116,000 WEIGHTED-AVERAGE (1) Ending Inventory (2) Cost of Goods Sold $142,500 ÷ 15,500 = $9.194 Cost of goods available for sale $142,500 Unit Less: Ending Units Cost Total Cost inventory 32,179 3,500 $9.194 $32,179* Cost of goods sold $110,321 *rounded to nearest dollar (c) (1) As shown in (b) above, FIFO produces the highest inventory amount, $37,500. (2) As shown in (b) above, LIFO produces the highest cost of goods sold, $116,000.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-3B

(a) Date 1/1 2/20 5/5 8/12 12/8

COST OF GOODS AVAILABLE FOR SALE Explanation Units Unit Cost Beginning Inventory 400 $ 8 Purchase 600 9 Purchase 500 10 Purchase 300 11 Purchase 200 12 Total 2,000

(b)

Total Cost $ 3,200 5,400 5,000 3,300 2,400 $19,300

FIFO (1) Date 12/8 8/12

Ending Inventory Unit Units Cost 200 $12 300 11 500

Total Cost $2,400 3,300 $5,700

(2) Cost of Goods Sold Cost of goods available for sale $19,300 Less: Ending inventory 5,700 Cost of goods sold $13,600

Proof of Cost of Goods Sold Unit Total Date Units Cost Cost 1/1 400 $ 8 $ 3,200 2/20 600 9 5,400 5/5 500 10 5,000 1,500 $13,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-3B (Continued) (b)

LIFO (1) Date 1/1 2/20

Ending Inventory Unit Units Cost 400 $8 100 9 500

Total Cost $3,200 900 $4,100

(2) Cost of Goods Sold Cost of goods available for sale $19,300 Less: Ending inventory 4,100 Cost of goods sold $15,200

Proof of Cost of Goods Sold Unit Total Date Units Cost Cost 12/8 200 $12 $ 2,400 8/12 300 11 3,300 5/5 500 10 5,000 2/20 500 9 4,500 1,500 $15,200 WEIGHTED-AVERAGE (1) Ending Inventory (2) Cost of Goods Sold $19,300 ÷ 2,000 = $9.65 Cost of goods available for sale $19,300 Unit Less: Ending Total Units Cost inventory 4,825 Cost 500 $9.65 $4,825 Cost of goods sold $14,475 Proof of Cost of Goods Sold 1,500 units X 9.65 = $14,475 (c) (1) LIFO results in the lowest inventory amount for the balance sheet, $4,100. (2) FIFO results in the lowest cost of goods sold, $13,600.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-4B

(a)

Patel CO. Condensed Income Statement For the Year Ended December 31, 2022 Sales revenue............................................. Cost of goods sold Beginning inventory ........................... Cost of goods purchased .................. Cost of goods available for sale........ Ending inventory ................................ Cost of goods sold ............................. Gross profit ................................................ Operating expenses................................... Income before income taxes ..................... Income tax expense (34%) ........................ Net income ................................................. a

28,000 X $2.80 = $78,400.

FIFO $865,000

LIFO $865,000

32,000 600,000 632,000 78,400a 553,600 311,400 147,000 164,400 55,896 $108,504

32,000 600,000 632,000 63,200b 568,800 296,200 147,000 149,200 50,728 $98,472

$32,000 + (13,000 X $2.40) = $63,200.

(b) (1) The FIFO method produces the most meaningful inventory amount for the balance sheet because the units are costed at the most recent purchase prices. (2) The LIFO method produces the most meaningful net income because the costs of the most recent purchases are matched against sales. (3) The FIFO method is most likely to approximate actual physical flow because the oldest goods are usually sold first to minimize spoilage and obsolescence. (4) There will be $5,168 additional cash available under LIFO because income taxes are $50,728 under LIFO and $55,896 under FIFO. (5) Gross profit under the average cost method will be: (a) lower than FIFO and (b) higher than LIFO. .

PROBLEM 6-5B

Cost of Goods Available for Sale Date Explanation October 1 Beginning Inventory 9 Purchase 17 Purchase 25 Purchase Total Ending Inventory in Units: Units available for sale Sales (100 + 60 + 110) Units remaining in ending inventory

Units 60 120 70 80 330 330 270 60

Unit Cost $25 26 27 28

Total Cost $1,500 3,120 1,890 2,240 $8,750

Sales Revenue Unit Date Units Price Total Sales October 11 100 $35 $ 3,500 22 60 40 2,400 29 110 40 4,400 270 $10,300

(a) (1) LIFO (i) Ending Inventory October 1 60 @ $25 = $1,500

(iii) Gross Profit Sales revenue Cost of goods sold Gross profit

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$10,300 7,250 $ 3,050

$8,750 1,500 $7,250

(iv) Gross Profit Rate Gross profit $ 3,050 = 29.6% Net sales $10,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-5B (Continued) (2) FIFO (i) Ending Inventory October 25 60 @ $28 = $1,680

(iii) Gross Profit Sales revenue Cost of goods sold Gross profit

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$10,300 7,070 $ 3,230

$ 8,750 1,680 $ 7,070

(iv) Gross Profit Rate Gross profit $ 3,230 = 31.4% Net sales $10,300

(3) Weighted-Average Weighted-average cost per unit:

cost of goods available for sale units available for sale $8,750 330

(i)

Ending Inventory 60 @ $26.515 = $1,591* *rounded to nearest dollar

(iii) Gross Profit Sales revenue Cost of goods sold Gross profit

$10,300 7,159 $ 3,141

= $26.515

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$8,750 1,591 $7,159

(iv) Gross Profit Rate Gross profit $ 3,141 = 30.5% Net sales $10,300

(b) LIFO produces the lowest ending inventory value, gross profit, and gross profit rate because its cost of goods sold is higher than FIFO or average-cost.

PROBLEM 6-6B

(a) (1) To maximize gross profit, Princess Diamonds should sell the diamonds with the lowest cost. Sale Date March 5 March 25

Cost of Goods Sold 150 @ $300 $ 45,000 30 @ $360 10,800 170 @ $360 61,200 230 @ $380 87,400 580 $204,400

Sales Revenue 180 @ $600 $108,000 400 @ $650 260,000

580

$368,000

Gross profit $368,000 – $204,400 = $163,600. (2) To minimize gross profit, Princess Diamonds should sell the diamonds with the highest cost. Sale Date March 5 March 25

Cost of Goods Sold 180 @ $360 $ 64,800 350 @ $380 133,000 20 @ $360 7,200 30 @ $300 9,000 580 $214,000

Sales Revenue 180 @ $600 $108,000 400 @ $650 260,000

580

$368,000

Gross profit $368,000 – $214,000 = $154,000. (b) FIFO Cost of goods available for sale March 1 Beginning inventory 3 Purchase 10 Purchase Goods available for sale Units sold Ending inventory Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

150 @ $300 200 @ $360 350 @ $380 700

$ 45,000 72,000 133,000 $250,000

700 580 120 @ $380

$45,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 6-6B (Continued) Goods available for sale – Ending inventory Cost of goods sold

$250,000 45,600 $204,400

Gross profit: $368,000 – $204,400 = $163,600. (c) LIFO Cost of goods available for sale (from part b) – Ending inventory 120 @ $300 Cost of goods sold

$250,000 36,000 $214,000

Gross profit: $368,000 – $214,000 = $154,000. (d) The choice of inventory method depends on the company’s objectives. Since the diamonds are marked and coded, the company could use specific identification. This could, however, result in “earnings management” by the company because, as shown, it could carefully choose which diamonds to sell to result in the maximum or minimum income. Employing a cost flow assumption, such as LIFO or FIFO, would reduce record-keeping costs. FIFO would result in higher income, but LIFO would reduce income taxes and provide better matching of current sales revenue with current costs.

PROBLEM 6-7B

(a)

Chelsea INC. Condensed Income Statement For the Year Ended December 31, 2022

Sales revenue ........................................... Cost of goods sold Beginning inventory........................... Cost of goods purchased .................. Cost of goods available for sale ....... Ending inventory ................................ Cost of goods sold ............................. Gross profit ............................................... Operating expenses ................................. Income before income taxes .................... Income tax expense (28%) ....................... Net income ................................................ a

FIFO

LIFO

$665,000

35,000 504,500 539,500 133,500a 406,000 259,000 130,000 129,000 36,120 $ 92,880

35,000 504,500 539,500 115,000b 424,500 240,500 130,000 110,500 30,940 $ 79,560

(25,000 @ $4.50) + ( 5,000 @ $4.20) = $133,500. (10,000 @ $3.50) + (20,000 @ $4.00) = $115,000.

(b) Answers to questions: (1) The FIFO method produces the most meaningful inventory amount for the balance sheet because the units are costed at the most recent purchase prices. (2) The LIFO method produces the most meaningful net income because the costs of the most recent purchases are matched against sales. (3) The FIFO method is most likely to approximate actual physical flow because the oldest goods are usually sold first to minimize spoilage and obsolescence.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

(4) There will be $5,180 additional cash available under LIFO because income taxes are $30,940 under LIFO and $36,120 under FIFO. (5) The illusionary gross profit is $18,500 or ($259,000 – $240,500). Under LIFO, Chelsea Inc. has recovered the current replacement cost of the units ($424,500), whereas under FIFO, it has only recovered the earlier costs ($406,000). This means that under FIFO the company must reinvest at least $18,500 of the gross profit to replace the units used. Answer in business letter form: Dear Chelsea Inc. After preparing the comparative condensed income statements for 2022 under FIFO and LIFO methods, we have found the following: The FIFO method produces the most meaningful inventory amount for the balance sheet because the units are costed at the most recent purchase prices. This method is most likely to approximate actual physical flow because the oldest goods are usually sold first to minimize spoilage and obsolescence. The LIFO method produces the most meaningful net income because the costs of the most recent purchases are matched against sales. There will be $5,180 additional cash available under LIFO because income taxes are $30,940 under LIFO and $36,120 under FIFO. There exists an illusionary gross profit of $18,500 ($259,000 – $240,500) under FIFO. Under LIFO, you have recovered the current replacement cost of the units ($424,500) whereas under FIFO you have only recovered the earlier costs ($406,000). This means that under FIFO, the company must reinvest $18,500 of the gross profit to replace the units sold. Sincerely,

*PROBLEM 6-8B (a) Sales: Date January 6 January 9 (return) January 10 January 30 Total sales (1) LIFO Date

150 units @ $40 (10 units @ $40) 60 units @ $45 110 units @ $50

Purchases

$ 6,000 (400) 2,700 5,500 $13,800

Cost of Goods Sold

January 1 January 2 January 6

(100 @ $21) $2,100 (100 @ $21) ( 50 @ $17)

} $2,950

January 9 ( 80 @ $24) $1,920 January 9 January 10 (–10 @ $24) ($ 240)

(–10 @ $17)

($ 170)

January 10

( 60 @ $24)

$1,440

January 23

(100 @ $28) $2,800

January 30

(100 @ $28) ( 10 @ $24)

} $3,040

Balance (160 @ $17) (160 @ $17) (100 @ $21) (110 @ $17) (120 @ $17) ( 80 @ $24) (120 @ $17) ( 70 @ $24) (120 @ $17) ( 10 @ $24) (120 @ $17) ( 10 @ $24) (100 @ $28) (120 @ $17)

$2,720

} $4,820 $1,870

} $3,960 } $3,720 } $2,280

}

$5,080 $2,040

$7,260

(i) Cost of goods sold: = $7,260. (ii) Ending inventory = $2,040. (iii) Gross profit = $13,800 – $7,260 = $6,540

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 6-8B (Continued) (2) FIFO Date

Purchases

Cost of Goods Sold

January 1 January 2 January 6 January 9 January 9

(100 @ $21) $2,100 (150 @ $17)

$2,550

(–10 @ $17)

($ 170)

( 80 @ $24) $1,920

January 10 January 10

(–10 @ $24) ($ 240)

January 23

(100 @ $28) $2,800

( 20 @ $17) ( 40 @ $21)

January 30

( 60 @ $21) ( 50 @ $24)

} $1,180 } $2,460

Balance (160 @ $17) (160 @ $17) (100 @ $21) ( 10 @ $17) (100 @ $21) ( 20 @ $17) (100 @ $21) ( 80 @ $24) ( 20 @ $17) (100 @ $21) ( 70 @ $24) ( 60 @ $21) ( 70 @ $24) ( 60 @ $21) ( 70 @ $24) (100 @ $28) ( 20 @ $24) (100 @ $28)

$2,720

} $4,820 } $2,270

} }

$4,360

$4,120

} $2,940

}

$5,740

} $3,280

$6,020

(i) Cost of goods sold = $6,020. (ii) Ending inventory = $3,280. (iii) Gross profit = $13,800 – $6,020 = $7,780.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 6-8B (Continued) (3) Moving-Average Date January 1 January 2 January 6 January 9 January 9 January 10 January 10 January 23 January 30

Purchases

Cost of goods sold

(160 @ $17) (260 @ $18.538)a (150 @ $18.538) $2,781 (110 @ $18.538) (–10 @ $18.538) ($ 185) (120 @ $18.538) (200 @ $20.72) b (190 @ $20.547) c ( 60 @ $20.547) $1,233 (130 @ $20.547) (230 @ $23.787) d (110 @ $23.787) $2,617 (120 @ $23.787) $6,446

(100 @ $21) $2,100

( 80 @ $24) $1,920 (–10 @ $24) ($ 240) (100 @ $28) $2,800

$4,820 ÷ 260 = $18.538 $4,144 ÷ 200 = $20.72

Balance $2,720 $4,820 $2,039 $2,224 $4,144 $3,904 $2,671 $5,471 $2,854

$3,904 ÷ 190 = $20.547 $5,471 ÷ 230 = $23.787

(i) Cost of goods sold = $6,446. (ii) Ending inventory = $2,854. (iii) Gross profit = $13,800 – $6,446 = $7,354.

*PROBLEM 6-8B (Continued) (b) Gross profit: Sales Cost of goods sold Gross profit Ending inventory

LIFO $13,800 7,260 $ 6,540 $ 2,040

FIFO $13,800 6,020 $ 7,780 $ 3,280

Moving-Average $13,800 6,446 $ 7,354 $ 2,854

In a period of rising costs, the LIFO cost flow assumption results in the highest cost of goods sold and lowest gross profit. FIFO gives the lowest cost of goods sold and highest gross profit. The moving average cost flow assumption results in amounts between the other two. On the balance sheet, FIFO gives the highest ending inventory (representing the most current costs); LIFO gives the lowest ending inventory (representing the oldest costs); and the moving average-cost results in an ending inventory falling between the other two.

*PROBLEM 6-9B (a) (1)

FIFO Date May 1 4 8

Cost of Goods Sold

Purchases (7 @ $150)

$1,050

} $1,810

} $790 (6 @ $170)

$1,020

(3 @ $150) (2 @ $170) (6 @ $185)

(6 @ $170) (6 @ $185) (3 @ $170) (6 @ $185)

} $2,130 } $1,620

} $695 (5 @ $185)

$ 925

$600

$1,360

12 15

(7 @ $150) (3 @ $150) (3 @ $150) (8 @ $170)

(4 @ $150) (8 @ $170)

Balance

$1,110

(3 @ $170)

(3 @ $170) (1 @ $185)

(2)

$510

$1,050 $ 450

MOVING-AVERAGE Date May 1 4 8 12 15 20 25

Purchases (7 @ $150) (8 @ $170) (6 @ $185)

Cost of Goods Sold

Balance

$1,050 (4 @ $150)

$600

(5 @ $164.55)

$823

(3 @ $174.75) (4 @ $174.75)

$524 $699

$1,360 $1,110

( 7 @ $150) ( 3 @ $150) (11 @ $164.55)* ( 6 @ $164.55) (12 @ $174.75)** ( 9 @ $174.75) ( 5 @ $174.75)

*Average-cost = $1,810 ÷ 11 (rounded) **$2,097 ÷ 12

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$1,050 $ 450 $1,810 $ 987 $2,097 $1,573 $ 874

*PROBLEM 6-9B (Continued) (3)

LIFO Date May 1 4 8

Purchases (7 @ $150)

$1,050 (4 @ $150)

(8 @ $170)

(5 @ $170) (6 @ $185)

$600

$1,360

12 15

Cost of Goods Sold

$850

$1,110

(3 @ $185)

$555

(3 @ $185) (1 @ $170)

} $725

Balance (7 @ $150) (3 @ $150) (3 @ $150) (8 @ $170) (3 @ $150) (3 @ $170) (3 @ $150) (3 @ $170) (6 @ $185) (3 @ $150) (3 @ $170) (3 @ $185) (3 @ $150) (2 @ $170)

$1,050 $ 450

} }

} } }

(b) The highest ending inventory is $925 under the FIFO method.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

$1,810 $ 960

$2,070 $1,515 $ 790

*PROBLEM 6-10B

(a)

February $300,000

Net sales .................................................. Cost of goods sold Beginning inventory ....................... $ 4,500 Net purchases................................. $176,800 Add: Freight-in............................... 3,900 Cost of goods purchased .............. 180,700 Cost of goods available for sale .... 185,200 Ending inventory ............................ 20,200 Cost of goods sold .................. 165,000 Gross profit ............................................. $135,000 Gross profit rate =

$135,000 = 45% $300,000

(b) Net sales .............................................................. Less: Estimated gross profit (45% X $250,000) ..................................... Estimated cost of goods sold ............................

$250,000

Beginning inventory ........................................... Net purchases ..................................................... Add: Freight-in ................................................... Cost of goods purchased................................... Cost of goods available for sale ........................ Less: Estimated cost of goods sold ................. Estimated total cost of ending inventory ......................................................... Estimated inventory lost in fire (70% X $24,700) ..............................................

$ 20,200

112,500 $137,500 $139,000 3,000 142,000 162,200 137,500 $ 24,700 $ 17,290

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 6-11B

(a)

Sporting Goods Cost

Beginning inventory Purchases Purchase returns Purchase discounts Freight-in Goods available for sale Less: Net sales Ending inventory at retail

Jewelry and Cosmetics

Retail

$ 47,360 $ 74,000 675,000 1,066,000 (26,000) (40,000) (12,360) 9,000 $693,000 1,100,000 1,000,000 $ 100,000

Cost

Retail

$ 39,440 $ 62,000 741,000 1,158,000 (12,000) (20,000) (2,440) 14,000 $780,000 1,200,000 1,160,000 $ 40,000

Cost-to-retail ratio: Sporting Goods—$693,000 ÷ $1,100,000 = 63%. Jewelry and Cosmetics—$780,000 ÷ $1,200,000 = 65%. Estimated ending inventory at cost: $100,000 X 63% = $63,000—Sporting Goods. $ 40,000 X 65% = $26,000—Jewelry and Cosmetics. (b) Sporting Goods—$95,000 X 60% = $57,000. Jewelry and Cosmetics—$44,000 X 64% = $28,160.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

CHAPTER 7 Fraud, Internal Control, and Cash PROBLEM 7-1B (a) Principles

Application to Granada Theater

Establishment of responsibility.

Only cashiers are authorized to sell tickets. Only the manager and cashier can handle cash.

Segregation of duties.

The duties of receiving cash and admitting customers are assigned to the cashier and to the usher. The manager maintains custody of the cash, and the company accountant records the cash.

Documentation procedures.

Tickets are pre-numbered. Cash count sheets are prepared. Deposit slips are prepared.

Physical controls.

A safe is used for the storage of cash and a machine is used to issue tickets.

Independent internal verification.

Cash counts are made by the manager at the end of each cashier’s shift. Daily comparisons are made by the company treasurer.

Human resource controls.

Shifts are rotated among the cashiers.

(b) Actions by the usher and cashier to misappropriate cash might include: (1) Instead of tearing the tickets, the usher could return the tickets to the cashier who could resell them, and the two could divide the cash. (2) The cashier could issue a lower price ticket than paid for and the usher would admit the customer. The difference between the ticket issued and the cash received could be divided between the usher and cashier. .

PROBLEM 7-2B

(a) July

1 15

Aug. 15

16 31

Petty Cash ................................................ Cash...................................................

100.00

Freight-Out ............................................... Postage Expense ..................................... Entertainment Expense ........................... Miscellaneous Expense ........................... Cash................................................... Cash Over and Short ........................

51.00 20.50 23.10 6.10

Freight-Out ............................................... Charitable Contribution Expense ............ Postage Expense ..................................... Miscellaneous Expense ........................... Cash...................................................

43.50 20.00 20.10 12.30

Freight-Out ............................................... Entertainment Expense ........................... Postage Expense ..................................... Miscellaneous Expense ........................... Cash Over and Short................................ Cash...................................................

40.20 21.00 16.00 19.80 1.00

Petty Cash ................................................ Cash...................................................

50.00

Freight-Out ............................................... Entertainment Expense ........................... Postage Expense ..................................... Cash Over and Short................................ Cash...................................................

74.00 43.20 17.70 2.10

100.00

96.90 3.80

95.90

98.00 50.00

137.00

(b) Petty Cash Date July 1 Aug. 16

Explanation

Ref. CP CP

Debit 100 50

Credit

Balance 100 150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 7-2B (Continued) (c) The internal control features of a petty cash fund include: (1) A custodian who is responsible for the fund. (2) A pre-numbered petty cash receipt (signed by the custodian and the individual receiving payment) is required for each payment from the fund. (3) The treasurer’s office examines all payments and stamps supporting documents to indicate they were paid when the fund is replenished. (4) Surprise counts can be made at any time to determine whether the fund is intact.

PROBLEM 7-3B (a)

DAVANEY GENETICS COMPANY Bank Reconciliation May 31, 2022 Cash balance per bank statement ..................... Add: Deposit in transit ..................................... Bank error—Morray check ......................

$13,332 $2,600 900

3,500 16,832 1,225 $15,607

Less: Outstanding checks ................................ Adjusted cash balance per bank ....................... Cash balance per books ...................................... Add: Collection of note receivable ($4,500 note plus $80 interest less $25 fee) ............................................. Less: NSF check ................................................. Error in May 12 deposit ........................... Error in recording check No. 1181.......... Check printing charge ............................. Adjusted cash balance per books .....................

$13,287 4,555 17,842 $1,308 100 792* 35

2,235 $15,607

*$911 – $119 (b) May 31

31 31 31 31

Cash ................................................................ Miscellaneous Expense ................................. Notes Receivable .................................... Interest Revenue ....................................

4,555 25

Accounts Receivable—Peter Reser .............. Cash ........................................................

1,308

Sales Revenue ................................................ Cash ........................................................

100

Accounts Payable—J. Tallgrass.................... Cash ........................................................

792

Miscellaneous Expense ................................. Cash ........................................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B (Instructor Use Only)

4,500 80 1,308 100 792 35

PROBLEM 7-4B

(a)

PHILLIPS COMPANY Bank Reconciliation November 30, 2022 Cash balance per bank statement ................. Add: Deposits in transit ............................... Less: Outstanding checks No. 2451............................................ No. 2472............................................ No. 2478............................................ No. 2482............................................ No. 2484............................................ No. 2485............................................ No. 2487............................................ No. 2488............................................ Adjusted cash balance per bank ...................

$ 9,100 2,541 11,641 $700 270 300 350 460 525 210 635

Cash balance per books................................. Add: Note collected by bank ($2,300 note plus $91 interest less $16 fee) ......................................... Less: Check printing charge ......................... Error in recording check No. 2479 ....... Error in 11-21 deposit ($1,642 – $1,624) ............................... Adjusted cash balance per books .................

3,450 $ 8,191 $ 5,958 2,375 8,333

$ 34 90* 18

142 $ 8,191

*$980 – $890

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 7-4B (Continued) (b) Nov. 30

30 30 30

Cash .......................................................... Miscellaneous Expense ........................... Notes Receivable .............................. Interest Revenue ...............................

2,375 16

Miscellaneous Expense ........................... Cash ...................................................

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

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

2,300 91 34 90

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 7-5B

(a)

GAMEL COMPANY Bank Reconciliation October 31, 2022 Cash balance per bank statement .................................... Plus: Undeposited receipts .............................................

$15,313.00 3,226.18 18,539.18

Less: Outstanding checks No. 62 183 284

Amount $107.74 127.50 215.26

No. 862 863 864

Amount $132.10 192.78 140.49 ...................

915.87

Adjusted cash balance per bank ......................................

$17,623.31

Cash balance per books.................................................... Add: Bank credit (collection of note receivable) ........... Adjusted balance per books (before theft) ...................... Less: Theft ........................................................................ Adjusted cash balance per books ....................................

$18,608.81 460.00 19,068.81 1,445.50* $17,623.31

*$19,068.81 – $17,623.31 (b) The cashier attempted to cover the theft of $1,445.50 by: 1.

Not listing as outstanding three checks totaling $450.50 (No. 62, $107.74; No. 183, $127.50; and No. 284, $215.26).

Underfooting the outstanding checks listed by $75.00 (The correct total is $465.37.)

Subtracting the $460 bank credit from the book balance instead of adding it to the book balance, thereby concealing $920 of the theft.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 7-5B (Continued) (c) 1.

The principle of independent internal verification has been violated because the cashier prepared the bank reconciliation.

The principle of segregation of duties has been violated because the cashier had access to the accounting records and also prepared the bank reconciliation.

CHAPTER 8 Accounting for Receivables PROBLEM 8-1B

(a) 1. 2. 3. 4. 5.

Accounts Receivable ................................... Sales Revenue ......................................

2,600,000

Sales Returns and Allowances ................... Accounts Receivable ...........................

45,000

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

2,250,000

Allowance for Doubtful Accounts............... Accounts Receivable ...........................

10,000

Accounts Receivable ................................... Allowance for Doubtful Accounts ...........................................

3,000

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

3,000

2,600,000 45,000 2,250,000 10,000

3,000 3,000

(b) Bal. (1) (5) Bal.

Accounts Receivable 250,000 (2) 45,000 2,600,000 (3) 2,250,000 3,000 (4) 10,000 (5) 3,000 545,000

Allowance for Doubtful Accounts (4) 10,000 Bal. 15,000 (5) 3,000

Bal.

8,000

(c) Balance before adjustment [see (b)] .................................... Balance needed ..................................................................... Adjustment required ..............................................................

$ 8,000 22,000 $14,000

The journal entry would therefore be as follows:

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

Bad Debt Expense ............................................ Allowance for Doubtful Accounts ...........

(d)

14,000

$2,555,000 $2,600,000 – $45,000 = = 6.74 times $379, 000 ($523,000 + $235,000) ÷ 2

365/6.74 = 54.2 days

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

14,000

PROBLEM 8-2B

(a) $22,150. (b) $20,000 ($1,000,000 X 2%). (c) $14,450 [($369,000 X 5%) – $4,000]. (d) $20,450 [($369,000 X 5%) + $2,000]. (e) There are two major weaknesses with the direct write-off method. First, it does not match expenses with the associated revenues. Second, the accounts receivable are not stated at cash realizable value at the balance sheet date.

PROBLEM 8-3B (a) Dec. 31

Bad Debt Expense ................................... Allowance for Doubtful Accounts ($47,970 – $16,000).......................

31,970 31,970

(a) & (b)

Bad Debt Expense Bal. (a)

31,970

Bal.

31,970

(b) Mar. 1

May 1 1

Allowance for Doubtful Accounts (b) 1,900 Bal. 16,000 (a) 31,970 (b) 1,900 Bal. 47,970

2022 (1) Allowance for Doubtful Accounts ............ Accounts Receivable ......................... (2) Accounts Receivable ................................ Allowance for Doubtful Accounts ....... Cash ........................................................... Accounts Receivable ......................... 2022 Bad Debt Expense ..................................... Allowance for Doubtful Accounts ($38,300 + $2,000) ..........................

1,900 1,900 1,900 1,900 1,900 1,900

40,300 40,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 8-4B

(a)

Total estimated bad debts

Total

0–30

Number of Days Outstanding 31–60 61–90 91–120 Over 120

Accounts receivable $375,000 $220,000 $90,000 $40,000 $10,000 $15,000 % uncollectible 1% 4% 5% 8% 20% Estimated Bad debts $ 11,600 $ 2,200 $ 3,600 $ 2,000 $ 800 $ 3,000

(b) Bad Debt Expense .................................................... Allowance for Doubtful Accounts ($11,600 – $3,000)............................................

8,600

(c) Allowance for Doubtful Accounts ........................... Accounts Receivable .........................................

1,600

(d) Accounts Receivable ................................................ Allowance for Doubtful Accounts.....................

700

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

700

8,600 1,600 700 700

(e) When an allowance account is used, an adjusting journal entry is made at the end of each accounting period. This entry satisfies the expense recognition principle by recording the bad debt expense in the period in which the sales occur.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 8-5B

(a)

(b)

Dec. 31

Bad Debt Expense ($13,500 – $1,100).......................... Allowance for Doubtful Accounts ................................ Bad Debt Expense ($13,500 + $1,100) ......................... Allowance for Doubtful Accounts ................................

12,400 12,400

14,600 14,600

(c) Allowance for Doubtful Accounts............................. Accounts Receivable .........................................

3,200

(d) Bad Debt Expense ..................................................... Accounts Receivable .........................................

3,200

(e) The advantages of the allowance method over the direct write-off method are: (1) It attempts to match bad debt expense related to uncollectible accounts receivable with sales revenues on the income statement. (2) It attempts to show the cash realizable value of the accounts receivable on the balance sheet.

PROBLEM 8-6B

(a) July 5 14

Accounts Receivable ................................ Sales Revenue ...................................

7,200

Cash ($1,000 – $30) ................................... Service Charge Expense ($1,000 X 3%) ......................................... Sales Revenue ...................................

970

Cash ........................................................... Notes Receivable ............................... Interest Receivable ($12,000 X 7% X 45/360) ................. Interest Revenue ($12,000 X 7% X 15/360) .................

12,140

Accounts Receivable—Masasi ................. Notes Receivable ............................... Interest Receivable ($20,000 X 9% X 36/360) ................. Interest Revenue ($20,000 X 9% X 24/360) .................

20,300

Interest Receivable ($15,000 X 8% X 1/12) ............................ Interest Revenue ................................

7,200

30 1,000 12,000 105 35 20,000 180 120 100 100

(b) Notes Receivable Date Explanation July 1 Balance 15 24

Ref.

Debit

Credit 12,000 20,000

Balance 47,000 35,000 15,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 8-6B (Continued) Accounts Receivable Date Explanation July 5 24 Interest Receivable Date Explanation July 1 Balance 15 24 31 Adjusting

Ref.

Debit 7,200 20,300

Credit

Balance 7,200 27,500

Ref.

Debit

Credit

Balance 285 180 0 100

105 180 100

(c) Current assets Notes receivable ............................................................... Accounts receivable ........................................................ Interest receivable ............................................................ Total receivables.......................................................

$15,000 27,500 100 $42,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 8-7B Jan.

Feb. 2

12 26 Apr.

5 12

June 2

July

Accounts Receivable—Motte Company ........................................................ Sales Revenue............................................

10,800 10,800

Notes Receivable ............................................... Accounts Receivable—Motte Company.................................................

10,800

Notes Receivable ............................................... Sales Revenue............................................

13,500

Accounts Receivable—Benedict Co. ............... Sales Revenue............................................

9,000

Notes Receivable ............................................... Accounts Receivable—Benedict Co. .......

9,000

Cash ($13,500 + $180) ....................................... Notes Receivable ....................................... Interest Revenue ($13,500 X 8% X 2/12) .............................

13,680

Cash ($10,800 + $324) ....................................... Notes Receivable ....................................... Interest Revenue ($10,800 X 9% X 4/12) .............................

11,124

Accounts Receivable—Benedict Co. ($9,000 + $180) ............................................... Notes Receivable ....................................... Interest Revenue ($9,000 X 8% X 3/12) ............................... Notes Receivable ............................................... Sales Revenue ...........................................

10,800 13,500 9,000 9,000 13,500 180 10,800 324 9,180 9,000 180 12,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

12,000

CHAPTER 9 Plant Assets, Natural Resources, and Intangible Assets PROBLEM 9-1B

Item 1 2 3 4 5 6 7 8 9 10

Land ($ 5,000)

Buildings

Other Accounts $ 7,500

Property Tax Expense

18,000

Land Improvements

6,000

Land Improvements

$490,000 19,000 100,000 9,000 ( 27,000) ( (3,500) ($128,500)

$518,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-2B

(a)

Accumulated Depreciation 12/31

Year

Computation

2020 2021 2022 2023

MACHINE 1 $100,000 X 10% = $10,000 $100,000 X 10% = $10,000 $100,000 X 10% = $10,000 $100,000 X 10% = $10,000

$ 10,000 20,000 30,000 40,000

2021 2022 2023

MACHINE 2 $180,000 X 25% = $45,000 $135,000 X 25% = $33,750 $101,250 X 25% = $25,313

$ 45,000 78,750 104,063

2022 2023

MACHINE 3 2,000 X ($110,000 ÷ 25,000) = $8,800 4,500 X ($110,000 ÷ 25,000) = $19,800

(b)

8,800 28,600

Year

Depreciation Computation

Expense

(1)

2021

MACHINE 2 $180,000 X 25% X 8/12 = $30,000

$30,000

(2)

2022

$150,000 X 25% = $37,500

$37,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-3B

(a) (1) Purchase price ................................................................. Sales tax ........................................................................... Shipping costs ................................................................. Insurance during shipping .............................................. Installation and testing .................................................... Total cost of machine ...............................................

$ 58,000 2,750 100 75 75 $ 61,000

Equipment .......................................................... Cash ............................................................

61,000

(2) Recorded cost .................................................................. Less: Salvage value ........................................................ Depreciable cost .............................................................. Years of useful life ........................................................... Annual depreciation ................................................. Depreciation Expense ........................................ Accumulated Depreciation— Equipment ................................................

14,000 14,000

(b) (1) Recorded cost .................................................................. Less: Salvage value ........................................................ Depreciable cost .............................................................. Years of useful life ........................................................... Annual depreciation ................................................. (2) Year 2022 2023 2024 2025

Book Value at Beginning of Year $120,000 60,000 30,000 15,000

DDB Rate *50%* *50%* *50%* *50%*

$ 61,000 5,000 56,000 ÷ 4 $14,000

Annual Depreciation Expense $60,000 30,000 15,000 5,000**

$120,000 10,000 $110,000 ÷ 4 $ 27,500

Accumulated Depreciation $60,000 90,000 105,000 110,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-3B (Continued) (3) Depreciation cost per unit = ($120,000 – $10,000)/25,000 units = $4.40 per unit. Annual Depreciation Expense 2022: 2023: 2024: 2025:

$4.40 X 5,500 = $24,200 4.40 X 7,000 = 30,800 4.40 X 8,000 = 35,200 4.40 X 4,500 = 19,800

(c) The units-of-activity method reports the lowest amount of depreciation expense the first year while the declining-balance method reports the highest. In the fourth year, the declining-balance method reports the lowest amount of depreciation expense while the straight-line method reports the highest. These facts occur because the declining-balance method is an accelerated depreciation method in which the largest amount of depreciation is recognized in the early years of the asset’s life. If the straight-line method is used, the same amount of depreciation expense is recognized each year. Therefore, in the early years less depreciation expense will be recognized under the straight-line method than under the decliningbalance method while more will be recognized in the later years. The amount of depreciation expense recognized using the units-of-activity method is dependent on production, so this method could recognize more or less depreciation expense than the other two methods in any year depending on output. No matter which of the three methods is used, the same total amount of depreciation expense will be recognized over the four-year period.

PROBLEM 9-4B

Year 2020 2021 2022 2023 2024 2025 2026 (a)

Depreciation Expense $45,000(a) 45,000 36,000(b) 36,000 36,000 48,500(c) 48,500

$300,000 – $30,000 = $45,000 6 years

(b) Book value – Salvage value

Remaining useful life (c)

Accumulated Depreciation $ 45,000 90,000 126,000 162,000 198,000 246,500 295,000

$210,000 – $30,000 = $36,000 5 years

$102,000 – $5,000 = $48,500 2 years

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-5B

(a) Apr. 1 May 1

Land................................................. Cash .........................................

1,200,000

Depreciation Expense .................... Accumulated Depreciation— Equipment ........................... ($450,000 X 1/10 X 4/12)

15,000

Cash ................................................ Accumulated Depreciation— Equipment ................................... Equipment ............................... Gain on Disposal of Plant Assets ........................

260,000

Cost Accum. depreciation— equipment

$450,000

1,200,000

15,000

195,000 450,000 5,000

195,000

[($450,000 X 1/10 X 4) + $15,000]

Book value Cash proceeds Gain on disposal June 1

July 1 Dec. 31

255,000 260,000 $ 5,000

Cash ................................................ Land ......................................... Gain on Disposal of Plant Assets ........................

1,000,000

Equipment ....................................... Cash .........................................

1,500,000

Depreciation Expense .................... Accumulated Depreciation— Equipment ........................... ($300,000 X 1/10)

30,000

Accumulated Depreciation— Equipment ................................... Equipment ...............................

340,000 660,000 1,500,000

30,000

300,000 300,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-5B (Continued) Cost Accum. depreciation— equipment

$300,000 300,000

($300,000 X 1/10 X 10)

Book value (b) Dec. 31

Depreciation Expense ..................... Accumulated Depreciation— Buildings .............................. ($20,000,000 X 1/50)

400,000

Depreciation Expense ..................... Accumulated Depreciation— Equipment ............................

3,000,000

400,000

3,000,000

($29,250,000* X 1/10) $2,925,000 [($1,500,000 X 1/10) X 6/12] 75,000

$3,000,000 *($30,000,000 – $450,000 – $300,000)

(c)

TORREALBA COMPANY Partial Balance Sheet December 31, 2023 Plant Assets* Land ..................................................... Buildings.............................................. Less: Accumulated depreciation— buildings .................................. Equipment ........................................... Less: Accumulated depreciation— equipment ................................ Total plant assets ........................

$ 2,860,000 $20,000,000 8,400,000 30,750,000

11,600,000

6,550,000

24,200,000 $38,660,000

*See T-accounts which follow.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-5B (Continued)

Bal. Apr. 1 Bal.

Land 2,000,000 June 1 1,200,000 2,860,000

Bal. Bal.

Buildings 20,000,000 20,000,000

340,000

Accumulated Depreciation—Buildings Bal. 8,000,000 Dec. 31 adj. 400,000 Bal. 8,400,000

Bal. July 1 Bal.

Equipment 30,000,000 May 1 1,500,000 Dec. 31 30,750,000

450,000 300,000

Accumulated Depreciation—Equipment May 1 195,000 Bal. 4,000,000 Dec. 31 300,000 May 1 15,000 Dec. 31 30,000 Dec. 31 adj. 3,000,000 Bal. 6,550,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-6B

(a) Accumulated Depreciation—Equipment .................. Loss on Disposal of Plant Assets ............................ Equipment ..........................................................

26,000 19,000

(b) Cash............................................................................ Accumulated Depreciation—Equipment .................. Gain on Disposal of Plant Assets ..................... Equipment ..........................................................

29,000 26,000

(c) Cash............................................................................ Accumulated Depreciation—Equipment .................. Loss on Disposal of Plant Assets ............................ Equipment ..........................................................

10,000 26,000 9,000

45,000

10,000 45,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

45,000

PROBLEM 9-7B

(a) Jan. 2 Jan.– June Sept. 1 Oct. 1

(b) Dec. 31

Patents .................................................. Cash ............................................... Research and Development Expense ............................................ Cash ...............................................

36,000 36,000 230,000 230,000

Advertising Expense ............................ Cash ...............................................

125,000

Copyrights ............................................ Cash ...............................................

300,000

Amortization Expense .......................... Patents........................................... [($100,000 X 1/10) + ($36,000 X 1/9)]

14,000

Amortization Expense .......................... Copyrights ..................................... [($60,000 X 1/10) + ($300,000 X 1/50 X 3/12)]

7,500

125,000 300,000

14,000

(c) Intangible Assets Patents ($136,000 cost – $24,000 amortization) (1) ............. Copyrights ($360,000 cost – $31,500 amortization) (2) ....... Total intangible assets ...................................................

7,500

$112,000 328,500 $440,500

(1) Cost ($100,000 + $36,000); amortization ($10,000 + $14,000). (2) Cost ($60,000 + $300,000); amortization ($24,000 + $7,500). (d) The intangible assets of the company consist of two patents and two copyrights. One patent with a total cost of $136,000 is being amortized in two segments ($100,000 over 10 years and $36,000 over 9 years); the other patent was obtained at no recordable cost. A copyright with a cost of $60,000 is being amortized over 10 years; the other copyright with a cost of $300,000 is being amortized over 50 years. .

PROBLEM 9-8B

Research and Development Expense ...................... Patents ................................................................

110,000

Patents ....................................................................... Amortization Expense [$16,000 – ($50,000 X 1/10)] ...........................

11,000

Goodwill ..................................................................... Amortization Expense........................................

2,000

110,000

11,000

2,000

Note: Goodwill should not be amortized because it has an indefinite life unlike Patents.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 9-9B

(a) Asset turnover

Auer Corp.

Marte Corp.

$1,050,000 = 1.05 times $1,000,000

$945,000 = .90 times $1,050,000

(b) Based on the asset turnover, Auer Corp. is more effective in using assets to generate sales. Its asset turnover is 17% higher than Marte’s asset turnover ratio.

CHAPTER 10 Liabilities PROBLEM 10-1B

(a) Jan. 1 5

12 14 20

(b) Jan. 31

Cash ............................................................. Notes Payable......................................

30,000

Cash ............................................................. Sales Revenue ($11,130 ÷ 106%) ........ Sales Taxes Payable ($11,130 – $10,500) ..........................

11,130

Unearned Service Revenue ........................ Service Revenue .................................

8,000

Sales Taxes Payable ................................... Cash .....................................................

5,000

Accounts Receivable .................................. Sales Revenue ..................................... Sales Taxes Payable (750 X $44 X 6%) ..............................

34,980

Cash ............................................................. Sales Revenue ($16,536 ÷ 106%) ........ Sales Taxes Payable ($16,536 – $15,600) ..........................

16,536

Interest Expense ................................. Interest Payable ($30,000 X 6% X 1/12) ..............

150

30,000 10,500 630 8,000 5,000 33,000 1,980 15,600 936

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

150

*PROBLEM 10-1B (Continued) (c) Current liabilities Notes payable ............................................................ Accounts payable...................................................... Unearned service revenue ($12,000 – $8,000) ......... Sales taxes payable ($630 + $1,980 + $936) ............ Interest payable ......................................................... Total current liabilities.......................................

$30,000 35,000 4,000 3,546 150 $72,696

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 10-2B

(a) Jan. Feb.

2 1

Mar. 31

Apr.

July

Sept. 30

Oct.

Dec.

Dec. 31

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

40,000

Accounts Payable ................................... Notes Payable ..................................

40,000

Interest Expense ($40,000 X 9% X 2/12) .......................... Interest Payable ...............................

40,000 40,000 600 600

Notes Payable.......................................... Interest Payable ....................................... Cash..................................................

40,000 600

Equipment................................................ Cash.................................................. Notes Payable ..................................

51,000

Interest Expense ($40,000 X 10% X 3/12) ........................ Interest Payable ...............................

40,600 11,000 40,000 1,000 1,000

Notes Payable.......................................... Interest Payable ....................................... Cash..................................................

40,000 1,000

Cash ......................................................... Notes Payable ..................................

15,000

Interest Expense ($15,000 X 8% X 1/12) .......................... Interest Payable ...............................

41,000 15,000 100

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

100

PROBLEM 10-2B (Continued) (b) 4/1 10/1

4/1 10/1

3/31 9/30 12/31 12/31 Bal.

Notes Payable 40,000 2/1 40,000 7/1 12/1 12/31 Bal.

40,000 40,000 15,000 15,000

Interest Payable 600 3/31 1,000 9/30 12/31 12/31 Bal.

600 1,000 100 100

Interest Expense 600 1,000 100 1,700

(c) Current liabilities Notes payable ................................................. Interest payable ..............................................

$15,000 100

$15,100

(d) Total interest is $1,700.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 10-3B

(a) June 1 (b) Dec. 31

2022 Cash .................................................. Bonds Payable .......................... Interest Expense ............................... Interest Payable ($3,000,000 X 9% X 7/12) .......

3,000,000 3,000,000 157,500 157,500

157,500

Long-term Liabilities Bonds payable due 2022...........................

3,000,000

(d) June 1

(e) Dec. 31

(f) Jan. 1

2023 Interest Payable ................................ Interest Expense ($3,000,000 X 9% X 5/12) .............. Cash ........................................... Interest Expense ............................... Interest Payable ($3,000,000 X 9% X 7/12) ........ 2024 Interest Payable ................................ Cash ........................................... Bonds Payable .................................. Loss on Bond Redemption .............. Cash ($3,000,000 X 1.02)...........

157,500 112,500 270,000 157,500 157,500

157,500 157,500 3,000,000 60,000 3,060,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 10-4B

(a) Jan. 1

2022 Cash ($800,000 X 1.05) ....................... Bonds Payable ............................ Premium on Bonds Payable .......

840,000

(b) Long-term Liabilities Bond payable, due 2029............................... $800,000 Add: Premium on bonds payable............... 36,000 (c) Jan. 1

2023 Bonds Payable .................................... $800,000 Premium on Bonds Payable .............. 36,000 Loss on Bond Redemption ................ 4,000* Cash ($800,000 X 1.05) ................

800,000 40,000

$836,000

840,000

*($840,000 – $832,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 10-5B

(a)

Annual Interest Period Issue Date 2023 2024 2025 2026

(b) Dec. 31

Dec. 31

Cash Payment

Interest Expense

Reduction of Principal

$119,224 119,224 119,224 119,224

$64,000 59,582 54,811 49,658

$55,224 59,642 64,413 69,566

2022 Cash ..................................................... Mortgage Payable ........................

800,000

2023 Interest Expense ................................. Mortgage Payable................................ Cash..............................................

64,000 55,224

(c)

Principal Balance $800,000 744,776 685,134 620,721 551,155

800,000

119,224 12/31/2023

Current Liabilities Current portion of mortgage payable

$ 59,642

Long-term Liabilities Mortgage payable due 2032

$685,134 *

*($744,776 – $59,642)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-6B

(a)

2022 Jan. 1

Cash ($6,000,000 X 96%) .................. Discount on Bonds Payable ............ Bonds Payable ..........................

5,760,000 240,000 6,000,000

(b) See below (c)

2022 Dec. 31

Interest Expense ............................... Discount on Bonds Payable ($240,000 ÷ 20) ......... Interest Payable ($6,000,000 X 8%)...................

492,000 12,000 480,000

2023 Jan. 1 Dec. 31

Interest Payable ............................... Cash ..........................................

480,000

Interest Expense ............................... Discount on Bonds Payable ................................... Interest Payable.........................

492,000

480,000

12,000 480,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-6B (Continued) (d) Current Liabilities Interest payable ........................................

$ 480,000

Long-term Liabilities Bonds payable due 2042 ......................... Less: Discount on bonds payable .........

$6,000,000 216,000 $5,784,000

*PROBLEM 10-6B (Continued)

(b) Annual Interest Periods Issue date 2022 2023 2024 2025

(A) Interest to Be Paid (8% X $6,000,000) $480,000 480,000 480,000 480,000

(B) (C) (D) (E) Interest Expense Discount Unamortized Bond to Be Recorded Amortization Discount Carrying Value (A) + (C) ($240,000 ÷ 40) (D) – (C) [$6,000,000 – (D)] $492,000 492,000 492,000 492,000

$12,000 12,000 12,000 12,000

$240,000 228,000 216,000 204,000 192,000

$5,760,000 5,772,000 5,784,000 5,796,000 5,808,000

*PROBLEM 10-7B

(a) Jan. 1

Dec. 31

(b) Jan. 1

Dec. 31

Cash ($4,000,000 X 103%) ................. Premium on Bonds Payable ...... Bonds Payable ...........................

4,120,000

Interest Expense ................................ Premium on Bonds Payable ($120,000 ÷ 10) ............................... Interest Payable ($4,000,000 X 7%) ...................

268,000

Cash ($4,000,000 X 96%) ................... Discount on Bonds Payable ............. Bonds Payable ...........................

3,840,000 160,000

Interest Expense ................................ Discount on Bonds Payable ($160,000 ÷ 10)........................ Interest Payable .........................

296,000

120,000 4,000,000

12,000 280,000

4,000,000

16,000 280,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-7B (Continued) (c) Premium Current Liabilities Interest payable ....................................... Long-term Liabilities Bonds payable, due 2032........................ Add: Premium on bonds payable .........

$ 280,000 $4,000,000 108,000

4,108,000

Discount Current Liabilities Interest payable ....................................... Long-term Liabilities Bonds payable, due 2032........................ Less: Discount on bonds payable ........

$ 280,000 $4,000,000 144,000

3,856,000

*PROBLEM 10-8B

(a)

2023 Jan. 1

(b) Dec. 31

Interest Payable ................................. Cash ............................................

216,000

Interest Expense ................................ Discount on Bonds Payable ($90,000 ÷ 10) ........... Interest Payable ($2,400,000 X .09) ...................

225,000

(c)

216,000**

9,000** 216,000**

2024 Jan. 1

Bonds Payable ................................... Loss on Bond Redemption ............... Discount on Bonds Payable ...... Cash ($800,000 X 102%) ............

800,000 43,000 27,000** 816,000**

*($90,000 – $9,000) X 1/3 = $27,000

(d) Dec. 31

Interest Expense ................................ Discount on Bonds Payable ...... Interest Payable .........................

150,000 6,000** 144,000**

*($90,000 – $9,000) X 2/3 = $54,000; *($54,000 ÷ 9 = $6,000 or *($9,000 X 2/3 = $6,000 **($2,400,000 – $800,000 = $1,600,000; **($1,600,000 X 9% = $144,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-9B

(a) Jan. 1

(b)

2022 Cash................................................. Discount on Bonds Payable .......... Bonds Payable ........................

4,219,600 280,400 4,500,000

WITHERSPOON SATELLITES Bond Discount Amortization Effective-Interest Method—Annual Interest Payments 9% Bonds Issued at 10% (A) Annual Interest Interest to Be Periods Paid Issue date 1 $405,000 2 405,000 3 405,000

(d) Jan. 1 (e) Dec. 31

(B) (C) (D) (E) Interest Discount UnamorBond Expense Amortized Carrying to Be tization Discount Value Recorded (B) – (A) (D) – (C) ($4,500,000 – D) $280,400 $4,219,600 $421,960 $16,960 263,440 4,236,560 423,656 18,656 244,784 4,255,216 425,522 20,522 224,262 4,275,738

Interest Expense ($4,219,600 X 10%) ...................... Discount on Bonds Payable ..... Interest Payable ($4,500,000 X 9%) ................ 2023 Interest Payable .............................. Cash ......................................... Interest Expense ($4,236,560 X 10%) ...................... Discount on Bonds Payable ..... Interest Payable.......................

421,960 16,960 405,000

405,000 405,000 423,656 18,656 405,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-10B

(a) (1) July 1

(2) Dec. 31

(3)

2022 Cash ............................................. 4,543,627 Bonds Payable..................... Premium on Bonds Payable............................. Interest Expense ($4,543,627 X 8%) .................... Premium on Bonds Payable ....... Interest Payable ($4,000,000 X 10%)...........

400,000

Interest Expense [($4,543,627 – $36,510) X 8%] .... Premium on Bonds Payable ....... Interest Payable ...................

360,569 39,431

(b) Bonds payable ................................................... Add: Premium on bonds payable ....................

4,000,000 467,686*

(4) Dec. 31

543,627

363,490 36,510

2023 Interest Payable ........................ Cash .....................................

Jan. 1

4,000,000

400,000

4,467,686

*($543,627 – $36,510 – $39,431)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 10-10B (Continued) (c) Dear

Thank you for asking me to clarify some points about the bonds issued by Ashlock Chemical Company. (1) The amount of interest expense reported for 2023 related to these bonds is $360,569. (2) When the bonds are sold at a premium, the effective-interest method will result in more interest expense reported than the straight-line method in 2023. Straight-line interest expense for 2023 is $345,637 [$400,000 – $54,363)]. If you have other questions, please contact me. Sincerely,

CHAPTER 11 Corporations: Organization, Stock Transactions, and Stockholders’ Equity PROBLEM 11-1B

(a) Jan. 10

Mar. 1

Apr. 1

May 1

Aug. 1

Cash (100,000 X $3) ................................ Common Stock (100,000 X $2) ....... Paid-in Capital in Excess of Stated Value—Common Stock (100,000 X $1) ....................

300,000

Cash (10,000 X $55) ................................ Preferred Stock (10,000 X $40) ....... Paid-in Capital in Excess of Par—Preferred Stock (10,000 X $15) ..............................

550,000

Land ......................................................... Common Stock (25,000 X $2) ......... Paid-in Capital in Excess of Stated Value—Common Stock ($75,000 – $50,000) ...........

75,000

Cash (75,000 X $4) .................................. Common Stock (75,000 X $2) ......... Paid-in Capital in Excess of Stated Value—Common Stock (75,000 X $2) ......................

300,000

Organization Expense ............................ Common Stock (10,000 X $2) ......... Paid-in Capital in Excess of Stated Value—Common Stock ($50,000 – $20,000) ...........

50,000

200,000 100,000 400,000 150,000 50,000 25,000 150,000 150,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

20,000 30,000

Sept. 1

(5,000 X $4) Nov. 1

Cash (5,000 X $6) .................................... Common Stock (5,000 X $2)............ Paid-in Capital in Excess of Stated Value—Common Cash (2,000 X $60) .................................. Preferred Stock (2,000 X $40) ......... Paid-in Capital in Excess of Par—Preferred Stock (2,000 X $20)................................

30,000 10,000 Stock 20,000 120,000 80,000 40,000

(b) Preferred Stock Date Explanation Mar. 1 Nov. 1

Ref. J1 J1

Debit

Credit 400,000 80,000

Balance 400,000 480,000

Common Stock Date Explanation Jan. 10 Apr. 1 May 1 Aug. 1 Sept. 1

Ref. J1 J1 J1 J1 J1

Debit

Credit 200,000 50,000 150,000 20,000 10,000

Balance 200,000 250,000 400,000 420,000 430,000

Credit 150,000 40,000

Balance 150,000 190,000

Paid-in Capital in Excess of Stated Value—Common Stock Date Explanation Ref. Debit Credit Jan. 10 J1 100,000 Apr. 1 J1 25,000 May 1 J1 150,000 Aug. 1 J1 30,000 Sept. 1 J1 20,000

Balance 100,000 125,000 275,000 305,000 325,000

Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Mar. 1 J1 Nov. 1 J1

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

(c)

MENDOZA CORPORATION Paid-in capital Capital stock 6% Preferred stock, $40 par value, 20,000 shares authorized, 12,000 shares issued and outstanding .............................. Common stock, no par, $2 stated value, 500,000 shares authorized, 215,000 shares issued and outstanding ............................. Total capital stock ...................... Additional paid-in capital In excess of par— preferred stock .............................. In excess of stated value— common stock ............................... Total additional paid-in capital ..................................... Total paid-in capital ...................

$ 480,000

430,000 910,000 $190,000 325,000 515,000 $1,425,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-2B

(a) Mar. 1 June 1

Sept. 1

Dec. 1

Treasury Stock (5,000 X $7) ..................... Cash ...................................................

35,000

Cash (1,000 X $10) .................................... Treasury Stock (1,000 X $7) .............. Paid-in Capital from Treasury Stock (1,000 X $3) ..........................

10,000

Cash (2,000 X $9) ...................................... Treasury Stock (2,000 X $7) .............. Paid-in Capital from Treasury Stock (2,000 X $2) ..........................

18,000

Cash (1,000 X $5) ...................................... Paid-in Capital from Treasury Stock (1,000 X $2) ............................................ Treasury Stock (1,000 X $7) ..............

5,000

Income Summary ...................................... Retained Earnings ..........................

80,000

35,000 7,000 3,000 14,000 4,000

2,000 7,000 80,000

(b) Paid-in Capital from Treasury Stock Date Explanation Ref. June 1 J12 Sept. 1 J12 Dec. 1 J12

Debit

Credit 3,000 4,000

Balance 3,000 7,000 5,000

Credit

Balance 35,000 28,000 14,000 7,000

2,000

Treasury Stock Date Mar. June Sept. Dec.

Explanation 1 1 1 1

Ref. J12 J12 J12 J12

Debit 35,000

7,000 14,000 7,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-2B (Continued) Retained Earnings Date Explanation Jan. 1 Balance Dec. 31

(c)

Ref.

Debit

J12

Credit 80,000

Balance 100,000 180,000

HAWTHORNE CORPORATION Stockholders’ equity Paid-in capital Capital stock Common stock, $1 par, 400,000 shares issued and 399,000 outstanding............... Additional paid-in capital In excess of par— common stock........................ From treasury stock .................. Total additional paid-in capital .............................. Total paid-in capital ............ Retained earnings ..................................... Total paid-in capital and retained earnings............ Less: Treasury stock (1,000 shares at cost) ............................................ Total stockholders’ equity...............................

$ 400,000 $500,000 5,000 505,000 905,000 180,000 1,085,000 (7,000) $1,078,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-3B

(a) Feb.

Mar. 20 June 14

Sept. 3

Dec. 31

Cash....................................................... Common Stock (3,000 X $5) ......... Paid-in Capital in Excess of Stated Value—Common Stock ..........................................

25,500

Treasury Stock (1,500 X $8) ................. Cash ...............................................

12,000

Cash....................................................... Paid-in Capital from Treasury Stock .......................... Treasury Stock (4,000 X $8) ..........

36,000

Patents .................................................. Common Stock (2,000 X $5) ......... Paid-in Capital in Excess of Stated Value—Common Stock ..........................................

19,000

Income Summary .................................. Retained Earnings .........................

350,000

15,000 10,500 12,000

4,000 32,000 10,000 9,000 350,000

(b) Preferred Stock Date Explanation Jan. 1 Balance

Common Stock Date Explanation Jan. 1 Balance Feb. 1 Sept. 3

Ref.

Debit

Credit

Balance 300,000

Ref.

Debit

Credit

Balance 1,000,000 1,015,000 1,025,000

J1 J1

15,000 10,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-3B (Continued) Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Jan. 1 Balance

Credit

Balance 20,000

Paid-in Capital in Excess of Stated Value—Common Stock Date Jan. Feb. Sept.

1 1 3

Explanation Balance

Ref.

Debit

J1 J1

Credit 10,500 9,000

Balance 425,000 435,500 444,500

Paid-in Capital from Treasury Stock Date June 14

Explanation

Retained Earnings Date Explanation Jan. 1 Balance Dec. 31

Ref. J1

Debit

Credit 4,000

Balance 4,000

Ref.

Debit

Credit

Balance 488,000 838,000

350,000

Treasury Stock Date Jan. 1 Mar. 20 June 14

Explanation Balance

Ref.

Debit

J1 J1

12,000

Credit

32,000

Balance 40,000 52,000 20,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-3B (Continued) (c)

LORE CORPORATION Stockholders’ equity Paid-in capital Capital stock 10% Preferred stock, $100 par value, noncumulative, 5,000 shares authorized, 3,000 shares issued and outstanding ............................... Common stock, no par, $5 stated value, 300,000 shares authorized, 205,000 shares issued and 202,500 shares outstanding ............................... Total capital stock ................. Additional paid-in capital In excess of par— preferred stock ......................... In excess of stated value— common stock .......................... From treasury stock ..................... Total additional paid-in capital ................................. Total paid-in capital ............... Retained earnings ...................................... Total paid-in capital and retained earnings ............... Less: Treasury stock (2,500 common shares)............................................. Total stockholders’ equity ..................................

$ 300,000

1,025,000 1,325,000 $ 20,000 444,500 4,000 468,500 1,793,500 838,000 2,631,500 (20,000) $2,611,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-4B

(a) Feb. Mar. July

1 1 1

Cash Dividends (80,000 X $1.00) ...... Dividends Payable .....................

80,000

Dividends Payable ............................ Cash ............................................

80,000

Stock Dividends (12,000* X $25) ...... Common Stock Dividends Distributable (12,000 X $20) .... Paid-in Capital in Excess of Par Value (12,000 X $5) ...........

300,000

80,000 80,000

240,000 60,000

*80,000 shares X 0.15 31

Dec.

1 31

Common Stock Dividends Distributable ................................... Common Stock ...........................

240,000 240,000

Cash Dividends (92,000 X $1) ........... Dividends Payable .....................

92,000

Income Summary .............................. Retained Earnings......................

500,000

Retained Earnings ............................. Stock Dividends .........................

300,000

Retained Earnings ............................. Cash Dividends ..........................

172,000

92,000 500,000 300,000 172,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 11-4B (Continued) (b) Common Stock 1/1 Bal. 1,600,000 7/31 240,000 12/31 Bal. 1,840,000 Paid-in Capital in Excess of Par Value 1/1 Bal. 240,000 7/1 60,000 12/31 Bal. 300,000 Cash Dividends 2/1 80,000 12/1 92,000 12/31 12/31 Bal. –0–

172,000

12/31 12/31

Retained Earnings 300,000 1/1 Bal. 750,000 172,000 12/31 500,000 12/31 Bal. 778,000

Common Stock Dividends Distributable 7/31 240,000 7/1 240,000 12/31 Bal. –0–

Stock Dividends 7/1 300,000 12/31 300,000 12/31 Bal. –0–

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 11-4B (Continued) (c)

LAMAR CORPORATION Partial Balance Sheet December 31, 2022 Stockholders’ equity Paid-in capital Capital stock Common stock, $20 par value, 92,000 shares issued and outstanding ........................................ Additional paid-in capital Paid-in capital in excess of par value . Total paid-in capital ....................... Retained earnings ............................................... Total stockholders’ equity ............

$1,840,000 300,000 2,140,000 778,000 $2,918,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-5B

(a)

(b)

Retained Earnings Dec. 31 Cash Dividends 500,000 Jan. 1 Balance Dec. 31 Stock Dividends 360,000 Dec. 31 Net Income Dec. 31 Balance

2,450,000 970,000 2,560,000

GIFFIN CORPORATION Partial Balance Sheet December 31, 2022 ____________________________________________________________ Stockholders’ equity Paid-in capital Capital stock 6% Preferred stock, $100 par value, noncumulative, callable at $125, 20,000 shares authorized, 10,000 shares issued and outstanding............................ $1,000,000 Common stock, no par, $5 stated value, 600,000 shares authorized, 400,000 shares issued and outstanding ........ $2,000,000 Common stock dividends distributable ........................... 200,000 2,200,000 Total capital stock .............. 3,200,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-5B (Continued) GIFFIN CORPORATION (Continued) Additional paid-in capital In excess of par— preferred stock ...................... In excess of stated value— common stock ....................... Total additional paid-in capital .............................. Total paid-in capital ............ Retained earnings (see Note A) ............. Total stockholders’ equity...............................

$ 200,000 1,180,000 1,380,000 4,580,000 2,560,000 $7,140,000

Note A: Retained earnings is restricted for plant expansion, $100,000. (c) Total dividend ........................................................................ Allocated to preferred stock— .............................................. Remainder to common stock ................................................

$500,000 120,000* $380,000

*10,000 shares x $100 par x 6% = 60,000 x 2 years (2021 and 2022) = $120,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-6B

(a) (1) Cash .............................................................. Preferred Stock (4,000 X $100) ............. Paid-in Capital in Excess of Par Value—Preferred Stock .....................

452,000

(2) Cash .............................................................. Common Stock (600,000 X $4) ............. Paid-in Capital in Excess of Stated Value—Common Stock ......................

9,000,000

(3) Treasury Stock (40,000 X $17) ..................... Cash .......................................................

680,000

400,000 52,000 2,400,000 6,600,000 680,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-6B (Continued) (b)

HARTWELL CORPORATION Partial Balance Sheet December 31, 2022 Stockholders’ equity Paid-in capital Capital stock 8% Preferred stock, $100 par value, noncumulative, 25,000 shares authorized, 4,000 shares issued and outstanding ................................. $ 400,000 Common stock, no-par, $4 stated value, 1,000,000 shares authorized, 600,000 shares issued, and 560,000 shares outstanding..................... 2,400,000 Total capital stock .................. $ 2,800,000 Additional paid-in capital Paid-in capital in excess of par value—preferred stock ............... 52,000 Paid-in capital in excess of stated value—common stock ................ 6,600,000 Total additional paid-in capital ................................... 6,652,000 Total paid-in capital ................ 9,452,000 Retained earnings ................................. 3,630,000 Total paid-in capital and retained earnings................. 13,082,000 Less: Treasury stock (40,000 shares) ........................... 680,000 Total stockholders’ equity ..... $12,402,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-7B (a) Jan. 15 Feb. 15 Apr. 15

May 15

Cash Dividends (200,000 X $1) ............. Dividends Payable .........................

200,000

Dividends Payable ................................. Cash ................................................

200,000

Stock Dividends (20,000 X $15) ............ Common Stock Dividends Distributable (20,000 X $5) ......... Paid-in Capital in Excess of Par—Common Stock (20,000 X $10) .............................

300,000

Common Stock Dividends Distributable ....................................... Common Stock (20,000 X $5) ........

200,000 200,000

100,000 200,000 100,000 100,000

July

Memo—two-for-one stock split increases the number of shares outstanding to 440,000, or (220,000 X 2) and reduces par value to $2.50 per share.

Dec.

Cash Dividends (440,000 X $.50) .......... Dividends Payable .........................

220,000

Income Summary ................................... Retained Earnings ..........................

250,000

Retained Earnings ................................. Cash Dividends ..............................

420,000

Retained Earnings ................................. Stock Dividends .............................

300,000

220,000 250,000 420,000 300,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-7B (Continued) (b) Common Stock Date Jan. 1 May 15 July 1

Explanation Balance

Ref. 

Debit

Credit 100,000

Balance 1,000,000 1,100,000

2 for 1 stock split— new par value = $2.50

Common Stock Dividends Distributable Date Apr. 15 May 15

Explanation

Ref.

Debit

Credit 100,000

Balance 100,000 0

Credit

Balance 200,000 400,000

100,000

Paid-in Capital in Excess of Par—Common Stock Date Jan. 1 Apr. 15

Explanation Balance

Ref.

Debit

 200,000

Retained Earnings Date Jan. 1 Dec. 31 31 31

Explanation Balance Net income Cash dividends Stock dividends

Ref.

Debit

Credit

 250,000 420,000 300,000

Balance 840,000 1,090,000 670,000 370,000

Cash Dividends Date Jan. 15 Dec. 1 31

Explanation

Ref.

Debit 200,000 220,000

Credit

420,000

Balance 200,000 420,000 0

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-7B (Continued) Stock Dividends Date Apr. 15 Dec. 31

Explanation

(c)

Ref.

Debit 300,000

Credit 300,000

Balance 300,000 0

CHEN CORPORATION Balance Sheet (Partial) December 31, 2022 Stockholders’ equity Paid-in capital Capital stock Common stock, $2.50 par value, 440,000 shares issued and outstanding ............... Additional paid-in capital In excess of par—common stock ............... Total paid-in capital .............................. Retained earnings ....................................................... Total stockholders’ equity ...................

$1,100,000 400,000 1,500,000 370,000 $1,870,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-8B

(a)

CRIVELLO CORPORATION Stockholders’ equity Paid-in capital Capital stock 8% Preferred stock, $50 par noncumulative, 16,000 shares issued ............ Common stock, no par, $3 stated value, 800,000 shares issued and 790,000 outstanding............................ Total capital stock .............. Additional paid-in capital In excess of par — preferred stock ...................... In excess of stated value— common stock ....................... From treasury stock .................. Total additional paid-in capital .............................. Total paid-in capital ............ Retained earnings ................................... Total paid-in capital and retained earnings............ Less: Treasury stock (10,000 common shares) ......................................... Total stockholders’ equity...............................

$ 800,000

2,400,000 3,200,000 $ 220,000 1,600,000 10,000 1,830,000 5,030,000 1,448,000 6,478,000 75,000 $6,403,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-8B (Continued) *(b) The book value of the common stock is $6.89 computed as follows: Total stockholders’ equity.............................................. Less: Preferred stock equity Call price (16,000 X $60) ................................... Common stock equity ....................................................

$6,403,000

Common shares outstanding ........................................

790,000

Book value per share ($5,443,000 ÷ 790,000) ................

$6.89

960,000 $5,443,000

Note: No preferred dividends are assigned to the preferred stock equity because the preferred stock is noncumulative.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 11-9B

FERRIS INC. Partial Balance Sheet December 31, 2022 Stockholders’ equity Paid-in capital Common stock, $5 par value, 2,000,000 shares authorized, 735,000* shares issued, and 710,000 shares outstanding ........................................... Additional paid-in capital Paid-in capital in excess of par value— common stock......................................................... Total paid-in capital ............................................ Retained earnings ............................................................. Total paid-in capital and retained earnings ...... Less: Treasury stock (25,000 shares) ............................. Total stockholders’ equity..................................

$3,675,000 2,370,000** 6,045,000 1,386,000*** 7,431,000 250,000 $7,181,000

***600,000 + 75,000 + 60,000 = 735,000 shares ***$1,800,000 + (75,000 X $4) + (60,000 X $4.50) = $2,370,000 ***$810,000 – $284,000 + $860,000 = $1,386,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

CHAPTER 13 Statement of Cash Flows PROBLEM 12-1B

Transaction (a) Recorded depreciation expense on the plant assets. (b) Incurred a loss on disposal of plant assets. (c) Acquired a building by paying cash. (d) Made principal repayments on a mortgage. (e) Issued common stock (f) Purchased shares of another company to be held as a long-term equity investment. (g) Paid cash dividends to common stockholders. (h) Sold inventory on credit. The company uses a perpetual inventory system. (i) Purchased inventory on credit. (j) Paid wages to employees.

SCF Activity Affected O

Cash inflow, outflow, or no cash flow effect? No cash flow effect

No cash flow effect

I F

Cash outflow Cash outflow

F I

Cash inflow Cash outflow

Cash outflow

No cash flow effect

O O

No cash flow effect Cash outflow

PROBLEM 12-2B

(a) Cash inflows (outflows) related to plant assets 2022: Equipment purchase Land purchase Proceeds from equipment sales

($95,000) (30,000) 11,000*

*Cost of equipment sold $240,000 + $95,000 – $300,000 = $35,000 Accumulated depreciation removed from accounts for sale of equipment Accumulated Depreciation— Equipment 96,000 Plug 16,000 64,000 Depreciation Expense 144,000 Cash proceeds = Cost $35,000 – accumulated depreciation $16,000 – loss $8,000 = $11,000 Note to instructor—some students may find journal entries helpful in understanding this exercise. Equipment .............................................................. Cash ................................................................

95,000

Land........................................................................ Cash ................................................................

30,000

Cash (plug) ............................................................ Accumulated Depreciation—Equipment.............. Loss on Disposal of Plant Assets ........................ Equipment .....................................................

11,000 16,000 8,000

(b) Equipment purchase Land purchase Proceeds from equipment sale

95,000 30,000

35,000

Investing activities (outflow) Investing activities (outflow) Investing activities (inflow)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 12-3B

EICHORN COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ......................................................... Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense ................................ $105,000 Amortization expense ................................ 20,000 Decrease in accounts receivable .............. 320,000 Increase in inventory ................................. (120,000) Increase in prepaid expenses ................... (175,000) Increase in accounts payable.................... 50,000 Increase in accrued expenses payable ....... 155,000 Net cash provided by operating activities ....

$1,020,000

355,000 $1,375,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-4B EICHORN COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers......... Less cash payments: To suppliers ............................... For operating expenses ............ Net cash provided by operating activities ........................................

$5,720,000 (1) $3,380,000 (2) 965,000 (3)

4,345,000 $1,375,000

Computations: (1) Cash receipts from customers Sales revenue ................................................... Add: Decrease in accounts receivable .......... Cash receipts from customers ........................

$5,400,000 320,000 $5,720,000

(2) Cash payments to suppliers Cost of goods sold ........................................... Add: Increase in inventory .............................. Cost of purchases ............................................ Deduct: Increase in accounts payable........... Cash payments to suppliers ............................

$3,310,000 120,000 3,430,000 (50,000) $3,380,000

(3) Cash payments for operating expenses Operating expenses .................. Add: Increase in prepaid expenses .......................... $ 175,000 Deduct: Increase in accrued expenses payable ...... (155,000) Cash payments for operating expenses ................................

$ 945,000

20,000 $ 965,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 12-5B

DARBYSHIRE INC. Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income .......................................................... Adjustments to reconcile net income to net cash provided by operating activities Decrease in accounts receivable ............... Decrease in accounts payable ................... Increase in income taxes payable .............. Net cash provided by operating activities ...................................................

$109,000 $ 20,000 (21,000) 6,000

5,000 $114,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-6B DARBYSHIRE INC. Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers............. Less cash payments: For operating expenses ................ For income taxes ........................... Net cash provided by operating activities ............................................

$565,000 (1) $421,000 (2) 30,000 (3)

(1) Computation of cash receipts from customers Service revenue .............................................................. Add: Decrease in accounts receivable ($70,000 – $50,000) ............................................... Cash receipts from customers....................................... (2) Computation of cash payments for operating expenses Operating expenses........................................................ Add: Decrease in accounts payable ($51,000 – $30,000) ............................................... Cash payments for operating expenses ....................... (3) Income tax expense ........................................................ Deduct: Increase in income taxes payable ($10,000 – $4,000) ............................................ Cash payments for income taxes ..................................

451,000 $114,000

$545,000 20,000 $565,000

$400,000 21,000 $421,000 $ 36,000 (6,000) $ 30,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 12-7B

(a)

JOHNSTON COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income.................................................... Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense........................... Increase in accounts receivable .......... Increase in inventory ............................ Decrease in accounts payable............. Increase in income taxes payable ....... Net cash provided by operating activities ............................................ Cash flows from investing activities Sale of equipment ........................................ Purchase of equipment................................ Net cash provided by investing activities ............................................ Cash flows from financing activities Issuance of bonds ........................................ Payment of cash dividends ......................... Net cash used by financing activities ............................................ Net decrease in cash ........................................... Cash at beginning of period ............................... Cash at end of period ..........................................

$28,000

$ 8,000 (11,000) (16,000) (12,000) 4,000

(27,000) 1,000

10,000 (7,000) 3,000 10,000 (23,000) (13,000) (9,000) 33,000 $24,000

(b) $1,000 – $7,000 – $23,000 = ($29,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-8B

(a)

JOHNSTON COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers ........ Less cash payments: To suppliers .............................. For operating expenses ($37,000 – $8,000) ................. For interest ................................ For income taxes ...................... Net cash provided by operating activities ............... Cash flows from investing activities Sale of equipment ............................ Purchase of equipment .................... Net cash provided by investing activities ................ Cash flows from financing activities Issuance of bonds ............................ Payment of cash dividends ............. Net cash used by financing activities ................................

$275,000 (1) $232,000 (2) 29,000 7,000 6,000 (3)

274,000 1,000

10,000 (7,000) 3,000 10,000 (23,000)

Net decrease in cash ............................... Cash at beginning of period .................... Cash at end of period ..............................

(13,000) (9,000) 33,000 $ 24,000

Computations: (1) Cash receipts from customers Sales revenue ................................................. Deduct: Increase in accounts receivable ..... Cash receipts from customers ...................... Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$286,000 (11,000) $275,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-8B (Continued) (2) Cash payments to suppliers Cost of goods sold ............................................... Add: Increase in inventory .................................. Cost of purchases ................................................ Add: Decrease in accounts payable................... Cash payments to suppliers ................................

$204,000 16,000 220,000 12,000 $232,000

(3) Cash payments for income taxes Income tax expense ............................................. Deduct: Increase in income taxes payable ........ Cash payments for income taxes ........................

$ 10,000 (4,000) $ 6,000

(b) $1,000 – $7,000 – $23,000 = ($29,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 12-9B

SAFFORDVILLE COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ....................................................... Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense .............................. Gain on disposal of equipment ................ Increase in accounts receivable.............. Increase in inventory ............................... Increase in accounts payable .................. Decrease in accrued expenses payable .................................................. Net cash provided by operating activities ................................................ Cash flows from investing activities Sale of investments ......................................... Sale of equipment............................................. Purchase of equipment .................................... Net cash used by investing activities ................................................ Cash flows from financing activities Issuance of bonds ........................................... Issuance of common stock ............................. Payment of cash dividends ............................. Net cash provided by financing activities ................................................ Net increase in cash ................................................ Cash at beginning of period ................................... Cash at end of period ..............................................

$ 112,660

$ 30,500 (5,000) (23,800) (24,250) 9,420 (3,730)

(16,860) 95,800

27,500 15,000 (146,000) (103,500) 75,000 50,000 (48,000) 77,000 69,300 33,400 $ 102,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-10B

SAFFORDVILLE COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers ............. Less cash payments: To suppliers.................................... For income taxes............................ For operating expenses ................. For interest ..................................... Net cash provided by operating activities...................................... Cash flows from investing activities Sale of equipment .................................. Sale of investments ............................... Purchase of equipment .......................... Net cash used by investing activities...................................... Cash flows from financing activities Issuance of common stock ................... Issuance of bonds ................................. Payment of cash dividends................... Net cash provided by financing activities ..................... Net increase in cash...................................... Cash at beginning of period ......................... Cash at end of period ....................................

$273,700 (1) $ 114,290 (2) 37,270 23,400 (3) 2,940

177,900 95,800

15,000 27,500 (146,000) (103,500) 50,000 75,000 (48,000) 77,000 69,300 33,400 $102,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

*PROBLEM 12-10B (Continued) Computations: (1) Cash receipts from customers Sales revenue ................................................................ Deduct: Increase in accounts receivable ................... Cash receipts from customers .....................................

$297,500 (23,800) $273,700

(2) Cash payments to suppliers Cost of goods sold ........................................................ Add: Increase in inventory .......................................... Cost of purchases ......................................................... Deduct: Increase in accounts payable........................ Cash payments to suppliers .........................................

$ 99,460 24,250 123,710 (9,420) $114,290

(3) Cash payments for operating expenses Operating expenses ...................................................... Add: Decrease in accrued expenses payable ............ Cash payments for operating expenses ......................

$ 19,670 3,730 $ 23,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 12-11B

PESTER COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ........................................................... Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense .................................. Gain on disposal of equipment ................... Increase in accounts receivable ................. Increase in inventory ................................... Decrease in prepaid expenses .................... Increase in accounts payable...................... Net cash provided by operating activities ..... Cash flows from investing activities Sale of land .......................................................... Sale of equipment ................................................ Purchase of equipment ....................................... Net cash used by investing activities .........

$47,890 $ 55,000 (4,000)* (13,000) (32,000) 4,400 13,000

23,400 71,290

40,000 37,000 (80,000) (3,000)

Cash flows from financing activities Payment of cash dividends.................................

(84,290)

Net decrease in cash................................................... Cash at beginning of period ....................................... Cash at end of period ..................................................

(16,000) 57,000 $41,000

Noncash investing and financing activities Conversion of bonds by issuance of stock .......

$30,000

*($37,000 – $33,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set B

PROBLEM 13-1B

(a)

Condensed Income Statement For the Year Ended December 31, 2022 Dean Company Gerald Company Dollars Percent Dollars Percent $350,000 100.0% $1,200,000 100.0% 175,000 50.0% 648,000 54.0% 175,000 50.0% 552,000 46.0% 72,000 20.6% 266,000 22.2% 103,000 29.4% 286,000 23.8%

Net sales Cost of goods sold Gross profit Operating expenses Income from operations Other expenses and losses Interest expense 5,000 Income before income taxes 98,000 Income tax expense 22,000 Net income $ 76,000

1.4% 10,000 28.0% 276,000 6.3% 54,000 21.7% $ 222,000

.8% 23.0% 4.5% 18.5%

(b) Dean Company appears to be more profitable. It has higher relative income from operations, income before taxes, and net income.  $222,000  a Gerald’s return on assets of 14.3%  is lower than Dean  $1,550,000

 $76,000  b Company’s return on assets of 16.9%  , and Gerald’s return on  $450,000  $222,000  c common stockholders’ equity of 20.0%  is lower than Dean’s  $1,112,500  $76,000  d return on common stockholders’ equity of 23.0%  .  $330,000

Weygandt, Financial Accounting, 11e, Problem Set B Solutions

(For Instructor Use Only)

PROBLEM 13-1B (Continued) $222,000 is Gerald’s 2022 net income. $1,550,000 is Dean’s 2022 average assets: Return on assets = ($222,000 ÷ $1,550,000) = 14.3% a

Current assets Plant assets Total assets

2022 2021 $ 700,000 $ 650,000 1,000,000 750,000 $1,700,000 + $1,400,000 =

$3,100, 000 2

$76,000 is Dean’s 2022 net income. $450,000 is Dean’s 2022 average assets: Return on assets = ($76,000 ÷ $450,000) = 16.9% b

Current assets Plant assets Total assets

2022 $130,000 400,000 $530,000

2021 $100,000 270,000 $370,000

$900, 000 2

$222,000 is Gerald’s 2022 net income. $1,112,500 is Gerald’s 2022 average stockholders’ equity: Return = $222,000 ÷ $1,112,500 = 20.0%

Common stock Retained earnings Stockholders’ equity

2022 $ 950,000 300,000

2021 $700,000 275,000

$1,250,000 +

$975,000

$2, 225, 000 2

$76,000 is Dean’s 2022 net income. $330,000 is Dean’s 2022 average stockholders’ equity: Return = $76,000 ÷ $330,000 = 23% d

Common stock Retained earnings Stockholders’ equity

13-2

2022 $340,000 80,000 $420,000

2021 $200,000 40,000 +

$240,000

Weygandt, Financial Accounting, 11e, Solutions Manual

$660, 000 2

(For Instructor Use Only)

PROBLEM 13-2B

(a) Earnings per share =

$119,200 = $8.51 14,000 (1)

(1) [13,000 + 15,000] ÷ 2

(b) Return on common stockholders’ equity =

$119,200  $376,000 + $480,300   2   $119,200 $428,150

= 27.8%

(d) Current ratio =

$119,200  $652,000 + $775,800   2  

$119,200 = 16.7% $713,900

$290,500 = 1.78:1 $163,500

(e) Accounts receivable turnover =

(f)

$780,000 $780,000 = = 8.2 times ($83,800+ $106,200) $95,000 2

Average collection period = 365 days ÷ 8.2 = 44.5 days

Weygandt, Financial Accounting, 11e, Problem Set B Solutions

(For Instructor Use Only)

PROBLEM 13-2B (Continued)

(g) Inventory turnover =

$440,000 $440,000 = = 4.6 times $95,200  $74,000+ $116,400    2  

(h) Days in inventory = 365 days ÷ 4.6 = 79.3 days

(i)

Times interest earned =

(j)

Asset turnover =

$119,200 + $9,920 + $34,000 = 16.4 times $9,920

$780,000 $780,000 = = 1.09 times  $775,800 + $652,000  $713,900   2

(k) Debt to assets = $295,500 = 38% $775,800

(l)

Current cash debt coverage =

(m) Cash debt coverage =

$108,000

 $163,500 + $156,000   2  

$108,000 = .68 times $159,750

$108,000 $108,000 = = .38 times $285,750  $295,500+ $276,000   2  

(n) Free cash flow = $108,000 – $47,000 – $30,900 = $30,100.

13-4

Weygandt, Financial Accounting, 11e, Solutions Manual

(For Instructor Use Only)

PROBLEM 13-3B

(a)

2022 (1)

2021

Profit margin.

$85,000 = 12.1% $700,000

$110,000 = 14.5% $760,000 (2)

Gross profit rate.

$340, 000 = 45% $760, 000 (3)

$294,000 = 42% $700,000

Asset turnover. $760,000  $620,000 +$813,000    2 

(4)

 34,000 + 40,000    2  

= $2.97

(7)





$85,000

= $2.66

 30,000 + 34,000    2  

Price-earnings ratio.

$2.80 = 0.94 times $2.97 (6)

$700,000 = 1.21 times  $540,000 + $620,000 

Earnings per share.

$110,000

(5)

= 1.06 times

$3.50 = 1.32 times $2.66

Payout ratio.

$55,000** = 50% $110,000

$60,000* = 70.6% $85,000

**($130,000 + $110,000 – $185,000)

*($105,000 + $85,000 – $130,000)

Debt to assets ratio.

$228,000 = 28% $813,000

$150, 000 = 24% $620, 000

Weygandt, Financial Accounting, 11e, Problem Set B Solutions

(For Instructor Use Only)

PROBLEM 13-3B (Continued) (b) The underlying profitability of the corporation has improved. For example, the profit margin and gross profit rate have both improved. In addition, the corporation’s earnings per share has increased, which suggests that investors will be looking more favorably at the corporation. Also, its payout ratio has decreased, which should have a positive effect on its solvency. However, the debt to total assets ratio has increased, indicating a heavier reliance on debt. Also, the asset turnover ratio has declined, indicating management has not managed assets well in generating sales. And, finally, the price-earnings ratio has declined, perhaps suggesting that investors are not impressed with the company’s future prospects.

13-6

Weygandt, Financial Accounting, 11e, Solutions Manual

(For Instructor Use Only)

PROBLEM 13-4B

(a)

LIQUIDITY 2021

2022

Change

Current ratio

$520,000 = 3.15:1 $165,000

$670, 000 = 2.03:1 $330, 000

(36%)

Accounts receivable turnover

$940,000 = 12.0 times $78,500

$1,050,000 = 11.9 times $88,500

(1%)

Inventory turnover

$635,000 = 1.95 times $325,000

$680,000 = 1.86 times $365,000

(5%)

An overall decrease in short-term liquidity exists.

PROFITABILITY Profit margin

$90,000 = 9.6% $940,000

$130,000 = 12.4% $1,050,000

29%

Asset turnover

$940,000 = .87 times $1,085,000

$1,050,000 = .91 times $1,155,000

Return on assets

$90,000 = 8.3% $1,085,000

$130,000 = 11.3% $1,155,000

36%

Earnings per share

$90,000 = $.90 100,000

$130,000 = $1.30 100,000

44%

Overall profitability has improved.

Weygandt, Financial Accounting, 11e, Problem Set B Solutions

(For Instructor Use Only)

PROBLEM 13-4B (Continued)

(b)

2022

2023

% Change

Return on common stockholders’ equity

$130,000 = 16.9% 767,500 (a)

$135,000 = 15.0% 897,500 (b)

(11%)

Debt to assets

$510,000 = 39% 1,315,000

$390,000 = 29% 1,350,000

(26%)

Priceearnings ratio

$15.00 = 11.5 times 1.30

$18.00 = 13.3 times 1.35 (c)

16%

(a) (b) (c)

($500,000 + $305,000 + $500,000 + $230,000) ÷ 2. ($550,000* + $440,000** + $500,000 + $305,000) ÷ 2. $135,000 ÷ 100,000.

**$500,000 + (10,000 X $5/share) **$305,000 + $135,000

13-8

Weygandt, Financial Accounting, 11e, Solutions Manual

(For Instructor Use Only)

PROBLEM 13-5B

(a)

Ratio

Edgewater

Ritter

(All Dollars Are in Millions) (1) Current 5.32:1 ($885.7 ÷ $166.5) 2.83:1 ($617.2 ÷ $218.0) (2) Accounts receivable turnover 4.6 ($1,356.0 ÷ $293.2) 7.3 ($1,436.5 ÷ $196.1) (3) Average collection period 79.3 (365 ÷ 4.6) 50.0 (365 ÷ 7.3) (4) Inventory turnover 3.2 ($776.3 ÷ $239.1) 4.0 ($771.7 ÷ $194.3) (5) Days in inventory 114.1 (365 ÷ 3.2) 91.3 (365 ÷ 4.0) (6) Profit margin 10.6%($144.4 ÷ $1,356.0) 2.8% ($40.0 ÷ $1,436.5) (7) Asset turnover 1.2 ($1,356.0 ÷ $1,096.9a) 1.7 ($1,436.5 ÷ $848.4f) (8) Return on assets 13.2%($144.4 ÷ $1,096.9a) 4.7% ($40.0 ÷ $848.4f) (9) Return on common stockholders’ equity 16.0%($144.4 ÷ $900.4b) 7.0% ($40.0 ÷ $569.5g) (10) Debt to assets 16.8%($196.4 ÷ $1,166.5) 31% ($259.1 ÷ $836.3) c (11) Times interest earned 2,081.0 ($208.1 ÷ $.1) 598.1 ($59.8h ÷ $.1) (12) Current cash debt coverage .70 ($124.5 ÷ $177.2d) .15 ($38.6 ÷ $251.8i) e (13) Cash debt coverage .63 ($124.5 ÷ $196.5 ) .14 ($38.6 ÷ $278.9j) (14) Free cash flow $69.3 ($124.5 – $34.3 – $20.9) $8.1 ($38.6 – $30.5 – $0) a

($1,166.5 + $1,027.3) ÷ 2 ($970.1 + $830.7) ÷ 2 c ($144.4 + $63.6 + $.1) d ($166.5 + $187.9) ÷ 2 e (($166.5 + $29.9) + $196.6) ÷ 2

($836.3 + $860.4) ÷ 2 ($577.2 + $561.7) ÷ 2 h ($40.0 + $19.7 + $.1) i ($218.0 + $285.6) ÷ 2 j (($218.0 + $41.1) + $298.7) ÷ 2

(b) The comparison of the two companies shows the following: Liquidity—Edgewater’s current ratio and current cash debt coverage are much better than Ritter’s. However, Ritter has better accounts receivable and inventory turnovers. Solvency—Edgewater’s debt to assets ratio, times interest earned and cash debt coverage and free cash flow are better than Ritter’s. Both companies appear to be very solvent. Profitability—With the exception of asset turnover, Edgewater betters Ritter in all of the profitability ratios. Thus, it is more profitable than Ritter.

Weygandt, Financial Accounting, 11e, Problem Set B Solutions

(For Instructor Use Only)

CHAPTER 1 PROBLEM 1-1C (a)

DIVERSE TRAVEL AGENCY

Cash

Accounts Accounts + Receivable + Supplies + Equipment = Payable +

1. +$13,000 + 13,000 2. + –500 12,500 3. + –2,700 + 9,800 4. +00 9,800 5. + –600 + 9,200 6. – +4,000 + 13,200 + 7. + –260 + 12,940 + 8. + –400 + 12,540 + 9. + –2,500 + 10,040 + 10. – +3,000 +$13,040 +

+$2,700 + 2,700 +00,000 + 2,700 +00,000 + 2,700 +00,000 + 2,700 +00,000 + 2,700 +00,000 + 2,700 +00,000 + 2,700

+$2,700

+ + + +$4,500 + 4,500 + 0,000 + 4,500 + 0,000 + 4,500 + 0,000 + 4,500 +–3,000 +$1,500

+ + + + +

+$600 + 600 +0000 + 600 +0000 + 600 +0000 + 600 +0000 + 600 + +$600

+ + + +

Common Stock

+$13,000 13,000

13,000

Stockholders’ Equity Retained Earnings + Revenues – Expenses – Dividends

$ 500 500

– – –

500 400 900

–

900

–

900

(a)

= = = = =

+$400 + 400 +0000 + 400 +0000 + 400 +0000 + 400 +–400 + 0 +0000

+ 13,000

13,000

+ +

13,000

–

900

13,000

+ 8,500 +000,000 + + 8,500

13,000

– – –

$13,000

–

= =

+ +$

(b)

+000,000 +

$17,840

– –

–$8,500 + 8,500

+ 8,500 + +$8,500 $17,840

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$260 260

900 2,500 3,400

–

260

–

260

$3,400

–

$260

(d)

(e)

PROBLEM 1-1C (Continued) Key to Retained Earnings Column (a) Rent Expense (b) Advertising Expense (c) Service Revenue

(d) Dividends (e) Salaries and Wages Expense

(b) Service revenue ........................................................................ Expenses Salaries and wages......................................... $2,500 Rent ................................................................. 500 Advertising ...................................................... 400 Net income...............................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$8,500

3,400 $5,100

(a)

WILL TROUT, ATTORNEY AT LAW Accounts Notes Accounts Common Retained Cash + Receivable + Supplies + Equipment = Payable + Payable + Stock + Earnings + Revenues – Expenses – Dividends

Bal.

$5,000 +

$1,600

+1,300

–1,300

6,300 +

300

–2,800

+3,000

+5,000

6,500 +

5,300

–600

00,000

5,900 +

5,300

300

400

$5,100

6,000

5,100

7,500

$7,000

7,000

2,300

$ 900 000,000

–2,800

900 000,000

7,000

900

00,000 =

2,300

3,200

+1,500 +

00,000 =

00,000

0000 +

00,000

0000 +

$6,000 00,000

0000

+$8,000 +

7,000

+900

900 +

(a)

8,000

000,000 900 +

8,000

–4,750

–$3,500

00,000

0000 +

00,000

3,500 +

$400

1,150 +

5,300

–650

00,000

500 +

5,300

+2,400

00,000

2,900 +

5,300

0000 +

400

00,000 +

0000 +

400

3,200

00,000 +

0000 +

7,500

00,000

7,500

$5,300

$400

3,200

900 +

8,000

–

4,750

7,000

900 +

8,000

–

4,750

–

650

8,000

–

4,750

–

650

–$650

00,000

7,500

= + 2,400 +

3,200

+350

= +$2,400 +

$3,550

Service revenue

(d) Advertising expense

(b)

Salaries and wages expense

(e) Dividends

(e)

000,000 7,000

900 +

–350 $7,000

$ 900 +

$8,000

$16,100

(a)

(d)

7,000

+$2,400

$16,100

(c)

–450 +

00,000

$7,500

–800

00,000 =

8. $2,900 +

(b)

(f) Utilities expense

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

–

$5,100

(f) –

$650

PROBLEM 1-2C

PROBLEM 1-2C (Continued) (b)

WILL TROUT, ATTORNEY AT LAW Income Statement For the Month Ended August 31, 2022 Revenues Service revenue ............................................. Expenses Salaries and wages expense ........................ Rent expense ................................................. Advertising expense ...................................... Utilities expense ............................................ Total expenses ....................................... Net income .............................................................

$8,000 $3,500 800 450 350 5,100 $2,900

WILL TROUT, ATTORNEY AT LAW Retained Earnings Statement For the Month Ended August 31, 2022 Retained earnings, August 1 ................................ Add: Net income ................................................. Less: Dividends .................................................... Retained earnings, August 31 ..............................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$ 900 2,900 3,800 650 $3,150

PROBLEM 1-2C (Continued) WILL TROUT, ATTORNEY AT LAW Balance Sheet August 31, 2022 Assets Cash ........................................................................... Accounts receivable ................................................. Supplies ..................................................................... Equipment ................................................................. Total assets ........................................................

$ 2,900 5,300 400 7,500 $16,100

Liabilities and Stockholders’ Equity Liabilities Notes payable .................................................... Accounts payable .............................................. Total liabilities ............................................ Stockholders’ equity Common stock ................................................... Retained earnings.............................................. Total liabilities and stockholders’ equity....

$ 2,400 3,550 5,950 $7,000 3,150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

10,150 $16,100

PROBLEM 1-3C

(a)

KLUM COSMETICS CO. Income Statement For the Month Ended June 30, 2022 Revenues Service revenue ........................................... Expenses Rent expense ............................................... Gasoline expense ........................................ Advertising expense .................................... Utilities expense .......................................... Total expenses ..................................... Net income ...........................................................

$6,000 $1,400 900 600 400 3,300 $2,700

KLUM COSMETICS CO. Retained Earnings Statement For the Month Ended June 30, 2022 Retained Earnings, June 1.................................. Add: Net income ............................................... Less: Dividends .................................................. Retained Earnings, June 30................................

0 2,700 2,700 1,400 $1,300

KLUM COSMETICS CO. Balance Sheet June 30, 2022 Assets Cash ......................................................................................... Accounts receivable ............................................................... Supplies ................................................................................... Equipment ............................................................................... Total assets ......................................................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$11,900 4,000 2,000 25,000 $42,900

PROBLEM 1-3C (Continued) KLUM COSMETICS CO. Balance Sheet (Continued) June 30, 2022 Liabilities and Stockholders’ Equity Liabilities Notes payable ...................................................... Accounts payable ................................................ Total liabilities .............................................. Stockholders’ equity Common stock ..................................................... Retained earnings................................................ Total liabilities and stockholders’ equity ...

(b)

$15,000 1,400 16,400 $25,200 1,300

26,500 $42,900

KLUM COSMETICS CO. Income Statement For the Month Ended June 30, 2022 Revenues Service revenue ($6,000 + $900) ................. Expenses Rent expense ............................................... Gasoline expense ($900 + $150) ................. Advertising expense .................................... Utilities expense .......................................... Total expenses ..................................... Net income ...........................................................

$6,900 $1,400 1,050 600 400 3,450 $3,450

KLUM COSMETICS CO. Retained Earnings Statement For the Month Ended June 30, 2022 Retained earnings, June 1 .................................. Add: Net income ............................................... Less: Dividends .................................................. Retained earnings, June 30 ................................ Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

0 3,450 3,450 1,400 $2,050

ANDERSEN CONSULTING Assets Accounts

Date

Cash

May 1

+$ 9,000

Notes

Common

Retained Earnings

Stock

+ Revenues – Expenses – Dividends

+$9,000 =

9,000

–700

–$ 700

8,300

May 3 8,300 + +

600

9,000 +

8,220 +

600 +050

11,720 +

600

700 700 –80

+3,500

600

–

9,000

780

600

9,000 +

3,500

780 –$750

10,970 + May 15

600

9,000 +

+$5,400 10,970 +

5,400

3,500

7,170 +

5,400

May 20

–600 6,570 +

5,400

May 23

+3,400

–3,400

9,970 +

2,000

600

9,000 +

8,900

(e) –

780 –

–

–3,800

750 (f)

9,000 +

8,900

–

4,580 –

750

9,000 +

8,900

–

4, 580 –

750

–0–

9,000 +

8,900

–

4, 580 –

750

–0–

9,000 +

8,900

–

4, 580 –

750

9,000 +

8,900

–

4,580 –

750

–0– +

600

+ +$4,000

2,000

600

4,000

+$3,800 2,000

600

3,800

+3,800 =

4,000

3,800

–250 $13,720 +

750

600

May 29 13,970 +

780 –

(d)

–600

+4,000 13,970 +

–

+5,400

–3,800

May 17

(b)

+$3,500

–750

May 12

(a)

+$ 600

–80

May 9

–

9,000 +

+$600

May 5

May 30

Accounts

+ Receivable + Supplies + Equipment = Payable + Payable

9,000 May 2

May 26

Stockholders’ Equity

Liabilities

–250 $ 2,000

+ $600

$3,800

$4,000 +

$3,800

$9,000 +

$8,900

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

$20,120

–

$4,830 –

(g) $750

PROBLEM 1-4C

(a)

PROBLEM 1-4C (Continued) Key to Retained Earnings Colum (a) Rent Expense (b) Advertising Expense (c) Service Revenue (d) Dividends (b)

(e) Service Revenue (f) Salaries and Wages Expense (g) Utilities Expense

ANDERSEN CONSULTING Income Statement For the Month Ended May 31, 2022 Revenues Service revenue ($3,500 + $5,400) ................ Expenses Salaries and wages expense ........................ Rent expense ................................................. Utilities expense ............................................ Advertising expense ...................................... Total expenses ....................................... Net income .............................................................

(c)

$8,900 $3,800 700 250 80 4,830 $4,070

ANDERSEN CONSULTING Balance Sheet May 31, 2022 Assets Cash ............................................................................... Accounts receivable ..................................................... Supplies ......................................................................... Equipment ..................................................................... Total assets ............................................................

$13,720 2,000 600 3,800 $20,120

Liabilities and Stockholders’ Equity Liabilities Notes payable ........................................................ Accounts payable .................................................. Total liabilities ................................................ Stockholders’ equity Common stock ....................................................... $9,000 Retained earnings.................................................. 3,320 Total liabilities and stockholders’ equity ..... Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$ 4,000 3,800 7,800 12,320 $20,120

PROBLEM 1-5C

(a)

(b)

Nick Company (a) $40,000 (b) 111,000 (c) 10,000

Joe Company (d) $40,000 (e) 47,000 (f) 22,000

Kevin Company (g) $125,000 (h) 70,000 (i) 403,000

Frank Company (j) $ 60,000 (k) 205,000 (l) 469,000

NICK COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Retained earnings, January 1 ............................. Add: Net income ............................................... Less: Dividends .................................................. Retained earnings December 31 ........................

0 25,000 25,000 20,000 $ 5,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 2-1C J1 Date Mar. 1

10 18

Account Titles and Explanation Ref. Cash......................................................... Common Stock ............................... (Issued shares of stock for cash)

Debit 55,000

27,000 3,000 7,000

Advertising Expense .............................. Cash ................................................ (Paid for advertising)

900

Prepaid Insurance................................... Cash ................................................ (Paid for 1-year insurance policy)

1,200

Equipment ............................................... Accounts Payable........................... (Purchased equipment on account) Cash......................................................... Service Revenue ............................. (Received cash for services performed) Cash......................................................... Unearned Service Revenue ........... (Received cash for coupon books sold)

Credit 55,000

37,000

900

1,200

1,400 1,400 300 300

1,200 1,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-1

PROBLEM 2-1C (Continued) Date Mar. 25

Account Titles and Explanation Dividends ............................................ Cash ............................................. (Declared and paid cash dividend)

Ref.

Debit 600

600

Salaries and Wages Expense ............ Cash ............................................. (Paid salaries)

850

Accounts Payable............................... Cash ............................................. (Paid creditor on account)

1,400

Cash .................................................... Service Revenue ......................... (Received cash for services performed)

600

Credit

850

1,400

600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-2

PROBLEM 2-2C (a) J1 Date

Account Titles and Explanation

Ref.

Debit

Apr. 1

Cash........................................................ Common Stock .............................. (Issued shares of stock for cash)

101 311

50,000 50,000

No entry—not a transaction.

Rent Expense ......................................... Cash ............................................... (Paid monthly office rent)

729 101

1,400

Supplies ................................................. Accounts Payable.......................... (Purchased supplies on account from Whyte Company)

126 201

4,500

Accounts Receivable ............................. Service Revenue ............................ (Billed clients for services performed)

112 400

5,300

Cash........................................................ Unearned Service Revenue .......... (Received cash for future service)

101 209

1,200

Cash........................................................ Service Revenue ............................ (Received cash for services performed)

101 400

2,300

Salaries and Wages Expense ............... Cash ............................................... (Paid monthly salary)

726 101

2,000

Credit

1,400

4,500

5,300

1,200

2,300

2,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-3

PROBLEM 2-2C (Continued) Date

Account Titles and Explanation

Ref.

Debits

Apr. 30

Accounts Payable .............................. Cash ............................................ (Paid Whyte Company on account)

201 101

1,800

Credit 1,800

(b) Cash Date Apr. 1 2 11 20 30 30

Explanation

Accounts Receivable Date Explanation Apr. 10 Supplies Date Explanation Apr. 3 Accounts Payable Date Explanation Apr. 3 30 Unearned Service Revenue Date Explanation Apr. 11 Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

Ref. J1 J1 J1 J1 J1 J1

Ref. J1

Ref. J1 J1

Ref. J1

Debit 50,000

Credit 1,400

1,200 2,300 2,000 1,800

Debit 5,300

Debit 4,500

Debit

Credit

No. 112 Balance 5,300

Credit

No. 126 Balance 4,500

Credit 4,500

No. 201 Balance 4,500 2,700

1,800

Debit

No. 101 Balance 50,000 48,600 49,800 52,100 50,100 48,300

Credit 1,200

No. 209 Balance 1,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-4

PROBLEM 2-2C (Continued) Common Stock Date Explanation Apr. 1

Ref. J1

Service Revenue Date Explanation Apr. 10 20

Ref. J1 J1

Salaries and Wages Expense Date Explanation Apr. 30 Rent Expense Date Explanation Apr. 2

(c)

Ref. J1

Debit

Debit 2,000

Debit 1,400

Credit 50,000

No. 311 Balance 50,000

Credit 5,300 2,300

No. 400 Balance 5,300 7,600

Credit

No. 726 Balance 2,000

Credit

No. 729 Balance 1,400

ALMA GUTIERREZ, DENTIST Trial Balance April 30, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Accounts Payable .............................................. Unearned Service Revenue ............................... Common Stock ................................................... Service Revenue ................................................ Salaries and Wages Expense ............................ Rent Expense .....................................................

Debit $48,300 5,300 4,500

Credit

$ 2,700 1,200 50,000 7,600 2,000 1,400 $61,500

$61,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-5

PROBLEM 2-3C (a) Trans. 1.

Account Titles and Explanation

Debit

Cash .................................................... Common Stock..........................

60,000 60,000

No entry—Not a transaction.

Prepaid Rent....................................... Cash ...........................................

36,000

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

35,000

Prepaid Insurance .............................. Cash ...........................................

1,500

Supplies .............................................. Cash ...........................................

400

Supplies .............................................. Accounts Payable .....................

1,600

Cash .................................................... Accounts Receivable ......................... Service Revenue .......................

12,000 16,000

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

600

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

6,000

Utilities Expense ................................ Accounts Payable .....................

400

10.

11.

Credit

36,000

12,000 23,000

1,500

400

1,600

28,000

600

6,000

400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-6

PROBLEM 2-3C (Continued) Trans. 12.

Account Titles and Explanation

Debit

Salaries and Wages Expense ........... Cash ...........................................

7,600

Credit 7,600

(b) (1)

(8) (10)

(8)

(6) (7)

(5)

(3)

Cash 60,000 (3) (4) (5) (6) 12,000 (9) 6,000 (12) 19,900

(4) 36,000 12,000 1,500 400 600 (9) 7,600

Accounts Receivable 16,000 (10) 6,000 10,000

Prepaid Rent 36,000 36,000

Accounts Payable (4) 23,000 (7) 1,600 600 (11) 400 24,400

Common Stock (1)

Service Revenue (8)

Supplies 400 1,600 2,000

Prepaid Insurance 1,500 1,500

Equipment 35,000 35,000

60,000 60,000

28,000 28,000

Salaries and Wages Expense (12) 7,600 7,600

(11)

Utilities Expense 400 400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-7

PROBLEM 2-3C (Continued) (c)

HOME SERVICES Trial Balance May 31, 2022 Cash ................................................................ Accounts Receivable ..................................... Supplies .......................................................... Prepaid Insurance .......................................... Prepaid Rent................................................... Equipment ...................................................... Accounts Payable .......................................... Common Stock .............................................. Service Revenue ............................................ Salaries and Wages Expense ........................ Utilities Expense ............................................

Debit $19,900 10,000 2,000 1,500 36,000 35,000

Credit

$24,400 60,000 28,000 7,600 400 $112,400

$112,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-8

PROBLEM 2-4C

TABLEAU CO. Trial Balance June 30, 2022 Cash ($2,771 + $270) .................................................. Accounts Receivable ($2,731 – $270) ....................... Supplies ($1,200 – $850)............................................ Equipment ($2,600 + $850) ........................................ Accounts Payable ($3,666 – $405 – $450) ................ Unearned Service Revenue ....................................... Common Stock .......................................................... Dividends ($800 + $700) ............................................ Service Revenue ($2,480 + $621) .............................. Salaries and Wages Expense ($3,200 + $900 – $700) Utilities Expense ........................................................

Debit $ 3,041 2,461 350 3,450

Credit

$ 2,811 1,100 8,000 1,500 3,101 3,400 810 $15,012

$15,012

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-9

PROBLEM 2-5C (a) & (c) Cash Date Mar. 1 2 9 10 12 20 20 31 31 31

Explanation Balance

J1 J1 J1 J1 J1 J1 J1 J1 J1

Accounts Receivable Date Explanation Mar. 31 Land Date Mar. 1

Ref.

Explanation Balance

Ref. J1

Ref.

480 8,000

No. 101 Balance 10,000 7,500 12,500 8,700 8,300 14,100 11,100 8,400 8,880 16,880

Debit 480

Credit

No. 112 Balance 480

Credit

No. 140 Balance 42,000

Credit

No. 145 Balance 12,000

Credit

No. 157 Balance 18,000

Debit

Credit 2,500

5,000 3,800 400 5,800 3,000 2,700

Debit

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-10

PROBLEM 2-5C (Continued) Accounts Payable Date Explanation Mar. 1 Balance 2 10 Common Stock Date Explanation Mar. 1 Balance Service Revenue Date Explanation Mar. 9 20 31 Rent Revenue Date Explanation Mar. 31 Advertising Expense Date Explanation Mar. 12 Salaries and Wages Expense Date Explanation Mar. 31 Rent Expense Date Explanation Mar. 2 20 Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

Ref. J1 J1

Ref.

Ref. J1 J1 J1

Ref. J1

Ref. J1 J1

Debit

Credit 1,200

3,800

Debit

Debit 400

Debit 2,700

Debit 3,700 3,000

Credit

No. 201 Balance 9,000 10,200 6,400 No. 311 Balance 73,000

Credit 5,000 5,800 8,000

No. 400 Balance 5,000 10,800 18,800

Credit 960

No. 429 Balance 960

Credit

No. 610 Balance 400

Credit

No. 726 Balance 2,700

Credit

No. 729 Balance 3,700 6,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-11

PROBLEM 2-5C (Continued) (b) J1 Date

Account Titles and Explanation

Ref.

Debit

Mar. 2

Rent Expense ....................................... Cash ............................................. Accounts Payable ....................... (Rented films for cash and on account)

729 101 201

3,700 2,500 1,200

No entry.

Cash ...................................................... Service Revenue.......................... (Received cash for services provided)

101 400

5,000

Accounts Payable ($1,200 + $2,600) ...... Cash ............................................. (Paid creditors on account)

201 101

3,800

5,000

3,800

No entry.

Advertising Expense ............................ Cash ............................................. (Paid advertising expense)

610 101

400

Cash ...................................................... Service Revenue.......................... (Received cash for services provided)

101 400

5,800

Rent Expense ....................................... Cash ............................................. (Paid film rental)

729 101

3,000

Credit

400

5,800

3,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-12

PROBLEM 2-5C (Continued) Date

Account Titles and Explanation

Ref.

Debit

Mar. 31

Salaries and Wages Expense .............. Cash ............................................. (Paid salaries expense)

726 101

2,700

Cash....................................................... Accounts Receivable ............................ Rent Revenue .............................. (12% X $8,000) (Received cash and balance on account for concession revenue)

101 112 429

480 480

Cash....................................................... Service Revenue .......................... (Received cash for services performed)

101 400

8,000

(d)

Credit 2,700

960

8,000

KEATON THEATER Trial Balance March 31, 2022 Cash ................................................................. Accounts Receivable ...................................... Land ................................................................. Buildings ......................................................... Equipment ....................................................... Accounts Payable ........................................... Common Stock ............................................... Service Revenue ............................................. Rent Revenue .................................................. Advertising Expense ...................................... Salaries and Wages Expense ........................ Rent Expense ..................................................

Debit 16,880 480 42,000 12,000 18,000

Credit

$ 6,400 73,000 18,800 960 400 2,700 6,700 $99,160

$99,160

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

2-13

CHAPTER 3 SOLUTIONS TO PROBLEMS—SET C PROBLEM 3-1C (a) Date Account Titles 2022 May 31 Supplies Expense............................... Supplies ......................................

Ref.

Debit

631 126

500

31 Utilities Expense.................................. Accounts Payable ......................

736 201

200

31 Insurance Expense .............................. Prepaid Insurance ($4,800 ÷ 24 months) ..............

722

200

31 Unearned Service Revenue ................ Service Revenue ($3,000 – $1,000) .....................

209

31 Salaries and Wages Expense ............. Salaries and Wages Payable [(3/5 X $700) X 2 employees]...

726

31 Depreciation Expense ......................... Accumulated Depreciation— Equipment ($9,600 ÷ 60 months) ..............

717

31 Accounts Receivable .......................... Service Revenue ........................

112 400

J4 Credit

500 200

130

200 2,000

400

2,000 840

212

840 160

150

160 1,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

1,000

PROBLEM 3-1C (Continued) Cash Date Explanation 2022 May 31 Balance Accounts Receivable Date Explanation 2022 May 31 Balance 31 Adjusting Supplies Date Explanation 2022 May 31 Balance 31 Adjusting

Ref.

Debit

Credit

No. 101 Balance 7,700

Ref.

Debit

Credit

No. 112 Balance

1,000

4,000 5,000

Debit

Credit

No. 126 Balance

500

1,500 1,000

Prepaid Insurance Date Explanation 2022 May 31 Balance 31 Adjusting Equipment Date Explanation 2022 May 31 Balance

No. 130 Ref.

Debit

Ref.

Debit

Credit

Balance

200

4,800 4,600

Credit

No. 149 Balance 9,600

Accumulated Depreciation—Equipment Date Explanation 2022 May 31 Adjusting

Ref. J4

No. 150 Debit

Credit

Balance

160

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-1C (Continued) Accounts Payable Date Explanation 2022 May 31 Balance 31 Adjusting Unearned Service Revenue Date Explanation 2022 May 31 Balance 31 Adjusting Salaries and Wages Payable Date Explanation 2022 May 31 Adjusting Common Stock Date Explanation 2022 May 31 Balance Service Revenue Date Explanation 2022 May 31 Balance 31 Adjusting 31 Adjusting Supplies Expense Date Explanation 2022 May 31 Adjusting Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

No. 201 Ref.

Debit

Ref.

Debit

Balance

200

3,500 3,700

Credit

No. 209 Balance

2,000

3,000 1,000

Debit

Credit

No. 212 Balance

840

Credit

No. 311 Balance

Ref.

Credit

Debit

19,100

Ref.

Debit

J4 J4

Ref.

Debit

500

Credit

No. 400 Balance

2,000 1,000

6,000 8,000 9,000

Credit

No. 631 Balance

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

500

PROBLEM 3-1C (Continued) Depreciation Expense Date Explanation 2022 May 31 Adjusting Insurance Expense Date Explanation 2022 May 31 Adjusting

Credit

No. 717 Balance

Ref.

Debit

160

Ref.

Debit

No. 722 Balance

200

Credit

200

Salaries and Wages Expense Date Explanation 2022 May 31 Balance 31 Adjusting

Rent Expense Date Explanation 2022 May 31 Balance

No. 726 Ref.

Ref.

Debit

Credit

Balance

840

3,000 3,840

Debit

No. 729 Balance

Credit

1,000

Utilities Expense Date Explanation 2022 May 31 Adjusting

No. 736 Ref.

Debit

200

Credit

Balance

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

200

PROBLEM 3-1C (Continued) (c)

ALTOM CONSULTING Adjusted Trial Balance May 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Equipment........................................................... Accumulated Depreciation—Equipment .......... Accounts Payable .............................................. Unearned Service Revenue ............................... Salaries and Wages Payable ............................. Common Stock ................................................... Service Revenue................................................. Supplies Expense............................................... Depreciation Expense ........................................ Insurance Expense ............................................. Salaries and Wages Expense ............................ Rent Expense ..................................................... Utilities Expense.................................................

Debit $ 7,700 5,000 1,000 4,600 9,600

Credit

160 3,700 1,000 840 19,100 9,000

500 160 200 3,840 1,000 200 $33,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$33,800

PROBLEM 3-2C

(a) Date May 31 31 31

31 31

Account Titles Insurance Expense .............................. Prepaid Insurance ......................

Ref. 722 130

Debit 200

Supplies Expense ................................ Supplies ($1,900 – $300) ............

631 126

1,600

619

300

Depreciation Expense ($3,600 X 1/12) .................................. Accumulated Depreciation— Buildings ................................. Depreciation Expense ($3,000 X 1/12).................................. Accumulated Depreciation— Equipment ...............................

J1 Credit 200 1,600

142 619

300 250

150

250

Interest Expense .................................. Interest Payable [($40,000 X 12%) X 1/12] .........

718

400

Unearned Rent Revenue ..................... Rent Revenue ($3,600 X 1/3) ......

208 429

1,200

Salaries and Wages Expense ............. Salaries and Wages Payable .....

726 212

800

230

400 1,200 800

(b) Cash Date Explanation May 31 Balance

Ref.

Debit

Credit

No. 101 Balance 2,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-2C (Continued) Supplies Date Explanation May 31 Balance 31 Adjusting

Ref.

Debit

Credit 1,600

No. 126 Balance 1,900 300

Prepaid Insurance Date Explanation May 31 Balance 31 Adjusting Land Date Explanation May 31 Balance

No. 130 Ref.

Debit

Ref.

Credit 200

Debit

Credit

Balance 2,400 2,200 No. 140 Balance 15,000

Buildings Date Explanation May 31 Balance

No. 141 Ref.

Accumulated Depreciation—Buildings Date Explanation Ref. May 31 Adjusting J1 Equipment Date Explanation May 31 Balance

Ref.

Debit

Credit

Credit 300

Credit

Balance 70,000 No. 142 Balance 300 No. 149 Balance 16,800

Accumulated Depreciation—Equipment Date Explanation May 31 Adjusting

Ref. J1

No. 150 Debit

Credit 250

Balance 250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-2C (Continued) Accounts Payable Date Explanation May 31 Balance Unearned Rent Revenue Date Explanation May 31 Balance 31 Adjusting Salaries and Wages Payable Date Explanation May 31 Adjusting Interest Payable Date Explanation May 31 Adjusting

Ref.

Debit

Ref.

Debit

1,200

Ref. J1

Debit

Credit

No. 201 Balance 5,300

Credit

No. 208 Balance 3,600 2,400

Credit 800

No. 212 Balance 800

Credit 400

No. 230 Balance 400

Mortgage Payable Date Explanation May 31 Balance Common Stock Date Explanation May 31 Balance Rent Revenue Date Explanation May 31 Balance 31 Adjusting

No. 275 Ref.

Ref.

Ref. J1

Debit

Credit

Balance 40,000

Credit

No. 311 Balance 55,000

Credit

No. 429 Balance 9,200 10,400

1,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-2C (Continued) Advertising Expense Date Explanation May 31 Balance Depreciation Expense Date Explanation May 31 Adjusting 31 Adjusting

Ref.

Ref. J1 J1

Debit

Debit 300 250

Credit

No. 610 Balance 500

Credit

No. 619 Balance 300 550

Supplies Expense Date May 31

Explanation Adjusting

Interest Expense Date Explanation May 31 Adjusting

Insurance Expense Date Explanation May 31 Adjusting

No. 631 Ref. J1

Ref. J1

Debit 1,600

Debit 400

Debit 200

Credit

Balance 1,600

Credit

No. 718 Balance 400

Credit

No. 722 Balance 200

Salaries and Wages Expense Date Explanation May 31 Balance 31 Adjusting Utilities Expense Date Explanation May 31 Balance

No. 726 Ref.

Debit

800

Ref.

Debit

Credit

Balance 3,000 3,800 No. 732 Balance 1,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-2C (Continued) (c)

COLLISON MOTEL Adjusted Trial Balance May 31, 2022 Cash .................................................................... Supplies .............................................................. Prepaid Insurance .............................................. Land..................................................................... Buildings ............................................................. Accumulated Depreciation—Buildings ............. Equipment ........................................................... Accumulated Depreciation—Equipment ........... Accounts Payable............................................... Unearned Rent Revenue .................................... Salaries and Wages Payable.............................. Interest Payable .................................................. Mortgage Payable ............................................... Common Stock ................................................... Rent Revenue ..................................................... Advertising Expense .......................................... Depreciation Expense ........................................ Supplies Expense ............................................... Interest Expense ................................................. Insurance Expense ............................................. Salaries and Wages Expense ............................ Utilities Expense .................................................

Debit $ 2,500 300 2,200 15,000 70,000

Credit

300

16,800 250 5,300 2,400 800 400 40,000 55,000 10,400 500 550 1,600 400 200 3,800 1,000 $114,850

$114,850

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-2C (Continued) (d)

COLLISON MOTEL Income Statement For the Month Ended May 31, 2022 Revenues Rent revenue ................................................... Expenses Salaries and wages expense .......................... Supplies expense ............................................ Utilities expense .............................................. Depreciation expense ..................................... Advertising expense ....................................... Interest expense .............................................. Insurance expense .......................................... Total expenses......................................... Net income ..............................................................

$10,400 $3,800 1,600 1,000 550 500 400 200 8,050 $ 2,350

COLLISON MOTEL Retained Earnings Statement For the Month Ended May 31, 2022 Beginning balance, May 1 ....................................................... Add: Net income .................................................................... Ending balance, May 31 ..........................................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

0 2,350 $2,350

PROBLEM 3-2C (Continued) COLLISON MOTEL Balance Sheet May 31, 2022 Assets Cash .................................................................... Supplies .............................................................. Prepaid insurance .............................................. Land .................................................................... Buildings ............................................................ Less: Accumulated depreciation— buildings ................................................. Equipment .......................................................... Less: Accumulated depreciation—equipment .. Total assets .........................................

2,500 300 2,200 15,000

$70,000 300 16,800 250

69,700 16,550 $106,250

Liabilities and Stockholders’ Equity Liabilities Accounts payable....................................... Unearned rent revenue .............................. Salaries and wages payable ...................... Interest payable .......................................... Mortgage payable ....................................... Total liabilities ..................................... Stockholders’ equity Common stock ........................................... Retained earnings ...................................... Total liabilities and owner’s equity ......

5,300 2,400 800 400 40,000 $ 48,900 55,000 2,350

57,350 $106,250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-3C (a) Sept. 30 30 30 30 30 30 30 (b)

Accounts Receivable .............................. Service Revenue ................................

500

Supplies Expense ................................... Supplies .............................................

200

Rent Expense .......................................... Prepaid Rent ......................................

600

Depreciation Expense............................. Accum. Depreciation—Equipment .....

350

Salaries and Wages Expense ................. Salaries and Wages Payable ............

600

Interest Expense ..................................... Interest Payable .................................

Unearned Rent Revenue ......................... Rent Revenue ....................................

400

500 200 600 350 600 50 400

RENN CO. Income Statement For the Quarter Ended September 30, 2022 Revenues Service revenue.................................................. Rent revenue ...................................................... Total revenues ............................................ Expenses Salaries and wages expense ............................. Rent expense...................................................... Utilities expense ................................................. Depreciation expense ........................................ Supplies expense ............................................... Interest expense ................................................. Total expenses............................................ Net income .................................................................

$14,500 800 $15,300 9,600 1,500 510 350 200 50

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

12,210 $ 3,090

PROBLEM 3-3C (Continued) RENN CO. Retained Earnings Statement For the Quarter Ended September 30, 2022 Beginning balance, July 1, 2022 ............................................. Add: Net income ..................................................................... Less: Dividends ...................................................................... Ending balance, September 30, 2022 .....................................

0 3,090 3,090 600 $2,490

RENN CO. Balance Sheet September 30, 2022 Assets Cash ....................................................................... Accounts receivable ............................................. Supplies ................................................................. Prepaid rent ........................................................... Equipment ............................................................. Less: Accum. depreciation—equipment ............ Total assets ............................................

$ 6,700 900 1,000 900 $15,000 350

14,650 $24,150

Liabilities and Stockholders’ Equity Liabilities Notes payable ................................................ Accounts payable.......................................... Salaries and wages payable ......................... Unearned rent revenue ................................. Interest payable ............................................. Total liabilities ........................................ Stockholders’ equity Common stock .............................................. Retained earnings ......................................... Total liabilities and owner’s equity .......

$ 5,000 1,510 600 500 50 $ 7,660 14,000 2,490

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

16,490 $24,150

PROBLEM 3-3C (Continued) (c) Interest of 12% per year equals a monthly rate of 1%; monthly interest is $50 ($5,000 X 1%). Since total interest expense is $50, the note has been outstanding one month.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-4C

Dec. 31

Insurance Expense ....................................... Prepaid Insurance ................................. [($6,000 ÷ 3) = $2,000 [($4,200 ÷ 2) = 2,100 $4,100]

4,100

Unearned Rent .............................................. Rent Revenue ........................................ [5 X $5,000 X 2 = $50,000 4 X $8,500 X 1 = 34,000 $84,000]

84,000

Interest Expense ........................................... Interest Payable ($60,000 X 9% X 4/12) ........................

1,800

Salaries and Wages Expense ...................... Salaries and Wages Payable ................ [5 X $600 X 3/5 = $1,800 [3 X $750 X 3/5 = 1,350 $3,150]

3,150

4,100

84,000

1,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

3,150

PROBLEM 3-5C

(a), (c) & (e) Cash Date Nov. 1 8 10 12 20 22 25 29

Explanation Balance

Ref. J1 J1 J1 J1 J1 J1 J1

Debit

Credit 1,100

1,200 1,400 2,500 300 1,300 550

No. 101 Balance 2,790 1,690 2,890 4,290 1,790 1,490 190 740

Accounts Receivable Date Nov.

1 10 27

Explanation Balance

No. 112 Ref. J1 J1

Debit

Credit 1,200

900

Balance 2,510 1,310 2,210

Supplies Date Nov.

1 17 30

No. 126 Explanation Balance Adjusting

Ref.

Debit

J1 J1

500

Credit

1,500

Balance 2,000 2,500 1,000

Equipment Date Nov.

1 15

Explanation Balance

No. 153 Ref.

Debit

3,000

Credit

Balance 10,000 13,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-5C (Continued) Accumulated Depreciation—Equipment Date Explanation Ref. Nov. 1 Balance 30 Adjusting J1

Debit

Credit 100

No. 154 Balance 500 600

Accounts Payable Date Nov.

1 15 17 20

Explanation Balance

No. 201 Ref. J1 J1 J1

Debit

Credit

Balance 2,100 5,100 5,600 3,100

3,000 500 2,500

Unearned Service Revenue Date Nov.

1 29 30

Explanation Balance Adjusting

No. 209 Ref. J1 J1

Debit

Credit 550

1,150

Balance 1,400 1,950 800

Salaries and Wages Payable Date Nov.

1 8 30

Explanation Balance Adjusting

No. 212 Ref.

Debit

J1 J1

500

Credit

500

Balance 500 0 500

Common Stock Date Nov.

Explanation Balance

No. 311 Ref.

Debit

Credit

Balance 10,000

Retained Earnings Date Nov.

Explanation Balance

No. 320 Ref.

Debit

Credit

Balance 2,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-5C (Continued) Service Revenue Date Explanation Nov. 12 27 30 Adjusting

Depreciation Expense Date Explanation Nov. 30 Adjusting

Supplies Expense Date Explanation Nov. 30 Adjusting

Ref. J1 J1 J1

Ref. J1

Debit

Debit 100

Debit 1,500

No. 400 Balance 1,400 2,300 3,450

Credit 1,400 900 1,150

Credit

No. 615 Balance 100

Credit

No. 631 Balance 1,500

Salaries and Wages Expense Date Nov.

Explanation 8 25 30

Adjusting

No. 726 Ref. J1 J1 J1

Debit 600 1,300 500

Credit

Balance 600 1,900 2,400

Rent Expense Date Explanation Nov. 22

No. 729 Ref. J1

Debit 300

Credit

Balance 300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 3-5C (Continued) (b) Date Nov.

10 12 15 17 20 22 25 27 29

General Journal Account Titles and Explanation Salaries and Wages Payable .............. Salaries and Wages Expense ............. Cash .............................................

Ref. 212 726 101

Debit 500 600

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

101 112

1,200

Cash ..................................................... Service Revenue .........................

101 400

1,400

Equipment ........................................... Accounts Payable .......................

153 201

3,000

Supplies............................................... Accounts Payable .......................

126 201

500

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

201 101

2,500

Rent Expense ...................................... Cash .............................................

729 101

300

Salaries and Wages Expense ............. Cash .............................................

726 101

1,300

Accounts Receivable .......................... Service Revenue .........................

112 400

900

Cash ..................................................... Unearned Service Revenue ........

101 209

550

J1 Credit

1,100 1,200 1,400 3,000 500 2,500 300 1,300 900

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

550

PROBLEM 3-5C (Continued) (d) & (f)

PINE EQUIPMENT REPAIR Trial Balances November 30, 2022

Cash ........................................... Accounts Receivable ................ Supplies ..................................... Equipment.................................. Accumulated Depr.—Equip. ..... Accounts Payable ..................... Unearned Service Revenue ...... Salaries and Wages Payable .... Common Stock .......................... Retained Earnings ..................... Service Revenue........................ Depreciation Expense ............... Supplies Expense...................... Salaries and Wages Expense ... Rent Expense ............................

(e) 1. Nov. 30

Before After Adjustment Adjustment Dr. Cr. Dr. Cr. $ 740 $ 740 2,210 2,210 2,500 1,000 13,000 13,000 $ 500 $ 600 3,100 3,100 1,950 800 500 10,000 10,000 2,800 2,800 2,300 3,450 100 1,500 1,900 2,400 300 300 $20,650 $20,650 $21,250 $21,250

Supplies Expense ........................ Supplies ($2,500 – $1,000) .....

631 126

1,500

Salaries and Wages Expense ...... Salaries and Wages Payable ...............................

726

500

Depreciation Expense .................. Accumulated Depreciation— Equipment ..........................

615

Unearned Service Revenue ......... Service Revenue ....................

209 407

1,500

212

500 100

154

100 1,150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

1,150

PROBLEM 3-5C (Continued) (g)

PINE EQUIPMENT REPAIR Income Statement For the Month Ended November 30, 2022 Revenues Service revenue .............................................. Expenses Salaries and wages expense ......................... Supplies expense ........................................... Rent expense .................................................. Depreciation expense .................................... Total expenses ........................................ Net loss...................................................................

$ 3,450 $2,400 1,500 300 100 4,300 $ (850)

PINE EQUIPMENT REPAIR Retained Earnings Statement For the Month Ended November 30, 2022 Beginning balance, November 1 ............................................. Less: Net loss ........................................................................ Ending balance, November 30 ................................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$2,800 850 $1,950

PROBLEM 3-5C (Continued) PINE EQUIPMENT REPAIR Balance Sheet November 30, 2022 Assets Cash....................................................................... Accounts receivable ............................................. Supplies ................................................................ Equipment ............................................................. Less: Accumulated depreciation— equipment .................................................. Total assets ...................................................

740 2,210 1,000

$13,000 600

12,400 $16,350

Liabilities and Stockholders’ Equity Liabilities Accounts payable ......................................... Unearned service revenue............................ Salaries and wages payable ......................... Total liabilities........................................ Stockholders’ equity Common stock .............................................. Retained earnings ......................................... Total liabilities and owner’s equity ......

$ 3,100 800 500 $ 4,400 10,000 1,950

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

11,950 $16,350

CHAPTER 4 SOLUTIONS TO PROBLEMS—SET C

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-1C (a)

RELIABLE ROOFING Worksheet For the Month Ended March 31, 2022 Account Titles

Cash Accounts Receivable Supplies Equipment Accumulated Depr.—Equip. Accounts Payable Unearned Service Revenue Common Stock Retained Earnings Dividends Service Revenue Salaries and Wages Expense Miscellaneous Expense Totals Supplies Expense Depreciation Expense Salaries and Wages Payable Totals Net Income Totals

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Dr.

Cr.

2,500 1,800 1,100 6,000 1,200 1,400 300 6,500 500

(c)

Cr.

(a)

860

(b)

200

(c)

170

1,400 1,400 130 6,500 500

1,400 1,400 130 6,500 500 600

3,170

(d)

350

1,050 200

(a) (b)

860 200

12,900

(d) 1,580

350 1,580

13,450

350 13,450

2,310 860 3,170

Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Service Revenue Earned; (d) Salaries Accrued.

Cr.

2,500 1,800 240 6,000

600 3,000

700 200 12,900

Cr.

2,500 1,800 240 6,000

170

600

Cr.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

3,170

11,140

3,170

11,140

350 10,280 860 11,140

PROBLEM 4-1C (Continued) (b)

RELIABLE ROOFING INC. Income Statement For the Month Ended March 31, 2022 Revenues Service revenue.................................................. Expenses Salaries and wages expense ............................. Supplies expense ............................................... Depreciation expense ........................................ Miscellaneous expense ..................................... Total expenses............................................ Net income .................................................................

$3,170 $1,050 860 200 200 2,310 $ 860

RELIABLE ROOFING INC. Retained Earnings Statement For the Month Ended March 31, 2022 Beginning balance, March 1 ..................................................... Add: Net income ...................................................................... Less: Dividends ........................................................................ Ending balance, March 31 .........................................................

$ 500 860 1,360 600 $ 760

RELIABLE ROOFING INC. Balance Sheet March 31, 2022 Assets Current assets Cash .................................................................... Accounts receivable .......................................... Supplies .............................................................. Total current assets ................................... Property, plant, and equipment Equipment .......................................................... Less: Accum. depreciation—equipment ......... Total assets ................................................. Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$2,500 1,800 240 $4,540 6,000 1,400

4,600 $9,140

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-1C (Continued) RELIABLE ROOFING INC. Balance Sheet (Continued) March 31, 2022 Liabilities and Stockholders’ Equity Current liabilities Accounts payable .......................................................... Salaries and wages payable.......................................... Unearned service revenue ............................................ Total current liabilities.................................. Stockholders’ equity Common stock ............................................................... Retained earnings .......................................................... Total liabilities and stockholders’ equity .... (c) Mar. 31 31

31 31 (d) Mar. 31 31

31 31

$1,400 350 130 $1,880 6,500 760

Supplies Expense ......................................... Supplies .................................................

860

Depreciation Expense .................................. Accumulated Depreciation— Equipment ..........................................

200

Unearned Service Revenue .......................... Service Revenue ...................................

170

Salaries and Wages Expense ...................... Salaries and Wages Payable ................

350

Service Revenue ........................................... Income Summary ..................................

3,170

Income Summary .......................................... Salaries and Wages Expense ............... Supplies Expense ................................. Depreciation Expense ........................... Miscellaneous Expense ........................

2,310

Income Summary .......................................... Retained Earnings .................................

860

Retained Earnings ........................................ Dividends ...............................................

600

7,260 $9,140

860

200 170 350 3,170 1,050 860 200 200 860 600

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C

(a)

ESPINOSA COMPANY Partial Worksheet For the Year Ended December 31, 2022

Account

Adjusted Trial Balance

Income Statement

No. 101 112

Titles Cash Accounts Receivable

Dr. 11,600 15,400

Dr.

126 130 151 152

Supplies Prepaid Insurance Equipment Acc. Depreciation— Equip. Notes Payable Accounts Payable Salaries and Wages Payable Interest Payable Common Stock Retained Earnings Dividends Service Revenue Advertising Expense Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Interest Expense Totals Net Income Totals

2,000 2,800 34,000

200 201 212 230 311 320 332 400 610 631 711 722 726 905

Cr.

Balance Sheet Dr. 11,600 15,400

Cr.

2,000 2,800 34,000 8,000 20,000 9,000

8,000 20,000 9,000

3,500 800 20,000 5,000

10,000

10,000 85,000

85,000

12,000 5,700 8,000 5,000

44,000 800 151,300

44,000 800 75,500 9,500 85,000

151,300

85,000

75,800

85,000

75,800

66,300 9,500 75,800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C (Continued) (b)

ESPINOSA COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Service revenue ............................................. Expenses Salaries and wages expense ........................ Advertising expense ..................................... Depreciation expense ................................... Supplies expense .......................................... Insurance expense ........................................ Interest expense ............................................ Total expenses ....................................... Net income ............................................................

$85,000 $44,000 12,000 8,000 5,700 5,000 800 75,500 $ 9,500

ESPINOSA COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Beginning balance, January 1 ............................................... Add: Net income ................................................................... Less: Dividends ..................................................................... Ending balance, December 31 ...............................................

$5,000 9,500 14,500 10,000 $4,500

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C (Continued) ESPINOSA COMPANY Balance Sheet December 31, 2022 Assets Current assets Cash ................................................................ Accounts receivable ...................................... Supplies .......................................................... Prepaid insurance .......................................... Total current assets ............................... Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation—equip. ... Total assets .............................................

$11,600 15,400 2,000 2,800 $31,800 34,000 8,000

26,000 $57,800

Liabilities and Stockholders’ Equity Current liabilities Notes payable ................................................. Accounts payable .......................................... Salaries and wages payable .......................... Interest payable .............................................. Total current liabilities ........................... Long-term liabilities Notes payable ................................................. Total liabilities......................................... Stockholders’ equity Common stock ............................................... Retained earnings .......................................... Total liabilities and stockholders’ equity ...................................................

$10,000 9,000 3,500 800 $23,300 10,000 33,300 20,000 4,500

24,500 $57,800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C (Continued) (c) General Journal Date Account Titles and Explanation Dec. 31 Service Revenue.................................. Income Summary .......................

Ref. 400 350

Debit 85,000

31 Income Summary ................................ Advertising Expense .................. Supplies Expense ...................... Depreciation Expense ................ Insurance Expense .................... Salaries and Wages Expense .... Interest Expense ........................

350 610 631 711 722 726 905

75,500

31 Income Summary ................................ Retained Earnings ......................

350 320

9,500

31 Retained Earnings ............................... Dividends ....................................

320 332

10,000

J14 Credit 85,000 12,000 5,700 8,000 5,000 44,000 800 9,500 10,000

(d)

Date Jan. 1 Dec. 31 31

Date

Explanation Balance Closing entry Closing entry

Explanation

Dec. 31 Balance 31 Closing entry

Retained Earnings Ref. Debit J14 J14

Dividends Ref.

10,000

No. 320 Balance 5,000 14,500 4,500

Debit

Credit

No. 332 Balance

10,000

10,000 0

Credit 5,000 9,500

10,000 J14

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C (Continued)

Date Dec. 31 31 31

Explanation Closing entry Closing entry Closing entry

Income Summary Ref. Debit J14 J14 75,500 J14 9,500

Credit 85,000

Credit

Date Dec. 31 31

Explanation Balance Closing entry

85,000

No. 400 Balance 85,000 0

Date Dec. 31 31

Advertising Expense Explanation Ref. Debit Balance 12,000 Closing entry J14

No. 610 Balance 12,000 0

Date Dec. 31 31

Explanation Balance Closing entry

Supplies Expense Ref. Debit 5,700 J14

Date Dec. 31 31

Depreciation Expense Explanation Ref. Debit Balance 8,000 Closing entry J14

Date Dec. 31 31

Insurance Expense Ref. Debit 5,000 J14

Explanation Balance Closing entry

Service Revenue Ref. Debit

Credit 85,000

No. 350 Balance 85,000 9,500 0

J14

12,000

Credit 5,700

Credit 8,000

Credit 5,000

No. 631 Balance 5,700 0 No. 711 Balance 8,000 0 No. 722 Balance 5,000 0

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-2C (Continued)

Date Dec. 31 31

Salaries and Wages Expense Explanation Ref. Debit Balance 44,000 Closing entry J14

Date Dec. 31 31

Interest Expense Ref. Debit 800 J14

Explanation Balance Closing entry

(e)

Credit 44,000

Credit 800

No. 726 Balance 44,000 0

No. 905 Balance 800 0

ESPINOSA COMPANY Post-Closing Trial Balance December 31, 2022 Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Equipment .......................................................... Accumulated Depreciation—Equipment .......... Notes Payable .................................................... Accounts Payable .............................................. Salaries and Wages Payable ............................. Interest Payable ................................................. Common Stock .................................................. Retained Earnings ............................................. Totals ..........................................................

Debit $11,600 15,400 2,000 2,800 34,000

$65,800

Credit

$ 8,000 20,000 9,000 3,500 800 20,000 4,500 $65,800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-3C

(a)

NASH COMPANY Income Statement For the Year Ended December 31, 2022 Revenues Service revenue............................................. Expenses Salaries and wages expense ........................ Depreciation expense ................................... Insurance expense ........................................ Maintenance and repairs expense ............... Utilities expense ............................................ Total expenses....................................... Net income ............................................................

$69,000 $37,000 2,600 2,200 2,000 1,700 45,500 $23,500

NASH COMPANY Retained Earnings Statement For the Year Ended December 31, 2022 Beginning balance, January 1 ......................................... Add: Net income ............................................................. Less: Dividends ............................................................... Ending balance, December 31 .........................................

$ 6,000 23,500 29,500 14,000 $15,500

NASH COMPANY Balance Sheet December 31, 2022 Assets Current assets Cash ................................................................ Accounts receivable ...................................... Prepaid insurance .......................................... Total current assets ............................... Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation—equip. ... Total assets ............................................. Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$22,400 13,500 3,500 $39,400 26,000 5,600

20,400 $59,800

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-3C (Continued) NASH COMPANY Balance Sheet (Continued) December 31, 2022 Liabilities and Stockholders’ Equity Current liabilities Accounts payable............................................ Salaries and wages payable ........................... Total current liabilities............................. Stockholders’ equity Common stock ................................................ Retained earnings ........................................... Total liabilities and stockholders’ equity ....................................................

(b)

$11,300 3,000 $14,300 30,000 15,500

45,500 $59,800

General Journal

Date Dec. 31 31

31 31

Account Titles and Explanation Service Revenue .................................. Income Summary........................

Ref. 400 350

Debit 69,000

Income Summary ................................ Maintenance and Repairs Expense................................... Depreciation Expense ................ Insurance Expense ..................... Salaries and Wages Expense .... Utilities Expense .........................

350

45,500

Income Summary ................................ Retained Earnings ......................

350 320

23,500

Retained Earnings ............................... Dividends ....................................

320 332

14,000

Credit 69,000

622 711 722 726 732

2,000 2,600 2,200 37,000 1,700 23,500 14,000

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-3C (Continued) (c) 12/31

Retained Earnings No. 320 14,000 1/1 Bal. 6,000 12/31 23,500 12/31 Bal. 15,500

Maintenance and Repairs Expense No. 622 12/31 Bal. 2,000 12/31 2,000

Depreciation Expense No. 711 12/31 Bal. 2,600 12/31 2,600 12/31 Bal.

12/31 12/31

12/31

Dividends 14,000 12/31

Income Summary 45,500 12/31 23,500 69,000

No. 332 14,000 No. 722 2,200

Salaries and Wages Expense 12/31 Bal. 37,000 12/31

No. 726 37,000

Utilities Expense 12/31 Bal. 1,700 12/31

No. 732 1,700

No. 350 69,000 69,000

Service Revenue No. 400 69,000 12/31 Bal. 69,000

(d)

Insurance Expense 12/31 Bal. 2,200 12/31

NASH COMPANY Post-Closing Trial Balance December 31, 2022 Cash..................................................................... Accounts Receivable .......................................... Prepaid Insurance............................................... Equipment ........................................................... Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Common Stock ................................................... Retained Earnings .............................................. Totals ...........................................................

Debit $22,400 13,500 3,500 26,000

$65,400

Credit

$ 5,600 11,300 3,000 30,000 15,500 $65,400

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

LEIKER MANAGEMENT SERVICES INC. Worksheet For the Year Ended December 31, 2022 Account Titles

Cash Accounts Receivable Prepaid Insurance Land Buildings Equipment Accounts Payable Unearned Rent Revenue Mortgage Payable Common Stock Dividends Service Revenue Rent Revenue Salaries and Wages Expense Advertising Expense Utilities Expense Totals Insurance Expense Depr. Expense Accum. Depr.—Buildings Accum. Depr.—Equipment Interest Expense Interest Payable Totals Net Income Totals

Trial Balance

Adjustments

Adjusted Trial Balance

Dr.

Cr.

14,500 23,600 3,100 56,000 106,000 49,000

Cr.

(a) 1,700

10,400 5,000 100,000 120,000

Dr.

Cr.

14,500 23,600 1,400 56,000 106,000 49,000

10,400 2,800 100,000 120,000 15,000

75,600 26,200

35,000 17,000 15,800

1,700 6,400

335,000 (a) 1,700 (b) 6,400 (b) 2,500 (b) 3,900 (d) 9,000 19,300

2,500 3,900 9,000

(d) 9,000 19,300

350,400

2,500 3,900 9,000

9,000 350,400

84,900 16,900 101,800

101,800

265,500

101,800

265,500

Key: (a) Expired Insurance; (b) Depreciation Expense—Building; (c) Depreciation Expense—Equipment; (d) Rent Revenue Earned; (e) Accrued Interest Payable.

Cr.

14,500 23,600 1,400 56,000 106,000 49,000

15,000 75,600 24,000

Balance Sheet Dr.

10,400 2,800 100,000 120,000

15,000

35,000 17,000 15,800 335,000

Cr.

Income Statement

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

9,000 248,600 16,900 265,500

PROBLEM 4-4C

(a)

4-32

PROBLEM 4-4C (Continued) (b)

LEIKER MANAGEMENT SERVICES Balance Sheet December 31, 2022 Assets Current assets Cash ................................................ $ 14,500 Accounts receivable ...................... 23,600 Prepaid insurance .......................... 1,400 Total current assets ............... $ 39,500 Property, plant, and equipment Land ................................................ 56,000 Buildings......................................... $106,000 Less: Accumulated depreciation—buildings ..... 2,500 103,500 Equipment ...................................... 49,000 Less: Accumulated depreciation—equipment .... 3,900 45,100 204,600 Total assets ............................. $244,100 Liabilities and Stockholders’ Equity Current liabilities Current maturity of mortgage payable ........ Accounts payable ......................................... Interest payable ............................................. Unearned rent revenue ................................. Total current liabilities .......................... Long-term liabilities Mortgage payable.......................................... Total liabilities........................................ Stockholders’ equity Common stock .................................................... Retained earnings ($16,900 − $15,000) ......... Total liabilities and owner’s equity ......

$10,000 10,400 9,000 2,800 $ 32,200 90,000 122,200 120,000 1,900

121,900 $244,100

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-4C (Continued) (c) Dec. 31 31

31 31

(d) Dec. 31

31 31

Insurance Expense ............................... Prepaid Insurance .........................

1,700

Depreciation Expense .......................... Accumulated Depreciation— Building ..................................... Accumulated Depreciation— Equipment .................................

6,400

Unearned Rent Revenue ...................... Rent Revenue ................................

2,200

Interest Expense ................................... Interest Payable ............................

9,000

Service Revenue ................................... Rent Revenue ....................................... Income Summary ..........................

75,600 26,200

Income Summary ................................. Salaries and Wages Expense ....... Advertising Expense .................... Interest Expense ........................... Utilities Expense ........................... Depreciation Expense .................. Insurance Expense .......................

84,900

Income Summary ................................. Retained Earnings ........................

16,900

Retained Earnings ................................ Dividends ......................................

18,000

1,700

2,500 3,900 2,200 9,000

101,800 35,000 17,000 9,000 15,800 6,400 1,700 16,900 18,000

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-4C (Continued) (e)

LEIKER MANAGEMENT SERVICES INC. Post-Closing Trial Balance December 31, 2022 Cash................................................................. Accounts Receivable ...................................... Prepaid Insurance........................................... Land ................................................................. Buildings ......................................................... Accumulated Depreciation—Buildings ......... Equipment ....................................................... Accumulated Depreciation—Equipment ....... Accounts Payable ........................................... Interest Payable .............................................. Unearned Rent Revenue ................................ Mortgage Payable ........................................... Common Stock ............................................... Retained Earnings ..........................................

Debit $ 14,500 23,600 1,400 56,000 106,000 $

2,500

49,000

$250,500

Credit

3,900 10,400 9,000 2,800 100,000 120,000 1,900 $250,500

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C

(a) Date July 1 1

3 5 12 18 20 21 25 31 31

General Journal Account Titles and Explanation Cash .................................................... Common Stock ..........................

Ref. 101 311

Debit 12,000

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

157 101 201

6,000

Supplies .............................................. Accounts Payable .....................

128 201

1,300

Prepaid Insurance .............................. Cash ...........................................

130 101

2,400

Accounts Receivable ......................... Service Revenue .......................

112 400

2,500

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

201 101

1,800

Salaries and Wages Expense ............ Cash ...........................................

726 101

1,200

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

101 112

1,400

Accounts Receivable ......................... Service Revenue .......................

112 400

7,000

Gasoline Expense .............................. Cash ...........................................

633 101

200

Dividends ............................................ Cash ...........................................

332 101

900

J1 Credit 12,000 3,000 3,000 1,300 2,400 2,500 1,800 1,200 1,400 7,000 200 900

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Dr.

Cr.

3,900 8,100 1,300 2,400 6,000

Cr.

(a) 1,500 (d) (c)

900 200

Cr.

3,900 9,600 400 2,200 6,000

2,500 12,000

900 9,500

(a) 1,500 (e)

600

(b)

300

900 11,000

200 1,800

11,000 200 1,800

24,000 300 (b) (c) (d)

300

200 900

300

200 900 (e)

3,500

300 300

600 3,500

26,400

200 900 600 26,400

3,400 7,600 11,000

11,000

23,000

11,000

23,000

Key: (a) Service Revenue Earned; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

Cr.

3,900 9,600 400 2,200 6,000 2,500 12,000

900 200 1,200 24,000

Cr.

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

600 15,400 7,600 23,000

PROBLEM 4-5C (Continued)

VICK’S WINDOW WASHING INC. Worksheet For the Month Ended July 31, 2022

(b) & (c)

PROBLEM 4-5C (Continued) (a), (e)&(f)

Date Explanation July 1 1 5 18 20 21 31 31

Cash Ref. J1 J1 J1 J1 J1 J1 J1 J1

Date Explanation July 12 21 25 31 Adjusting

Accounts Receivable Ref. Debit J1 2,500 J1 J1 7,000 J2 1,500

Date July 3 31

Explanation Adjusting

Date Explanation July 5 31 Adjusting

Date July 1

Explanation

Supplies Ref. J1 J2

Debit 12,000

3,000 2,400 1,800 1,200 1,400 200 900

Debit 1,300

Credit 1,400

Credit 900

Prepaid Insurance Ref. Debit J1 2,400 J2 Equipment Ref. J1

Credit

Debit 6,000

Credit 200

Credit

No. 101 Balance 12,000 9,000 6,600 4,800 3,600 5,000 4,800 3,900 No. 112 Balance 2,500 1,100 8,100 9,600 No. 128 Balance 1,300 400 No. 130 Balance 2,400 2,200 No. 157 Balance 6,000

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C (Continued)

Date July 31

Date July 1 3 18

Accumulated Depreciation—Equipment Explanation Ref. Debit Credit Adjusting J2 300

Explanation

Accounts Payable Ref. Debit J1 J1 J1 1,800

Date July 31

Salaries and Wages Payable Explanation Ref. Debit Adjusting J2

Date July 1

Common Stock Ref. Debit J1

Date July 31 31

Date July 31 31 31

Explanation

Explanation Closing Closing

Explanation Closing

Explanation Closing Closing Closing

Retained Earnings Ref. Debit J3 J3 900 Dividends Ref. J1 J3

Debit 900

Income Summary Ref. Debit J3 J3 3,400 J3 7,600

Credit 3,000 1,300

No. 158 Balance 300 No. 201 Balance 3,000 4,300 2,500

Credit 600

No. 212 Balance 600

Credit 12,000

No. 311 Balance 12,000

Credit 7,600

No. 320 Balance 7,600 6,700

Credit

No. 332 Balance 900 0

900

Credit 11,000

No. 350 Balance 11,000 7,600 0

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C (Continued)

Date July 12 25 31 31

Explanation

Adjusting Closing

Service Revenue Ref. Debit J1 J1 J2 J3 11,000

Closing

Gasoline Expense Ref. Debit J1 200 J3

Explanation Adjusting Closing

Supplies Expense Ref. Debit J2 900 J3

Explanation Adjusting Closing

Depreciation Expense Ref. Debit J2 300 J3

Date July 31 31

Explanation Adjusting Closing

Insurance Expense Ref. Debit J2 200 J3

Date July 20 31 31

Salaries and Wages Expense Explanation Ref. Debit J1 1,200 Adjusting J2 600 Closing J3

Date July 31 31

Explanation

Credit 2,500 7,000 1,500

No. 400 Balance 2,500 9,500 11,000 0

Credit

No. 633 Balance 200 0

200

Credit 900

Credit 300

Credit 200

Credit

1,800

No. 634 Balance 900 0 No. 711 Balance 300 0 No. 722 Balance 200 0 No. 726 Balance 1,200 1,800 0

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C (Continued) (d)

VICK’S WINDOW WASHING INC. Income Statement For the Month Ended July 31, 2022 Revenues Service revenue............................................... Expenses Salaries and wages expense .......................... Supplies expense ............................................ Depreciation expense ..................................... Gasoline expense............................................ Insurance expense .......................................... Total expenses......................................... Net income ..............................................................

$11,000 $1,800 900 300 200 200 3,400 $ 7,600

VICK’S WINDOW WASHING INC. Retained Earnings Statement For the Month Ended July 31, 2022 Beginning balance, July 1 ...................................... Net income ..............................................................

0 7,600 7,600 900 $6,700

Less: Dividends ..................................................... Ending balance, July 31 .........................................

VICK’S WINDOW WASHING INC. Balance Sheet July 31, 2022 Assets Current assets Cash ................................................................. Accounts receivable ....................................... Supplies ........................................................... Prepaid insurance ........................................... Total current assets ................................

$3,900 9,600 400 2,200 $16,100

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C (Continued) VICK’S WINDOW WASHING INC. Balance Sheet (Continued) July 31, 2022 Assets (Continued) Property, plant, and equipment Equipment ........................................................... Less: Accumulated depreciation—equip. ..... Total assets ................................................

6,000 300

5,700 $21,800

Liabilities and Stockholders’ Equity Current liabilities Accounts payable ............................................ Salaries and wages payable............................ Total current liabilities ............................... Stockholders’ equity Common stock ................................................. Retained earnings ............................................ Total liabilities and stockholders’ equity ..

$2,500 600 $ 3,100 12,000 6,700

18,700 $21,800

(e) Date July 31 31

31 31 31

General Journal Account Titles and Explanation Accounts Receivable ........................ Service Revenue ......................

Ref. 112 400

Debit 1,500

Depreciation Expense ....................... Accumulated Depreciation— Equipment.............................

711

300

Insurance Expense ........................... Prepaid Insurance ....................

722 130

200

Supplies Expense ............................. Supplies ....................................

634 128

900

Salaries and Wages Expense ........... Salaries and Wages Payable ...

726 212

600

J2 Credit 1,500

158

300 200 900 600

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

PROBLEM 4-5C (Continued) (f) Date July 31 31

31 31

General Journal Account Titles and Explanation Service Revenue................................. Income Summary ......................

Ref. 400 350

Debit 11,000

Income Summary ............................... Salaries and Wages Expense ... Depreciation Expense ............... Insurance Expense.................... Supplies Expense...................... Gasoline Expense .....................

350 726 711 722 634 633

3,400

Income Summary ............................... Retained Earnings .....................

350 320

7,600

Retained Earnings .............................. Dividends ...................................

320 332

900

J3 Credit 11,000 1,800 300 200 900 200 7,600 900

VICK’S WINDOW WASHING INC. Post-Closing Trial Balance July 31, 2022

(g)

Cash..................................................................... Accounts Receivable .......................................... Supplies .............................................................. Prepaid Insurance............................................... Equipment ........................................................... Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Common Stock ................................................... Retained Earnings ..............................................

Debit $ 3,900 9,600 400 2,200 6,000

$22,100

Credit

300 2,500 600 12,000 6,700 $22,100

Weygandt, Financial and Managerial Accounting, 11e, Solutions Problems: Set C

CHAPTER 5 SOLUTIONS TO PROBLEMS—SET C PROBLEM 5-1C (a) June 1 3

6 9

15 17

20 24

Inventory (180 X $5) .................................... Accounts Payable ...............................

900

Accounts Receivable (120 X $10) .............. Sales Revenue .....................................

1,200

Cost of Goods Sold (120 X $5) ................... Inventory ..............................................

600

Accounts Payable (10 X $5)........................ Inventory ..............................................

Accounts Payable ($900 – $50) .................. Inventory ($850 X .02).......................... Cash .....................................................

850

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

1,200

Accounts Receivable (150 X $10) .............. Sales Revenue .....................................

1,500

Cost of Goods Sold (150 X $5) ................... Inventory ..............................................

750

Inventory (120 X $5) .................................... Accounts Payable ...............................

600

Cash ............................................................. Sales Discounts ($1,500 X .02) ................... Accounts Receivable ..........................

1,470 30

Accounts Payable ....................................... Inventory ($600 X .02).......................... Cash .....................................................

600

900 1,200 600 50 17 833 1,200 1,500 750 600

1,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

12 588

PROBLEM 5-1C (Continued) June 28

Accounts Receivable (110 X $10) ............... Sales Revenue .....................................

1,100

Cost of Goods Sold (110 X $5) ................... Inventory ..............................................

550

Sales Returns and Allowances (15 X $10) ................................................. Accounts Receivable........................... Inventory (15 X $5) ...................................... Cost of Goods Sold .............................

1,100 550 150 150 75

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-2C (a) Date May 1 2

5 9

11 12 15 17 19

General Journal Account Titles and Explanation Inventory .......................................... Accounts Payable ....................

Ref. 120 201

Debit 9,000

Accounts Receivable ....................... Sales Revenue ..........................

112 401

4,500

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

505 120

3,100

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

201 120

600

Cash ($4,500 – $45) .......................... Sales Discounts ($4,500 X 1%) ....... Accounts Receivable ...............

101 414 112

4,455 45

Accounts Payable ($9,000 – $600) .. Inventory ($8,400 X 2%) ........... Cash ..........................................

201 120 101

8,400

Supplies............................................ Cash ..........................................

126 101

900

Inventory .......................................... Cash ..........................................

120 101

2,700

Cash .................................................. Inventory ...................................

101 120

230

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

120 201

3,000

Inventory .......................................... Cash ..........................................

120 101

250

J1 Credit 9,000 4,500 3,100 600

4,500 168 8,232 900 2,700 230 3,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

250

PROBLEM 5-2C (Continued)

Date May 24

25 27

General Journal Account Titles and Explanation Cash .................................................... Sales Revenue ............................

Ref. 101 401

Debit 6,200

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

505 120

4,600

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

120 201

1,000

Accounts Payable .............................. Inventory ($3,000 X 2%) .............. Cash.............................................

201 120 101

3,000

Sales Returns and Allowances.......... Cash.............................................

412 101

100

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

120 505

Accounts Receivable ......................... Sales Revenue ............................

112 401

2,600

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

505 120

1,820

J1 Credit 6,200 4,600 1,000 60 2,940 100 20 2,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

1,820

PROBLEM 5-2C (Continued) (b) Cash Date May

1 9 10 11 12 15 19 24 27 29

Explanation Balance

Accounts Receivable Date Explanation May 2 9 31

Ref.

Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1

4,455

Ref. J1 J1 J1

Credit

8,232 900 2,700 230 250 6,200 2,940 100

Debit 4,500

Credit 4,500

2,600

No. 101 Balance 10,000 14,455 6,223 5,323 2,623 2,853 2,603 8,803 5,863 5,763 No. 112 Balance 4,500 0 2,600

Inventory Date May

No. 120 Explanation

1 2 5 10 12 15 17 19 24 25 27 29 31

Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit 9,000

Credit 3,100 600 168

2,700 230 3,000 250 4,600 1,000 60 20 1,820

Balance 9,000 5,900 5,300 5,132 7,832 7,602 10,602 10,852 6,252 7,252 7,192 7,212 5,392

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-2C (Continued) Supplies Date Explanation May 11

Ref. J1

Debit 900

Credit

Accounts Payable Date May

Explanation 1 5 10 17 25 27

No. 201 Ref. J1 J1 J1 J1 J1 J1

Debit

Credit 9,000

600 8,400 3,000 1,000 3,000

Common Stock Date May

Explanation 1 Balance

Sales Revenue Date Explanation May 2 24 31 Sales Returns and Allowances Date Explanation May 29 Sales Discounts Date Explanation May 9

No. 126 Balance 900

Balance 9,000 8,400 0 3,000 4,000 1,000 No. 311

Ref.

Ref. J1 J1 J1

Ref. J1

Debit

Debit 100

Debit 45

Credit

Credit 4,500 6,200 2,600

Balance 10,000 No. 401 Balance 4,500 10,700 13,300

Credit

No. 412 Balance 100

Credit

No. 414 Balance 45

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-2C (Continued) Cost of Goods Sold Date Explanation May 2 24 29 31

(c)

Ref. J1 J1 J1 J1

Debit 3,100 4,600

Credit

20 1,820

No. 505 Balance 3,100 7,700 7,680 9,500

BLUESTEM HARDWARE STORE Income Statement (Partial) For the Month Ended May 31, 2022 Sales revenues Sales revenue ..................................................... Less: Sales returns and allowances ................ Sales discounts....................................... Net sales ............................................................. Cost of goods sold .................................................... Gross profit ................................................................

$13,300 $100 45

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

145 13,155 9,500 $ 3,655

PROBLEM 5-3C

(a)

LONG DEPARTMENT STORE Income Statement For the Year Ended November 30, 2022

Sales revenues Sales revenue .................................... Less: Sales returns & allowances ... Net sales ............................................. Cost of goods sold ................................... Gross profit ............................................... Operating expenses Salaries and wages expense ............ Rent expense ..................................... Sales commissions expense ............ Depreciation expense ....................... Utilities expense ................................ Insurance expense ............................ Freight-out ......................................... Property tax expense ........................ Total oper. expenses .................. Income from operations ........................... Other revenues and gains Interest revenue ................................. Other expenses and losses Interest expense ................................ Net income ................................................

$850,000 10,000 840,000 633,220 206,780 $120,000 19,000 14,000 13,500 10,600 9,000 8,200 3,500 197,800 8,980 $5,000 8,000 $

3,000 5,980

LONG DEPARTMENT STORE Retained Earnings Statement For the Year Ended November 30, 2022 Beginning balance December 1, 2021 ............................................ Add: Net income ............................................................................ Less: Dividends .............................................................................. Ending balance November 30, 2022 ...............................................

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$14,200 5,980 20,180 12,000 $ 8,180

PROBLEM 5-3C (Continued) LONG DEPARTMENT STORE Balance Sheet November 30, 2022 Assets Current assets Cash................................................... Accounts receivable ......................... Inventory ........................................... Prepaid insurance............................. Total current assets .................. Property, plant, and equipment Equipment ......................................... Less: Accumulated depreciation— equipment .............................. Total assets ...............................

$ 8,000 11,770 36,200 4,500 $ 60,470 182,000 61,480

120,520 $180,990

Liabilities and Stockholders’ Equity Current liabilities Accounts payable ...................................................... $47,310 Sales commissions payable ..................................... 6,000 Property taxes payable.............................................. 3,500 Total current liabilities ....................................... $ 56,810 Long-term liabilities Notes payable due 2025 ............................................ 46,000 Total liabilities .................................................... 102,810 Stockholders’ equity Common Stock .......................................................... 70,000 Retained Earnings ..................................................... 8,180 78,180 Total liabilities and stockholders’ equity ......... $180,990

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-3C (Continued) (b) Nov. 30

30 30

Depr. Expense ........................................ Accumulated Depreciation— Equipment ...................................

13,500

Insurance Expense ................................. Prepaid Insurance ...........................

9,000

Property Tax Expense ............................ Property Taxes Payable..................

3,500

Sales Commissions Expense ................ Sales Commissions Payable ..........

6,000

Sales ........................................................ Interest Revenue .................................... Income Summary ............................

850,000 5,000

Income Summary ................................... Sales Returns and Allowances .................................. Cost of Goods Sold ........................ Salaries and Wages Expense ......... Depreciation Expense .................... Freight-Out ...................................... Sales Commissions Expense ........ Insurance Expense ......................... Rent Expense .................................. Property Tax Expense .................... Utilities Expense ............................. Interest Expense .............................

849,020

Income Summary ................................... Retained Earnings ..........................

5,980

Retained Earnings .................................. Dividends ........................................

12,000

13,500 9,000 3,500 6,000

855,000

10,000 633,220 120,000 13,500 8,200 14,000 9,000 19,000 3,500 10,600 8,000 5,980

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

12,000

PROBLEM 5-4C

(a) Date Apr. 5 7 9 10

12 14

17 20

General Journal Account Titles and Explanation Inventory ............................................. Accounts Payable.......................

Ref. 120 201

Debit 1,500

Inventory ............................................. Cash ............................................

120 101

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

201 120

100

Accounts Receivable ......................... Sales Revenue ............................

112 401

1,100

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

505 120

810

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

120 201

860

Accounts Payable ($1,500 – $100) .... Inventory ($1,400 X 2%).............. Cash ............................................

201 120 101

1,400

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

201 120

Accounts Receivable ......................... Sales Revenue ............................

112 401

700

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

505 120

490

Accounts Payable ($860 – $60) ......... Inventory ($800 X 1%)................. Cash ............................................

201 120 101

800

J1 Credit 1,500 80 100 1,100 810 860 28 1,372 60 700 490

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

8 792

PROBLEM 5-4C (Continued) Date Apr. 27 30

Account Titles and Explanation Sales Returns and Allowances ..... Accounts Receivable .............

Ref. 412 112

Debit 40

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

101 112

1,000

J1 Credit 40 1,000

(b) Cash Date Apr.

1 7 14 21 30

Explanation Balance

Accounts Receivable Date Explanation Apr. 10 20 27 30 Inventory Date Explanation Apr. 1 Balance 5 7 9 10 12 14 17 20 21

Ref. J1 J1 J1 J1

Debit

Credit 80 1,372 792

1,000

Debit 1,100 700

Credit

40 1,000

Ref.

Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1

1,500 80

Credit

100 810 860 28 60 490 8

No. 101 Balance 2,500 2,420 1,048 256 1,256 No. 112 Balance 1,100 1,800 1,760 760 No. 120 Balance 3,500 5,000 5,080 4,980 4,170 5,030 5,002 4,942 4,452 4,444

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-4C (Continued) Accounts Payable Date Explanation Apr. 5 9 12 14 17 21

Common Stock Date Explanation Apr. 1 Balance

Sales Revenue Date Explanation Apr. 10 20

Sales Returns and Allowances Date Explanation Apr. 27

Cost of Goods Sold Date Explanation Apr. 10 20

Ref. J1 J1 J1 J1 J1 J1

Ref.

Ref. J1 J1

Ref. J1

Ref. J1 J1

Debit

Credit 1,500

100 860 1,400 60 800

Debit

Debit 40

Debit 810 490

Credit

Credit 1,100 700

Credit

No. 201 Balance 1,500 1,400 2,260 860 800 0

No. 311 Balance 6,000

No. 401 Balance 1,100 1,800

No. 412 Balance 40

No. 505 Balance 810 1,300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-4C (Continued) PHIL’S PRO SHOP INC. Trial Balance April 30, 2022

(c)

Cash ........................................................................ Accounts Receivable ............................................. Inventory ................................................................ Owner’s Capital...................................................... Sales Revenue ....................................................... Sales Returns and Allowances ............................. Cost of Goods Sold ...............................................

Debit $1,256 760 4,444

Credit

$6,000 1,800 40 1,300 $7,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$7,800

PROBLEM 5-5C

HAMMOND DEPARTMENT STORE Income Statement (Partial) For the Year Ended November 30, 2022 Sales revenues Sales revenue ........................... Less: Sales returns and allowances ..................... Net sales ................................... Cost of goods sold Inventory, Dec. 1, 2021 ............. Purchases ................................. Less: Purchase returns and allowances ............. Purchase discounts ...... Net purchases........................... Add: Freight-in ......................... Cost of goods purchased ........ Cost of goods available for sale ............................. Inventory, Nov. 30, 2022 ........... Cost of goods sold .......... Gross profit......................................

$900,000 20,000 880,000 $ 44,360 $650,000 $3,000 7,000

10,000 640,000 5,060 645,060 689,420 36,200 653,220 $226,780

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-6C

(a)

Cost of goods sold = Sales – Gross profit = $96,850 – $69,640 = $27,210

(b)

Net income = Gross profit – Operating expenses = $69,640 – $63,500 = $6,140

(c)

Inventory = 2020 Inventory + Purchases – CGS = $13,000 + $28,890 – $27,210 = $14,680

(d)

Cash payments to suppliers = 2020 Accounts payable + Purchases – 2021 Accounts payable = $5,800 + $28,890 – $6,500 = $28,190

(e)

Sales = Cost of goods sold + Gross profit = $25,140 + $63,540 = $88,680

(f)

Operating expenses = Gross profit – Net income = $63,540 – $4,570 = $58,970

(g)

2021 Inventory + Purchases – 2022 Inventory = CGS Purchases = CGS – 2021 Inventory + 2022 Inventory = $25,140 – $14,680 [from (c)] + $14,700 = $25,160

(h)

Cash payments to suppliers = 2021 Accounts payable + Purchases – 2022 Accounts Payable = $6,500 + $25,160 [from (g)] – $4,600 = $27,060

(i)

Gross profit = Sales – CGS = $81,220 – $25,990 = $55,230

(j)

Net income = Gross profit – Operating expenses = $55,230 [from (i)] – $52,060 = $3,170

(k)

2022 Inventory + Purchases – 2023 Inventory = CGS 2023 Inventory = 2022 Inventory + Purchases – CGS = $14,700 + $24,050 – $25,990 = $12,760

(I)

Accounts payable = 2022 Accounts payable + Purchases – Cash payments = $4,600 + $24,050 – $24,650 = $4,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 5-6C (Continued) (b) A decline in sales does not necessarily mean that profitability declined. Profitability is affected by sales, cost of goods sold, and operating expenses. If cost of goods sold or operating expenses decline more than sales, profitability can increase even when sales decline. However, in this particular case, sales declined with insufficient offsetting cost savings to improve profitability. Therefore, profitability declined for Aguilar Inc. 2021

2022

2023

Gross profit rate

$69,640 ÷ $96,850 $63,540 ÷ $88,680 $55,230 ÷ $81,220 = 72% = 72% = 68%

Profit margin

$6,140 ÷ $96,850 = 6.3%

$4,570 ÷ $88,680 = 5.2%

$3,170 ÷ $81,220 = 3.9%

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 5-7C (a) Date Apr. 5 7 9 10 12 14

17 20 21

27 30

General Journal Account Titles and Explanation Purchases ..................................................... Accounts Payable .................................

Debit 2,700

2,700

Freight-in....................................................... Cash.......................................................

Accounts Payable ........................................ Purchase Returns and Allowances .....

200

Accounts Receivable ................................... Sales Revenue ......................................

950

Purchases ..................................................... Accounts Payable .................................

460

Accounts Payable ($2,700 – $200) ................ Purchase Discounts ($2,500 X 2%) ...... Cash ($2,500 – $50)...............................

2,500

Accounts Payable ........................................ Purchase Returns and Allowances .....

Accounts Receivable ................................... Sales Revenue ......................................

1,400

Accounts Payable ($460 – $60) ................... Purchase Discounts ($400 X 1%) .......... Cash ($400 – $4)....................................

400

Sales Returns and Allowances.................... Accounts Receivable ............................

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

1,100

Credit

80 200 950 460 50 2,450 60 1,400 4 396 75

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

1,100

*PROBLEM 5-7C (Continued) (b) 4/1 Bal. 4/30 4/30 Bal.

Cash 2,500 4/7 1,100 4/14 4/21 674

80 2,450 396

Accounts Receivable 4/10 950 4/27 75 4/20 1,400 4/30 1,100 4/30 Bal. 1,175

4/1 Bal. 4/30 Bal.

4/9 4/14 4/17 4/21

Inventory 3,500 3,500

Accounts Payable 200 4/5 2,500 4/12 60 400 4/30 Bal.

2,700 460

Common Stock 4/1 Bal. 4/30 Bal.

6,000 6,000

Sales Revenue 4/10 4/20 4/30 Bal.

950 1,400 2,350

Sales Returns and Allowances 4/27 75 4/30 Bal. 75

4/5 4/12 4/30 Bal.

Purchases 2,700 460 3,160

4/7 4/30 Bal.

Freight-in 80 80

Purchase Returns and Allowances 4/9 200 4/17 60 4/30 Bal. 260 Purchase Discounts 4/14 4/21 4/30 Bal.

50 4 54

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 5-7C (Continued) (c)

MOLINA PRO SHOP INC. Trial Balance April 30, 2022 Cash ...................................................................... Accounts Receivable ........................................... Inventory ............................................................... Common Stock ..................................................... Sales Revenue ...................................................... Sales Returns and Allowances ............................ Purchases ............................................................. Purchase Returns and Allowances ..................... Purchase Discounts ............................................. Freight-In ...............................................................

Debit $ 674 1,175 3,500

Credit

$6,000 2,350 75 3,160 260 54 80 $8,664

$8,664

MOLINA PRO SHOP INC. Income Statement (Partial) For the Month Ended April 30, 2022 Sales revenues Sales revenue ................................ Less: Sales returns and allowances .......................... Net sales ......................................... Cost of goods sold Inventory, April 1 ........................... Purchases ...................................... Less: Purchase returns and allowances ................... Purchase discounts ........... Net purchases ................................ Add: Freight-in .............................. Cost of goods purchased ............... Cost of goods available for sale ........................................ Inventory, April 30 ......................... Cost of goods sold ................. Gross profit ...........................................

$2,350 75 2,275 $3,500 $3,160 $260 54

314 2,846 80 2,926 6,426 4,524

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

1,902 $ 373

CHAPTER 6 SOLUTIONS TO PROBLEMS—SET C PROBLEM 6-1C

(a)

Title to the goods does not transfer to the customer until March 2. Include the $800 in ending inventory.

(b)

Mareska owns the goods once they are shipped on February 26. Include inventory of $375.

(c)

Include the $500 in ending inventory.

(d)

Exclude the items from Mareska’s inventory. Title remains with the consignor.

(e)

Title of the goods does not transfer to Mareska until March 2. Exclude this amount from the February 28 inventory.

(f)

The sale will be recorded on February 26. The goods (cost, $300) should be excluded from Mareska’s inventory at the end of February.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-2C

(a) Date Oct. 1 3 9 19 25

COST OF GOODS AVAILABLE FOR SALE Explanation Units Unit Cost Beginning Inventory 1,000 $5 Purchase 3,500 6 Purchase 4,000 7 Purchase 2,000 8 Purchase 2,000 9 Total 12,500

(b)

Total Cost $ 5,000 21,000 28,000 16,000 18,000 $88,000

FIFO (1)

Ending Inventory Unit Date Units Cost Oct. 25 2,000 $9 19 500 8 2,500*

Total Cost $18,000 4,000 $22,000

(2) Cost of Goods Sold Cost of goods available for sale $88,000 Less: Ending inventory 22,000 Cost of goods sold $66,000

*12,500 – 10,000 = 2,500 Date Oct. 1 3 9 19

Proof of Cost of Goods Sold Units Unit Cost Total Cost 1,000 $5 $ 5,000 3,500 6 21,000 4,000 7 28,000 1,500 8 12,000 10,000 $66,000 LIFO

(1)

Ending Inventory Unit Date Units Cost Oct. 1 1,000 $5 3 1,500 6 2,500

Total Cost $ 5,000 9,000 $14,000

(2) Cost of Goods Sold Cost of goods available for sale $88,000 Less: Ending inventory 14,000 Cost of goods sold $74,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-2C (Continued) Proof of Cost of Goods Sold Unit Total Date Units Cost Cost Oct. 25 2,000 $9 $18,000 19 2,000 8 16,000 9 4,000 7 28,000 3 2,000 6 12,000 10,000 $74,000 AVERAGE COST (1) Ending Inventory (2) Cost of Goods Sold $88,000 ÷ 12,500 = $7.04 Cost of goods available for sale $88,000 Units Unit Cost Total Cost Less: Ending inventory 17,600 2,500 $7.04 $17,600 Cost of goods sold $70,400 (c) 1. 2.

FIFO results in the highest inventory amount for the balance sheet, $22,000. LIFO results in the highest cost of goods sold, $74,000.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-3C

(a) Date 1/1 3/15 7/20 9/4 12/2

COST OF GOODS AVAILABLE FOR SALE Explanation Units Unit Cost Beginning Inventory 100 $21 Purchase 300 24 Purchase 200 25 Purchase 300 28 Purchase 100 30 Total 1,000

(b)

Total Cost $ 2,100 7,200 5,000 8,400 3,000 $25,700

FIFO (1) Date 12/2 9/4

Ending Inventory Unit Units Cost 100 $30 100 28 200

Total Cost $3,000 2,800 $5,800

(2) Cost of Goods Sold Cost of goods available for sale $25,700 Less: Ending inventory 5,800 Cost of goods sold $19,900

Proof of Cost of Goods Sold Unit Total Date Units Cost Cost 1/1 100 $21 $ 2,100 3/15 300 24 7,200 7/20 200 25 5,000 9/4 200 28 5,600 800 $19,900 (c)

LIFO (1) Date 1/1 3/15

Ending Inventory Unit Units Cost 100 $21 100 24 200

Total Cost $2,100 2,400 $4,500

(2) Cost of Goods Sold Cost of goods available for sale $25,700 Less: Ending inventory 4,500 Cost of goods sold $21,200

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-3C (Continued) Proof of Cost of Goods Sold Unit Total Date Units Cost Cost 12/2 100 $30 $ 3,000 9/4 300 28 8,400 7/20 200 25 5,000 3/15 200 24 4,800 800 $21,200 AVERAGE COST (1) Ending Inventory (2) Cost of Goods Sold $25,700 ÷ 1,000 = $25.70 Cost of goods available for sale $25,700 Units Unit Cost 5,140 Total Cost Less: Ending inventory 200 $25.70 $5,140 Cost of goods sold $20,560 Proof of Cost of Goods Sold 800 units X $25.70 = $20,560

FIFO results in the highest inventory amount, $5,800, as shown in (b) above.

LIFO produces the highest cost of goods sold, $21,200, as shown in (b) above.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-4C (a)

MATHENY INC. Condensed Income Statements For the Year Ended December 31, 2022 FIFO Sales ........................................................ Cost of goods sold Beginning inventory ........................ Cost of goods purchased................ Cost of goods available for sale ..... Ending inventory ............................. Cost of goods sold .......................... Gross profit ............................................. Operating expenses ............................... Income before income taxes .................. Income taxes (32%) ................................ Net income .............................................. a

LIFO

$865,000

22,800 578,500 601,300 53,000a 548,300 316,700 147,000 169,700 54,304 $115,396

22,800 578,500 601,300 45,800b 555,500 309,500 147,000 162,500 52,000 $110,500

20,000 X $2.65 = $53,000. $22,800 + (10,000 X $2.30) = $45,800.

(b) 1.

The FIFO method produces the most meaningful inventory amount for the balance sheet because the units are costed at the most recent purchase prices.

The LIFO method produces the most meaningful net income because the cost of the most recent purchases are matched against sales.

The FIFO method is most likely to approximate actual physical flow because the oldest goods are usually sold first to minimize spoilage and obsolescence.

There will be $2,304 additional cash available under LIFO because income taxes are $52,000 under LIFO and $54,304 under FIFO.

Gross profit under the average cost method will be: (a) lower than FIFO and (b) higher than LIFO.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-5C

(a) Cost of Goods Available for Sale Date Explanation June 1 Beginning Inventory June 4 Purchase June 18 Purchase June 18 Purchase return June 28 Purchase Total Ending Inventory in Units: Units available for sale —Sales (70 – 10 + 30) Units remaining in ending inventory

160 90 70

Units 25 85 35 (5) 20 160

Date June 10 11 25

Unit Cost $60 64 68 68 72

Total Cost $ 1,500 5,440 2,380 (340) 1,440 $10,420

Sales Revenue Unit Units Price Total Sales 70 $90 $6,300 (10) 90 (900) 30 95 2,850 90 $8,250

(1) LIFO (i) Ending Inventory June 1 25 @ $60 4 45 @ 64 70 (iii) Gross Profit Sales revenue –Cost of goods sold Gross profit

$1,500 2,880 $4,380

$8,250 6,040 $2,210

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$10,420 4,380 $ 6,040

(iv) Gross Profit Rate Gross profit $2,210 = 26.8% Net sales $8,250

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-5C (Continued) (2) FIFO (i) Ending Inventory June 28 20 @ $72 18 30 @ $68 4 20 @ $64 70 (iii) Gross Profit Sales revenue –Cost of goods sold Gross profit

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$1,440 2,040 1,280 $4,760

$10,420 4,760 $ 5,660

(iv) Gross Profit Rate Gross profit $2,590 = 31.4% Net sales $8,250

$8,250 5,660 $2,590

(3) Average-Cost Cost of goods available for sale Units available for sale

Weighted-average cost per unit:

$10,420 = $65.125 160 (i)

Ending Inventory 70 units @$65.125

(iii) Gross Profit Sales revenue –Cost of goods sold Gross profit

4,558.75

$8,250.00 5,861.25 $2,388.75

(ii) Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold

$10,420.00 4,558.75 $ 5,861.25

(iv) Gross Profit Rate Gross profit $2,388.75 = 29.0% Net sales $8,250.00

(b) In this period of rising prices, LIFO gives the highest cost of goods sold and the lowest gross profit. FIFO gives the lowest cost of goods sold and the highest gross profit.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-6C (a)

WAINWRIGHT INC. Income Statement (partial) For the Year Ended March 31, 2022 Sales revenuea Beginning inventory Purchasesb Cost of goods available for sale Ending inventoryc Cost of goods sold Gross profit

Specific Identification $4,230 600 3,715

FIFO $4,230 600 3,715

LIFO $4,230 600 3,715

4,315 1,341 2,974 $1,256

4,315 1,443 2,872 $1,358

4,315 1,140 3,175 $1,055

(a)

(1,800 @ $.60) + (4,500 @ $.70) (2,000 @ $.45) + (3,500 @ $.49) + (2,000 @ $.55) (c) Specific identification ending inventory consists of: (b)

Beginning inventory (1,500 litres – 900 – 400) March 3 purchase (2,000 litres – 900 – 500) March 10 purchase (3,500 litres – 2,600) March 20 purchase (2,000 litres – 1,000)

200 @ $.40 600 @ $.45 900 @ $.49 1,000 @ $.55 2,700 litres

80 270 441 550 $1,341

FIFO ending inventory consists of: March 20 purchase March 10 purchase

2,000 @ $.55 700 @ $.49 2,700 litres

$1,100 343 $1,443

1,500 @ $.40 1,200 @ $.45 2,700 litres

$ 600 540 $1,140

LIFO ending inventory consists of: Beginning inventory March 3 purchase

(b) Companies can choose a cost flow method that produces the highest possible cost of goods sold and lowest gross profit to justify price increases. In this example, LIFO produces the lowest gross profit and best support to increase selling prices. Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 6-7C (a)

MALONE CO. Condensed Income Statement For the Year Ended December 31, 2022 Sales ........................................................ Cost of goods sold Beginning inventory ........................ Cost of goods purchased ............... Cost of goods available for sale..... Ending inventory ............................. Cost of goods sold .......................... Gross profit ............................................. Operating expenses ............................... Income before income taxes ................. Income tax expense (30%) ..................... Net income .............................................. a

FIFO $630,000

LIFO $630,000

37,000 479,000 516,000 135,000a 381,000 249,000 120,000 129,000 38,700 $ 90,300

37,000 479,000 516,000 121,000b 395,000 235,000 120,000 115,000 34,500 $ 80,500

(20,000 @ $4.55) + (10,000 @ $4.40) = $135,000. (10,000 @ $3.70) + (20,000 @ $4.20) = $121,000.

(b) Answers to questions: 1.

The FIFO method produces the most meaningful inventory amount for the balance sheet because the units are costed at the most recent purchase prices.

The LIFO method produces the most meaningful net income because the costs of the most recent purchases are matched against sales.

The FIFO method is most likely to approximate actual physical flow because the oldest goods are usually sold first to minimize spoilage and obsolescence.

There will be $4,200 additional cash available under LIFO because income taxes are $34,500 under LIFO and $38,700 under FIFO.

The illusionary gross profit is $14,000 or ($249,000 – $235,000). Under LIFO, MALONE Co. has recovered the current replacement cost of the units ($395,000), whereas under FIFO, it has only recovered the

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

earlier costs ($381,000). This means that, under FIFO, the company must reinvest $14,000 of the gross profit to replace the units used.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-8C (a) Cost of goods available for sale: Inventory Purchases: January 5 January 15 January 16 (return) January 25 Sales: January 8 January 10 (return) January 20 (1) LIFO Date January 1 January 5

50 units @ $12

$ 600

100 units @ $14 30 units @ $18 (5 units @ $18) 10 units @ $20 185 units

1,400 540 (90) 200 $2,650

80 units @ $25 (10 units @ $25) 65 units @ $25 135 units

$2,000 (250) 1,625 $3,375

Purchases

Cost of Goods Sold

(100 @ $14) $1,400

January 8

( 80 @ $14)

$1,120

January 10

(–10 @ $14)

($ 140)

January 15

January 16

( 30 @ $18) $ 540

( –5 @ $18) ($

90)

( 25 @ $18) ( 30 @ $14) ( 10 @ $12)

January 20 January 25

}

$ 990

( 10 @ $20) $ 200

Balance ( 50 @ $12) ( 50 @ $12) (100 @ $14) ( 50 @ $12) ( 20 @ $14) ( 50 @ $12) ( 30 @ $14) ( 50 @ $12) ( 30 @ $14) ( 30 @ $18) ( 50 @ $12) ( 30 @ $14) ( 25 @ $18)

} $2,000 } $ 880 } $1,020

} }

$1,560

$1,470

( 40 @ $12)

$ 480

( 40 @ $12) ( 10 @ $20)

} $ 680

$1,970

$ 600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

(i) Cost of goods sold: $2,650 – $680 = $1,970. (ii) Ending inventory = $680. (iii) Gross profit = $3,375 – $1,970 = $1,405.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-8C (Continued) (2) FIFO Date

Purchases

Cost of Goods Sold

January 1 January 5

(100 @ $14) $1,400 ( 50 @ $12) ( 30 @ $14) (–10 @ $14)

January 8 January 10 January 15

( 30 @ $18) $ 540

January 16

( –5 @ $18)($

($ 140)

90)

January 20 January 25

} $1,020

(65 @ $14)

$ 910

( 10 @ $20) $ 200

Balance ( 50 @ $12) ( 50 @ $12) (100 @ $14)

$ 600

} $2,000

( 70 @ $14)

$ 980

( 80 @ $14) ( 80 @ $14) ( 30 @ $18) ( 80 @ $14) ( 25 @ $18) ( 15 @ $14) ( 25 @ $18) ( 15 @ $14) ( 25 @ $18) ( 10 @ $20)

$1,120

} $1,660 } $1,570 } $ 660

}

$ 860

$1,790

(i) Cost of goods sold: $2,650 – $860 = $1,790. (ii) Ending inventory = $860. (iii) Gross profit = $3,375 – $1,790 = $1,585. (3) Moving-Average Date January 1 January 5 January 8 January 10 January 15 January 16 January 20 January 25

Purchases

Cost of Goods Sold

(100 @ $14) $1,400 ( 80 @ $13.333) $1,067* (–10 @ $13.333) ($ 133)* ( 30 @ $18) $ 540 ( –5 @ $18) ($ 90) ( 65 @ $14.438) $ 938* ( 10 @ $20) $ 200

Balance ( 50 @ $12) (150 @ $13.333)a ( 70 @ $13.333) ( 80 @ $13.333) (110 @ $14.600)b (105 @ $14.438)c ( 40 @ $14.438)d ( 50 @ $15.56)

$ 600 $2,000 $ 933 $1,066 $1,606 $1,516 $ 578 $ 778

$1,872 *rounded a $2,000 ÷ 150 = $13.333 b $1,606 ÷ 110 = $14.60

$1,516 ÷ 105 = $14.438 $578 ÷ 40 = $14.438

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-8C (Continued) (b) Gross profit: Sales –Cost of goods sold Gross profit Ending inventory

LIFO $3,375 1,970 $1,405 $ 680

FIFO $3,375 1,790 $1,585 $ 860

Moving-Average $3,375 1,872 $1,503 $ 778

In a period of rising costs, the LIFO cost flow assumption results in the highest cost of goods sold and lowest gross profit. FIFO gives the lowest cost of goods sold and highest gross profit. The moving-average-cost flow assumption results in amounts between the other two. On the balance sheet, FIFO gives the highest ending inventory (representing the most current costs); LIFO gives the lowest ending inventory (representing the oldest costs); and average cost results in an ending inventory falling between the other two.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-9C FIFO

(1) Date July 1 6 11

Purchases (4 @ $ 90)

$360 (3 @ $ 90)

(5 @ $ 99)

(1 @ $ 90) (1 @ $ 99) (6 @ $106)

$270

$495

14 21

Cost of Goods Sold

} $189

$636

(4 @ $ 99) (1 @ $106)

(2)

} $502

Balance (4 @ $ 90) (1 @ $ 90) (1 @ $ 90) (5 @ $ 99)

$ 360 $ 90

} $ 585

(4 @ $ 99) (4 @ $ 99) (6 @ $106)

$ 396

} $1,032

(5 @ $106)

$ 530

AVERAGE-COST Date July 1 6 11 14 21 27

Cost of Goods Sold

Purchases (4 @ $ 90) (5 @ $ 99) (6 @ $106)

Balance

$360 (3 @ $ 90)

$270

(2 @ $ 97.5)

$195

(5 @ $102.60)

$513

$495 $636

( 4 @ $ 90) ( 1 @ $ 90) ( 6 @ $ 97.50)* ( 4 @ $ 97.50) (10 @ $102.60)** ( 5 @ $102.60)

$ 360 $ 90 $ 585 $ 390 $1,026 $ 513

*$585 ÷ 6 = $97.5 **$1,026 ÷ 10 = $102.60

(3)

LIFO Date July 1 6 11

Purchases (4 @ $ 90)

$360 (3 @ $ 90)

(5 @ $ 99)

(2 @ $ 99) (6 @ $106)

$270

$495

14 21

Cost of Goods Sold

$198

$636

(5 @ $106)

$530

Balance (4 @ $ 90) (1 @ $ 90) (1 @ $ 90) (5 @ $ 99) (1 @ $ 90) (3 @ $ 99) (1 @ $ 90) (3 @ $ 99) (6 @ $106) (1 @ $ 90) (3 @ $ 99) (1 @ $106)

$ 360 $ 90

} $ 585 } $ 387

} }

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$1,023

$ 493

(b) The highest ending inventory is $530 under the FIFO method.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-10C (a) Net sales ...................................................... Cost of goods sold Beginning inventory ............................ Purchases............................................. $334,975 Less: Purchase returns and Allowances................................ (11,800) Purchase discounts .................. (7,577) Add: Freight-in ................................... 6,402 Cost of goods purchased .................... Cost of goods available for sale ......... Ending inventory.................................. Cost of goods sold ....................... Gross profit .................................................. Gross profit rate =

November $500,000 $ 34,100

322,000 356,100 31,100 325,000 $175,000

$175,000 = 35% $500,000

(b) Net sales ............................................... Less: Estimated gross profit (35% X $400,000) ....................... Estimated cost of goods sold ..............

$400,000

Beginning inventory ............................. Purchases.............................................. Less: Purchase returns and allowances ................................. Purchase discounts ................... Net purchases ....................................... Freight-in ............................................... Cost of goods purchased ..................... Cost of goods available for sale .......... Less: Estimated cost of goods sold ............................................ Estimated inventory lost in fire ............

$ 31,100

140,000 $260,000 $246,000 $5,000 6,000

11,000 235,000 3,700 238,700 269,800 260,000 $ 9,800

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 6-11C

(a)

Hardcovers Beginning inventory Purchases Freight-in Purchase discounts Goods available for sale Net sales Ending inventory

Paperbacks

Cost

Retail

Cost

Retail

$ 256,000 1,180,000 4,000 (16,000) $1,424,000

$ 400,000 1,825,000

$ 65,000 266,000 2,000 (4,000) $329,000

$ 90,000 380,000

2,225,000 1,775,000 $ 450,000

470,000 400,000 $ 70,000

Cost-to-retail ratio: Hardcovers—$1,424,000 ÷ $2,225,000 = 64%. Paperbacks—$329,000 ÷ $470,000 = 70%. Estimated ending inventory at cost: $450,000 X 64% = $288,000—Hardcovers. $70,000 X 70% = $49,000—Paperbacks. (b) Hardcovers—$450,000 X 65% = $292,500. Paperbacks—$ 70,000 X 71% = $49,700.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

CHAPTER 7 SOLUTIONS TO PROBLEMS—SET C PROBLEM 7-1C

(a) Principles

Application to Spotlight Theater

Establishment of responsibility.

Only cashiers are authorized to sell tickets. Only the manager and cashier can handle cash.

Segregation of duties.

The duties of receiving cash and admitting customers are assigned to the cashier and to the usher. The manager maintains custody of the cash, and the company accountant records the cash.

Documentation procedures.

Tickets are prenumbered. Cash count sheets are prepared. Deposit slips are prepared.

Physical controls.

A safe is used for the storage of cash and a machine is used to issue tickets.

Independent internal verification.

Cash counts are made by the manager at the end of each cashier’s shift. Daily comparisons are made by the company treasurer.

Human resource controls.

Cashiers are bonded.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

(2) The cashier could issue a lower price ticket than paid for and the usher would admit the customer. The difference between the ticket issued and the cash received could be divided between the usher and cashier.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-2C

(a) July

1 15

Aug. 15

16 31

Petty Cash ................................................ Cash ..................................................

200.00

Freight-out ................................................ Postage Expense ..................................... Entertainment Expense ........................... Miscellaneous Expense ........................... Cash Over and Short ............................... Cash ..................................................

94.00 42.40 45.90 10.70 1.30

Freight-out ................................................ Charitable Contributions Expense.......... Postage Expense ..................................... Miscellaneous Expense ........................... Cash ..................................................

82.10 30.00 47.80 32.10

Freight-out ................................................ Entertainment Expense ........................... Postage Expense ..................................... Miscellaneous Expense ........................... Cash Over and Short ............................... Cash ..................................................

74.40 41.50 33.00 36.00 3.10

Petty Cash ................................................ Cash ..................................................

100.00

Postage Expense ..................................... Entertainment Expense ........................... Freight-out ................................................ Cash Over and Short ............................... Cash ..................................................

145.00 90.60 46.00 1.40

200.00

194.30

192.00

188.00 100.00

283.00

Ref. CP CP

Debit 200 100

Credit

Balance 200 300

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-2C (Continued) (c) The internal control features of a petty cash fund include: (1) A custodian is responsible for the fund. (2) A prenumbered petty cash receipt signed by the custodian and the individual receiving payment is required for each payment from the fund. (3) The treasurer’s office examines all payments and stamps supporting documents to indicate they were paid when the fund is replenished. (4) Surprise counts can be made at any time to determine whether the fund is intact.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-3C (a)

EZY FERTILIZER COMPANY Bank Reconciliation May 31, 2022 Cash balance per bank statement ................... Add: Deposit in transit ................................... Bank error—Bohr check .......................

$6,804.60 $1,436.15 600.00

Less: Outstanding checks .............................. Adjusted cash balance per bank ..................... Cash balance per books................................... Add: Collection of note receivable ($2,500 note plus $80 interest less $25 fee) ........................................... Less: NSF check .............................................. Error in May 12 deposit ......................... Error in recording check No. 1181 ....... Check printing charge ........................... Adjusted cash balance per books ...................

2,036.15 8,840.75 515.25 $8,325.50 $6,781.50 2,555.00 9,336.50

$934.00 10.00 27.00* 40.00

1,011.00 $8,325.50

*$685 – $658 (b) May 31

31 31 31 31

Cash ................................................................ Miscellaneous Expense ................................. Notes Receivable ................................... Interest Revenue ....................................

2,555 25

Accounts Receivable—Tyler Gricius ............ Cash ........................................................

934

Sales Revenue ................................................ Cash ........................................................

Accounts Payable—M. Datz........................... Cash ........................................................

Miscellaneous Expense ................................. Cash ........................................................

2,500 80 934 10 27

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-4C

(a)

LONBERG COMPANY Bank Reconciliation November 30, 2022 Balance per bank statement .......................... Add: Deposits in transit ............................... Less: Outstanding checks No. 2451 ............................................ No. 2472 ............................................ No. 2478 ............................................ No. 2482 ............................................ No. 2484 ............................................ No. 2485 ............................................ No. 2487 ............................................ No. 2488 ............................................ Adjusted cash balance per bank ...................

$17,069.40 2,338.00 19,407.40 $1,260.40 503.60 538.20 612.00 829.50 974.80 398.00 1,200.00

Balance per books .......................................... Add: Note collected by bank ($2,400 note plus $120 interest less $15 fee) ......................................... Less: Check printing charge ......................... Error in recording check No. 2479 ....... Error in 11-20 deposit ($2,954 – $2,945) ............................... Adjusted cash balance per books .................

6,316.50 $13,090.90 $10,846.90 2,505.00 13,351.90

72.00 180.00* 9.00

261.00 $13,090.90

*$1,750 – $1,570

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-4C (Continued) (b) Nov. 30

30 30 30

2,505 15

Miscellaneous Expense ........................... Cash...................................................

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

180

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

2,400 120 72 180

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-5C

(a)

TAVARES COMPANY Bank Reconciliation October 31, 2022 Balance per bank statement .............................................. Plus: Undeposited receipts ..............................................

$18,180.00 3,795.51 21,975.51

Less: Outstanding checks No. 62 183 284

Amount $126.75 150.00 253.25

No. 862 863 864

Amount $190.71 226.80 165.28 ....................

1,112.79

Adjusted balance per bank ................................................

$20,862.72

Cash balance per books ..................................................... Add: Bank credit (collection of note receivable) ............ Adjusted balance per books (before theft) ....................... Theft ..................................................................................... Adjusted balance per books ..............................................

$21,892.72 400.00 22,292.72 1,430.00* $20,862.72

*$22,292.72 – $20,862.72 (b) The cashier attempted to cover the theft of $1,430.00 by: 1.

Not listing as outstanding three checks totaling $530.00 (No. 62, $126.75; No. 183, $150.00; and No. 284, $253.25).

Underfooting the outstanding checks listed by $100. (The correct total is $582.79.)

Subtracting the $400 bank credit from the book balance instead of adding it to the book balance, thereby concealing $800 of the theft.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 7-5C (Continued) (c) 1.

The principle of independent internal verification has been violated because the cashier prepared the bank reconciliation.

The principle of segregation of duties has been violated because the cashier had access to the accounting records and also prepared the bank reconciliation.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

CHAPTER 8 SOLUTIONS TO PROBLEMS—SET C PROBLEM 8-1C

(a) 1. 2. 3. 4. 5.

Accounts Receivable ................................... 2,570,000 Sales Revenue ...................................... Sales Returns and Allowances .................... Accounts Receivable ............................

2,570,000

40,000 40,000

Cash .............................................................. 2,300,000 Accounts Receivable ............................ Allowance for Doubtful Accounts ............... Accounts Receivable ............................

65,000

Accounts Receivable ................................... Allowance for Doubtful Accounts ........

35,000

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

35,000

2,300,000 65,000 35,000 35,000

(b) Bal. (1) (5) Bal.

Accounts Receivable 1,000,000 (2) 40,000 2,570,000 (3) 2,300,000 35,000 (4) 65,000 (5) 35,000 1,165,000

Allowance for Doubtful Accounts (4) 65,000 Bal. 60,000 (5) 35,000

Bal.

30,000

$30,000 90,000 $60,000

The journal entry would therefore be as follows: Bad Debts Expense ....................................... 60,000 Allowance for Doubtful Accounts ...................

60,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

(d)

$2, 570,000 – $40,000 $2,530,000 = = 2.51 times ($1, 075,000 + $940,000) ÷ 2 $1,007,500 365/ 2.51 = 145.4 days

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-2C

(a) $26,000. (b) $30,800 ($1,540,000 X 2%). (c) $22,000 [($520,000 X 5%) – $4,000]. (d) $28,000 [($520,000 X 5%) + $2,000]. (e) There are two major weaknesses with the direct write-off method. First, it does not match expenses with the associated revenues. Second, the accounts receivable are not stated at cash realizable value at the balance sheet date.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-3C

(a) Dec. 31

Bad Debt Expense ................................... Allowance for Doubtful Accounts ($35,790 – $10,000) .......................

25,790 25,790

(a) & (b) Bad Debt Expense Date Explanation 2021 Dec. 31 Adjusting

Ref.

Mar. 1

May 1 1

Credit

Debit

25,790

Credit

Balance

25,790

10,000 35,790

1,100

34,690 35,790

1,100

2022 (1) Allowance for Doubtful Accounts ............. Accounts Receivable ......................... (2) Accounts Receivable ................................. Allowance for Doubtful Accounts ....... Cash ............................................................ Accounts Receivable ......................... 2022 Bad Debt Expense ..................................... Allowance for Doubtful Accounts ($28,300 + $1,200) ...........................

Balance

25,790

Allowance for Doubtful Accounts Date Explanation Ref. 2021 Dec. 31 Balance 31 Adjusting 2022 Mar. 1 May 1 (b)

Debit

1,100 1,100 1,100 1,100 1,100 1,100

29,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

29,500

PROBLEM 8-4C

(a)

Total estimated bad debts

Total

0–30

Number of Days Outstanding 31–60 61–90 91–120 Over 120

Accounts receivable $260,000 $100,000 $60,000 % uncollectible 1% 5% Estimated Bad debts $ 13,750 $ 1,000 $ 3,000

$50,000 $30,000 $20,000 7.5% 10% 15% $ 3,750 $ 3,000 $ 3,000

(b) Bad Debt Expense ..................................................... Allowance for Doubtful Accounts [$13,750 – $10,000] .........................................

3,750

(c) Allowance for Doubtful Accounts ............................ Accounts Receivable ........................................

2,000

(d) Accounts Receivable ................................................ Allowance for Doubtful Accounts ....................

1,000

3,750 2,000

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

1,000 1,000 1,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-5C

(a)

(b)

Dec. 31

Bad Debt Expense ($17,550 – $1,500) .......................... Allowance for Doubtful Accounts ................................ Bad Debt Expense ($17,550 + $1,500) .......................... Allowance for Doubtful Accounts ................................

16,050 16,050

19,050 19,050

(c) Allowance for Doubtful Accounts ............................. Accounts Receivable ..........................................

4,500

(d) Bad Debt Expense ..................................................... Accounts Receivable .........................................

4,500

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-6C

(a) July 5 14

Accounts Receivable ................................ Sales Revenue ...................................

6,200

Cash ($700 – $21) ...................................... Service Charge Expense ($700 X 3%) ...... Sales Revenue ...................................

679 21

Cash ........................................................... Notes Receivable ............................... Interest Receivable ($12,000 X 10% X 45/360) .............. Interest Revenue ($12,000 X 10% X 15/360) ..............

12,200

Accounts Receivable ................................ Notes Receivable ............................... Interest Receivable ($30,000 X 9% X 36/360) ................ Interest Revenue ($30,000 X 9% X 24/360) ................

30,450

6,200

700 12,000 150 50

Interest Receivable ($15,000 X 8% X 1/12) ............................ Interest Revenue................................

30,000 270 180 100 100

(b) Notes Receivable Date July 1 15 25

Explanation Balance

Ref.

Debit

Credit 12,000 30,000

Balance 57,000 45,000 15,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-6C (Continued) Accounts Receivable Date Explanation July 5 25 Interest Receivable Date Explanation July 1 Balance 15 25 31 Adjusting

Ref.

Debit 6,200 30,450

Credit

Balance 6,200 36,650

Ref.

Debit

Credit

Balance 420 270 0 100

150 270 100

(c) Current assets Notes receivable .............................................................. Accounts receivable ........................................................ Interest receivable ........................................................... Total receivables ......................................................

$15,000 36,650 100 $51,750

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 8-7C

Jan.

Feb. 2

12 26 Apr.

5 12

June 2

July

Accounts Receivable—Pendergraft Company ........................................................ Sales Revenue ...........................................

6,300 6,300

Notes Receivable .............................................. Accounts Receivable—Pendergraft Company ................................................

6,300

Notes Receivable .............................................. Sales Revenue ...........................................

7,800

Accounts Receivable—Groh Co....................... Sales Revenue ...........................................

4,000

Notes Receivable .............................................. Accounts Receivable—Groh Co. ..............

4,000

Cash ($7,800 + $130) ......................................... Notes Receivable ....................................... Interest Revenue ($7,800 X 10% X 2/12) ............................

7,930

Cash ($6,300 + $210) ......................................... Notes Receivable ....................................... Interest Revenue ($6,300 X 10% X 4/12) ............................

6,510

Accounts Receivable—Groh Co. ($4,000 + $80) ................................................. Notes Receivable ....................................... Interest Revenue ($4,000 X 8% X 3/12) .............................. Notes Receivable .............................................. Sales Revenue ...........................................

6,300 7,800 4,000 4,000 7,800 130 6,300 210 4,080 4,000 80 7,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

7,000

CHAPTER 9 SOLUTIONS TO PROBLEMS—SET C PROBLEM 9-1C

Item 1 2 3 4 5 6 7 8 9 10

Land ($ 2,000)

Buildings

Other Accounts $ 3,000

Property Taxes Expense

15,000

Land Improvements

4,000

Land Improvements

$600,000 22,000 125,000 10,000 ( 24,000) ( (2,500) ($148,500)

$632,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 9-2C

(a) Year

Computation

Cumulative 12/31

2020 2021 2022 2023

$ $ $ $

MACHINE 1 80,000 X 10% = $8,000 80,000 X 10% = $8,000 80,000 X 10% = $8,000 80,000 X 10% = $8,000

$ 8,000 16,000 24,000 32,000

2021 2022 2023

MACHINE 2 $120,000 X 25% = $30,000 $ 90,000 X 25% = $22,500 $ 67,500 X 25% = $16,875

$30,000 52,500 69,375

2022 2023

MACHINE 3 1,000 X ($72,000 ÷ 24,000) = $3,000 4,500 X ($72,000 ÷ 24,000) = $13,500

$ 3,000 16,500

Year

Depreciation Computation

Expense

(1)

2021

MACHINE 2 $120,000 X 25% X 9/12 = $22,500

$22,500

(2)

2022

$97,500 X 25% = $24,375

$24,375

(b)

PROBLEM 9-3C (a) (1) Purchase price .................................................................. Sales tax ............................................................................ Shipping costs .................................................................. Insurance during shipping ............................................... Installation and testing ..................................................... Total cost of machine ...............................................

$ 46,500 2,200 175 75 50 $ 49,000

Equipment .......................................................... Cash ............................................................

49,000

(2) Recorded cost ................................................................... Less: Salvage value......................................................... Depreciable cost ............................................................... Years of useful life ............................................................ Annual depreciation .................................................. Depreciation Expense ......................................... Accumulated Depreciation—Equipment ....

11,000 11,000

(b) (1) Recorded cost ................................................................... Less: Salvage value......................................................... Depreciable cost ............................................................... Years of useful life ............................................................ Annual depreciation .................................................. (2) Year 2022 2023 2024 2025

Book Value at Beginning of Year $120,000 60,000 30,000 15,000

DDB Rate *50%* *50%* *50%* *50%*

Annual Depreciation Expense $60,000 30,000 15,000 7,000**

$ 49,000 5,000 $ 44,000 ÷ 4 $ 11,000

$120,000 8,000 $112,000 ÷ 4 $ 28,000

Accumulated Depreciation $ 60,000 90,000 105,000 112,000

*100% ÷ 4-year useful life = 25% X 2 = 50%. **[($120,000 – $8,000) – $105,000] = $7,000.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 9-3C (Continued) (3) Depreciation cost per unit = ($120,000 – $8,000)/ 25,000 units = $4.48 per unit. Annual Depreciation Expense 2022: 2023: 2024: 2025:

$4.48 X 6,500 = $29,120 4.48 X 7,500 = 33,600 4.48 X 6,000 = 26,880 4.48 X 5,000 = 22,400

(c) The straight-line method reports the lowest amount of depreciation expense the first year while the declining-balance method reports the highest. In the fourth year, the declining-balance method reports the lowest amount of depreciation expense while the straight-line method reports the highest. These facts occur because the declining-balance method is an accelerated depreciation method in which the largest amount of depreciation is recognized in the early years of the asset’s life. If the straight-line method is used, the same amount of depreciation expense is recognized each year. Therefore, in the early years less depreciation expense will be recognized under this method than under the declining-balance method while more will be recognized in the later years. The amount of depreciation expense recognized using the units-of-activity method is dependent on production, so this method could recognize more or less depreciation expense than the other two methods in any year depending on output. No matter which of the three methods is used, the same total amount of depreciation expense will be recognized over the four-year period.

PROBLEM 9-4C

Year 2020 2021 2022 2023 2024 2025 2026

Depreciation Expense $12,000(a) 12,000 9,600(b) 9,600 9,600 11,600(c) 11,600

(a) $80,000 – $8,000

6 years

= $12,000

(b) Book value – Salvage value

Remaining useful life (c) $27,200 – $4,000

2 years

Accumulated Depreciation $12,000 24,000 33,600 43,200 52,800 64,400 76,000

$56,000 – $8,000 = $9,600 5 years

= $11,600

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 9-5C

(a) Apr. 1 May 1

Land................................................. Cash .........................................

2,200,000

Depreciation Expense .................... Accumulated Depreciation— Equipment ($900,000 X 1/10 X 4/12) ......

30,000

540,000

Cost Accum. depreciation— equipment

2,200,000

30,000

390,000 900,000 30,000

$900,000 390,000

[($900,000 X 1/10 X 4) + $30,000]

Book value Cash proceeds Gain on disposal June 1

July 1 Dec. 31

510,000 540,000 $ 30,000

Cash ................................................ Land ......................................... Gain on Disposal of Plant Assets ........................

1,800,000

Equipment ....................................... Cash .........................................

1,800,000

Depreciation Expense .................... Accumulated Depreciation— Equipment ($500,000 X 1/10) .................

50,000

Accumulated Depreciation— Equipment ................................... Equipment ...............................

600,000 1,200,000 1,800,000

50,000 500,000 500,000

PROBLEM 9-5C (Continued) Cost Accum. depreciation— equipment

$500,000 500,000

($500,000 X 1/10 X 10)

Book value (b) Dec. 31

Depreciation Expense .................... Accumulated Depreciation— Buildings ($26,500,000 X 1/50).............

530,000

Depreciation Expense .................... Accumulated Depreciation— Equipment............................

3,950,000

530,000

3,950,000

($38,600,000* X 1/10) $3,860,000 [($1,800,000 X 1/10) X 6/12] 90,000

$3,950,000 *($40,000,000 – $900,000 – $500,000)

(c)

WALLEN COMPANY Partial Balance Sheet December 31, 2023 Plant Assets* Land ..................................................... Buildings ............................................. Less: Accumulated depreciation— buildings .................................. Equipment ........................................... Less: Accumulated depreciation— equipment ................................ Total plant assets ........................

$ 4,600,000 $26,500,000 12,630,000 40,400,000

13,870,000

8,140,000

32,260,000 $50,730,000

*See T-accounts which follow.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 9-5C (Continued)

Bal. Apr. 1 Bal.

Land 3,000,000 June 1 2,200,000 4,600,000

Bal. Bal.

Buildings 26,500,000 26,500,000

600,000

Accumulated Depreciation—Buildings Bal. 12,100,000 Dec. 31 adj. 530,000 Bal. 12,630,000

Bal. July 1 Bal.

Equipment 40,000,000 May 1 1,800,000 Dec. 31 40,400,000

900,000 500,000

Accumulated Depreciation—Equipment May 1 390,000 Bal. 5,000,000 Dec. 31 500,000 May 1 30,000 Dec. 31 50,000 Dec. 31 adj. 3,950,000 Bal. 8,140,000

PROBLEM 9-6C

(a) Accumulated Depreciation—Equipment ................. Loss on Disposal of Plant Assets ............................ Equipment ..........................................................

24,000 26,000

(b) Cash ......................................................................... Accumulated Depreciation—Equipment ................. Gain on Disposal of Plant Assets ..................... Equipment ..........................................................

31,000 24,000

(c) Cash ......................................................................... Accumulated Depreciation—Equipment ................. Loss on Disposal of Plant Assets ............................ Equipment ..........................................................

18,000 24,000 8,000

50,000

5,000 50,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

50,000

PROBLEM 9-7C

(a) Jan. 2 Jan.– June Sept. 1 Oct. 1

(b) Dec. 31

27,000 27,000 140,000 140,000

Advertising Expense ............................ Cash ...............................................

75,000

Copyrights ............................................ Cash ...............................................

120,000

Amortization Expense .......................... Patents........................................... [($60,000 X 1/10) + ($27,000 X 1/9)]

9,000

Amortization Expense .......................... Copyrights ..................................... [($36,000 X 1/10) + ($120,000 X 1/50 X 3/12)]

4,200

75,000 120,000

9,000

(c) Intangible Assets Patents ($87,000 cost – $15,000 amortization) (1) ............... Copyrights ($156,000 cost – $18,600 amortization) (2) ....... Total intangible assets ...................................................

4,200

$ 72,000 137,400 $209,400

(1) Cost ($60,000 + $27,000); amortization ($6,000 + $9,000). (2) Cost ($36,000 + $120,000); amortization ($14,400 + $4,200). (d) The intangible assets of the company consist of two patents and two copyrights. One patent with a total cost of $87,000 is being amortized in two segments ($60,000 over 10 years and $27,000 over 9 years); the other patent was obtained at no recordable cost. A copyright with a cost of $36,000 is being amortized over 10 years; the other copyright with a cost of $120,000 is being amortized over 50 years.

PROBLEM 9-8C

Research and Development Expense ...................... Patents ...............................................................

95,000

Patents ....................................................................... Amortization Expense [$6,750 – ($40,000 X 1/20)] .............................

4,750

Goodwill ..................................................................... Amortization Expense .......................................

800

95,000

4,750

800

Note: Goodwill should not be amortized because it has an indefinite life unlike Patents.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 9-9C

(a) Asset turnover ratio

(b)

Glover Corp.

Lounsbury Corp.

$1,500,000 = .75 times $2,000,000

$1,260,000 = .84 times $1,500,000

Based on the asset turnover ratio, Lounsbury Corp. is more effective in using assets to generate sales. Its asset turnover ratio is 12% higher than Glover’s asset turnover ratio.

CHAPTER 10 SOLUTIONS TO PROBLEMS—SET C PROBLEM 10-1C

(a) Jan. 1 5

12 14 20

(b)

Cash ............................................................. 25,000 Notes Payable ...................................... Cash ............................................................. Sales Revenue ($9,964 ÷ 106%) .......... Sales Taxes Payable ($9,964 – $9,400) ..............................

9,964

Unearned Service Revenue ........................ Service Revenue ..................................

9,000

Sales Taxes Payable ................................... Cash ......................................................

5,000

9,400 564 9,000 5,000

Accounts Receivable .................................. 42,930 Sales Revenue ..................................... Sales Taxes Payable (900 X $45 X 6%) .............................. Cash ............................................................. 16,960 Sales Revenue ($16,960 ÷ 106%) ........ Sales Taxes Payable ($16,960 – $16,000) ..........................

Jan. 31

Interest Expense .................................. Interest Payable ($25,000 X 6% X 1/12) ...............

25,000

40,500 2,430 16,000 960

125

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

125

PROBLEM 10-1C (Continued) (c) Current liabilities Notes payable ............................................................ Accounts payable...................................................... Unearned service revenue ($12,000 – $9,000) ......... Sales taxes payable ($564 + $2,430 + $960) ............ Interest payable ......................................................... Total current liabilities.......................................

$25,000 30,000 3,000 3,954 125 $62,079

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 10-2C

(a) Jan. Feb.

2 1

Mar. 31

Apr.

July

Sept. 30

Oct.

Dec.

Dec. 31

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

20,000

Accounts Payable .................................... Notes Payable...................................

20,000

Interest Expense ($20,000 X 12% X 2/12) ......................... Interest Payable................................

20,000 20,000 400 400

Notes Payable .......................................... Interest Payable ....................................... Cash ..................................................

20,000 400

Equipment ................................................ Cash .................................................. Notes Payable...................................

37,000

Interest Expense ($25,000 X 10% X 3/12) ......................... Interest Payable................................

20,400 12,000 25,000 625 625

Notes Payable .......................................... Interest Payable ....................................... Cash ..................................................

25,000 625

Cash .......................................................... Notes Payable...................................

15,000

Interest Expense ($15,000 X 12% X 1/12) ......................... Interest Payable................................

25,625 15,000 150

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

150

PROBLEM 10-2C (Continued) (b) 4/1 10/1

4/1 10/1

3/31 9/30 12/31 12/31 Bal.

Notes Payable 20,000 2/1 25,000 7/1 12/1 12/31 Bal.

20,000 25,000 15,000 15,000

Interest Payable 400 3/31 625 9/30 12/31 12/31 Bal.

400 625 150 150

Interest Expense 400 625 150 1,175

(c) Current liabilities Notes payable ................................................. Interest payable ..............................................

$15,000 150

(d) Total interest is $1,175.

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

$15,150

PROBLEM 10-3C

(a) June 1 (b) Dec. 31

2022 Cash .................................................. Bonds Payable .......................... Interest Expense .............................. Interest Payable ($2,000,000 X 9% X 7/12) ......

2,000,000 2,000,000 105,000 105,000

105,000

Long-term Liabilities Bonds payable ..........................................

2,000,000

(d) June 1

(e) Dec. 31

2023 Interest Payable ............................... Interest Expense ($2,000,000 X 9% X 5/12) .............. Cash .......................................... Interest Expense .............................. Interest Payable ($2,000,000 X 9% X 7/2) ........

(f)

105,000 75,000 180,000 105,000 105,000

2024 Jan. 1 Jan. 1

Interest Payable ............................... Cash ..........................................

105,000

Bonds Payable ................................... Loss on Bond Redemption ................ Cash ($2,000,000 X 1.02) ............

2,000,000 40,000

105,000

2,040,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 10-4C

(a) Jan. 1

2022 Cash ($800,000 X 1.05) ....................... Bonds Payable ............................ Premium on Bonds Payable .......

840,000

(b) Long-term Liabilities Bond payable, due 2032............................... $800,000 Add: Premium on bonds payable ............... 36,000 (c) Jan. 1

800,000 40,000

$836,000

2024 Bonds Payable .................................... $800,000 Premium on Bonds Payable .............. 32,000 Loss on Bond Redemption ................ 16,000* Cash ($800,000 X 1.06) ................ *($848,000 – $832,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

848,000

PROBLEM 10-5C

(a)

Annual Interest Period Issue Date 1 2 3 4

(b) Dec. 31

Dec. 31

Cash Payment

Interest Expense

Reduction of Principal

$89,418 89,418 89,418 89,418

$48,000 44,687 41,108 37,243

$41,418 44,731 48,310 52,175

Principal Balance $600,000 558,582 513,851 465,541 413,366

2022 Cash ..................................................... Mortgage Payable .......................

600,000

2023 Interest Expense ................................. Mortgage Payable ............................... Cash .............................................

48,000 41,418

(c)

600,000

89,418 12/31/2023

Current Liabilities Current portion of mortgage payable Long-term Liabilities Mortgage payable

$ 44,731** $513,851**

*($558,896 – $44,731)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 10-6C

(a)

2022 Jan. 1

Cash ($6,000,000 X 96%) .................. Discount on Bonds Payable ............ Bonds Payable ..........................

5,760,000 240,000 6,000,000

(b) See page 10-9. (c)

2022 Dec. 31

Interest Expense ............................... Discount on Bonds Payable ($240,000 ÷ 20) ........ Interest Payable ($6,000,000 X 9%) ..................

552,000 12,000 540,000

2023 Jan. 1 Dec. 31

Interest Payable ............................... Cash ..........................................

540,000

Interest Expense ............................... Discount on Bonds Payable ................................... Interest Payable.........................

552,000

540,000

12,000 540,000

(d) Current Liabilities Interest payable ........................................

$ 540,000

Long-term Liabilities Bonds payable .......................................... Less: Discount on bonds payable .........

$6,000,000 216,000 $5,784,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

Annual Interest Periods Issue date 1 2 3 4

(A) Interest to Be Paid (9% X $6,000,000) $540,000 540,000 540,000 540,000

(B) (C) (D) (E) Interest Expense Discount Unamortized Bond to Be Recorded Amortization Discount Carrying Value (A) + (C) ($240,000 ÷ 20) (D) – (C) [$6,000,000 – (D)] $552,000 552,000 552,000 552,000

$12,000 12,000 12,000 12,000

$240,000 228,000 216,000 204,000 192,000

$5,760,000 5,772,000 5,784,000 5,796,000 5,808,000

*PROBLEM 10-6C (Continued)

(Instructor Use Only)

(b)

*PROBLEM 10-7C

(a) Jan. 1

Dec. 31

(b) Jan. 1

Dec. 31

Cash ($4,000,000 X 103%) ................ Premium on Bonds Payable ..... Bonds Payable ..........................

4,120,000

Interest Expense ............................... Premium on Bonds Payable ($120,000 ÷ 10) .............................. Interest Payable ($4,000,000 X 8%) ..................

308,000

Cash ($4,000,000 X 95%) .................. Discount on Bonds Payable ............ Bonds Payable ..........................

3,800,000 200,000

Interest Expense ............................... Discount on Bonds Payable ($200,000 ÷ 10) ........ Interest Payable.........................

340,000

120,000 4,000,000

12,000 320,000

4,000,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

20,000 320,000

*PROBLEM 10-7C (Continued) (c) Premium Current Liabilities Interest payable ...................................... Long-term Liabilities Bonds payable, due 2029 ....................... Add: Premium on bonds payable ........

$ 320,000 $4,000,000 108,000

$4,108,000

Discount Current Liabilities Interest payable ...................................... Long-term Liabilities Bonds payable, due 2029 ....................... Less: Discount on bonds payable ........

$ 320,000 $4,000,000 180,000

$3,820,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 10-8C

(a)

2023 Jan. 1

(b) Dec. 31

Interest Payable ................................ Cash ...........................................

225,000

Interest Expense ............................... Discount on Bonds Payable ($90,000 ÷ 10) .......... Interest Payable ($2,500,000 X .09) ..................

234,000

(c)

225,000**

9,000** 225,000**

2024 Jan. 1

Bonds Payable .................................. Loss on Bond Redemption .............. Discount on Bonds Payable ..... Cash ($800,000 X 103%)............

800,000 49,920 25,920** 824,000**

*($90,000 – $9,000) X 800/2,500 = $25,920

(d) Dec. 31

Interest Expense ............................... Discount on Bonds Payable ..... Interest Payable.........................

159,120 6,120** 153,000**

*($90,000 – $9,000) X 1,700/2,500 = $55,080; *($55,080 ÷ 9 = $6,120 or *($9,000 X 1,700/2,500 = $6,120 **($2,500,000 – $800,000 = $1,700,000; **($1,700,000 X 9% = $153,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 10-9C

(a) Jan. 1

(b)

2022 Cash ................................................. Discount on Bonds Payable ........... Bonds Payable .........................

3,939,246 560,754 4,500,000

EUROPA SATELLITES Bond Discount Amortization Effective-Interest Method—Annual Interest Payments 8% Bonds Issued at 10% (A)

Annual Interest Interest to Be Periods Paid Issue date 1 $360,000 2 360,000 3 360,000 (c) Dec. 31

(d) Jan. 1 (e) Dec. 31

(B) (C) (D) (E) Interest Discount UnamorBond Expense Amortized Carrying to Be tization Discount Value Recorded (B) – (A) (D) – (C) ($4,500,000 – D) $560,754 $3,939,246 $393,925 $33,925 526,829 3,973,171 397,317 37,317 489,512 4,010,488 401,049 41,049 448,463 4,051,537

Interest Expense ($3,939,246 X 10%) ...................... Discount on Bonds Payable ..... Interest Payable ($4,500,000 X 8%)................. 2023 Interest Payable .............................. Cash ......................................... Interest Expense ($3,973,171 X 10%) ..................... Discount on Bonds Payable ..... Interest Payable .......................

393,925 33,925 360,000

360,000 360,000 397,317

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

37,317 360,000

*PROBLEM 10-10C

(a) (1) Jan. 1

(2) Dec. 31

(3)

2022 Cash ............................................. 5,679,533 Bonds Payable ..................... Premium on Bonds Payable ............................. Interest Expense ($5,679,533 X 8%) .................... Premium on Bonds Payable ....... Interest Payable ($5,000,000 X 10%) ...........

500,000

Interest Expense [($5,679,533 – $45,637) X 8%] .... Premium on Bonds Payable ....... Interest Payable ...................

450,712 49,288

(b) Bonds payable ................................................... Add: Premium on bonds payable ....................

5,000,000 584,608*

(4) Dec. 31

679,533

454,363 45,637

2023 Interest Payable ........................... Cash .....................................

Jan. 1

5,000,000

500,000

5,584,608

*($679,533 – $45,637 – $49,288)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 10-10C (Continued) (c) Dear

Thank you for asking me to clarify some points about the bonds issued by Georgia Chemical Company. (1) The amount of interest expense reported for 2023 related to these bonds is $450,712. (2) When the bonds are sold at a premium, the effective-interest method will result in more interest expense reported than the straight-line method in 2023. Straight-line interest expense for 2023 is $432,047 [$500,000 – $67,953]. If you have other questions, please contact me. Sincerely,

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

CHAPTER 11 SOLUTIONS TO PROBLEMS—SET C PROBLEM 11-1C

(a) Jan. 10

Mar. 1

Apr. 1

May 1

Aug. 1

Sept. 1

Cash (100,000 X $3) ................................ Common Stock (100,000 X $2) ....... Paid-in Capital in Excess of Stated Value – Common Stock………….

300,000

Cash (10,000 X $55) ................................ Preferred Stock (10,000 X $50) ....... Paid-in Capital in Excess of Par—Preferred Stock (10,000 X $5) ................................

550,000

Land ......................................................... Common Stock (25,000 X $2) ......... Paid-in Capital in Excess of Stated Value – Common Stock………….

75,000

Cash (75,000 X $4) .................................. Common Stock (75,000 X $2) ......... Paid-in Capital in Excess of Stated Value—Common Stock (75,000 X $2) ......................

300,000

Organization Expense ............................ Common Stock (10,000 X $2) ......... Paid-in Capital in Excess of Stated Value—Common Stock ($50,000 – $20,000) ...........

50,000

Cash (5,000 X $6) .................................... Common Stock (5,000 X $2) ........... Paid-in Capital in Excess of Stated Value—Common Stock (5,000 X $4) ........................

30,000

200,000 100,000 500,000 50,000 50,000 25,000 150,000 150,000 20,000 30,000 10,000 20,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-1C (Continued) Nov.

Cash (2,000 X $60) ........................... Preferred Stock (2,000 X $50) ......... Paid-in Capital in Excess of Par—Preferred Stock (2,000 X $10)................................

120,000 100,000 20,000

(b) Preferred Stock Date Explanation Mar. 1 Nov. 1

Ref. J1 J1

Debit

Credit 500,000 100,000

Balance 500,000 600,000

Common Stock Date Explanation Jan. 10 Apr. 1 May 1 Aug. 1 Sept. 1

Ref. J1 J1 J1 J1 J1

Debit

Credit 200,000 50,000 150,000 20,000 10,000

Balance 200,000 250,000 400,000 420,000 430,000

Credit 50,000 20,000

Balance 50,000 70,000

Paid-in Capital in Excess of Stated Value—Common Stock Date Explanation Ref. Debit Credit Jan. 1 J1 100,000 Apr. 1 J1 25,000 May 1 J1 150,000 Aug. 1 J1 30,000 Sept. 1 J1 20,000

Balance 100,000 125,000 275,000 305,000 325,000

Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Mar. 1 J1 Nov. 1 J1

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-1C (Continued) (c)

JORGE CORPORATION Paid-in capital Capital stock 6% Preferred stock, $50 par value, 20,000 shares authorized, 12,000 shares issued and outstanding ...................... Common stock, no par, $2 stated value, 500,000 shares authorized, 215,000 shares issued and outstanding............................. Total capital stock...................... Additional paid-in capital In excess of par— preferred stock .............................. In excess of stated value— common stock ............................... Total additional paid-in capital ..................................... Total paid-in capital ...................

$ 600,000

430,000 1,030,000 $70,000 325,000 395,000 $1,425,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-2C

(a) Mar. 1 June 1

Sept. 1

Dec. 1

Treasury Stock (5,000 X $8) ..................... Cash ...................................................

40,000

Cash (1,000 X $10) .................................... Treasury Stock (1,000 X $8) .............. Paid-in Capital from Treasury Stock (1,000 X $2) ..........................

10,000

Cash (2,000 X $9) ...................................... Treasury Stock (2,000 X $8) .............. Paid-in Capital from Treasury Stock (2,000 X $1) ..........................

18,000

Cash (1,000 X $6) ...................................... Paid-in Capital from Treasury Stock (1,000 X $2) ............................................ Treasury Stock (1,000 X $8) ..............

6,000

Income Summary ...................................... Retained Earnings .............................

90,000

40,000 8,000 2,000 16,000 2,000

2,000 8,000 90,000

(b) Paid-in Capital from Treasury Stock Date Explanation Ref. June 1 J12 Sept. 1 J12 Dec. 1 J12

Debit

Credit 2,000 2,000

Balance 2,000 4,000 2,000

Credit

Balance 40,000 32,000 16,000 8,000

2,000

Treasury Stock Date Mar. June Sept. Dec.

Explanation 1 1 1 1

Ref. J12 J12 J12 J12

Debit 40,000

8,000 16,000 8,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-2C (Continued) Retained Earnings Date Explanation Jan. 1 Balance Dec. 31

(c)

Ref.

Debit

J12

Credit 90,000

Balance 100,000 190,000

YAMA CORPORATION Stockholders’ equity Paid-in capital Capital stock Common stock, $1 par, 400,000 shares issued and 399,000 outstanding .............. Additional paid-in capital In excess of par— common stock ....................... From treasury stock .................. Total additional paid-in capital .............................. Total paid-in capital............ Retained earnings ..................................... Total paid-in capital and retained earnings ........... Less: Treasury stock (1,000 shares at cost)............................................ Total stockholders’ equity ..............................

$ 400,000 $500,000 2,000 502,000 902,000 190,000 1,092,000 8,000 $1,084,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-3C

(a) Feb.

Mar. 20 June 14

Sept. 3

Dec. 31

Cash....................................................... Common Stock (3,000 X $5) ......... Paid-in Capital in Excess of Stated Value—Common Stock ..........................................

25,500

Treasury Stock (1,500 X $8) ................. Cash ...............................................

12,000

Cash....................................................... Paid-in Capital from Treasury Stock .......................... Treasury Stock (4,000 X $8) ..........

34,000

Patents .................................................. Common Stock (2,000 X $5) ......... Paid-in Capital in Excess of Stated Value—Common Stock ..........................................

19,000

Income Summary .................................. Retained Earnings .........................

350,000

15,000 10,500 12,000

2,000 32,000 10,000 9,000 350,000

(b) Preferred Stock Date Explanation Jan. 1 Balance

Common Stock Date Explanation Jan. 1 Balance Feb. 1 Sept. 3

Ref.

Debit

Credit

Balance 300,000

Ref.

Debit

Credit

Balance 1,000,000 1,015,000 1,025,000

J1 J1

15,000 10,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-3C (Continued) Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Jan. 1 Balance

Credit

Balance 20,000

Paid-in Capital in Excess of Stated Value—Common Stock Date Explanation Ref. Debit Credit Jan. 1 Balance Feb. 1 J1 10,500 Sept. 3 J1 9,000

Balance 425,000 435,500 444,500

Paid-in Capital from Treasury Stock Date Explanation Ref. June 14 J1

Debit

Credit 2,000

Balance 2,000

Debit

Credit

Balance 488,000 838,000

Retained Earnings Date Jan. 1 Dec. 31

Explanation Balance

Ref. J1

350,000

Treasury Stock Date Jan. 1 Mar. 20 June 14

Explanation Balance

Ref.

Debit

J1 J1

12,000

Credit

32,000

Balance 40,000 52,000 20,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-3C (Continued) (c)

WRIGHT CORPORATION Stockholders’ equity Paid-in capital Capital stock 10% Preferred stock, $100 par value, noncumulative, 5,000 shares authorized, 3,000 shares issued and outstanding ............................... Common stock, no par, $5 stated value, 300,000 shares authorized, 205,000 shares issued and 202,500 shares outstanding ............................... Total capital stock ................. Additional paid-in capital In excess of par— preferred stock ......................... In excess of stated value— common stock .......................... From treasury stock ..................... Total additional paid-in capital ................................. Total paid-in capital ............... Retained earnings ...................................... Total paid-in capital and retained earnings ............... Less: Treasury stock (2,500 common shares)............................................. Total stockholders’ equity ..................................

$ 300,000

1,025,000 1,325,000 $ 20,000 444,500 2,000 466,500 1,791,500 838,000 2,629,500 (20,000) $2,609,500

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-4C (a) Jan. 15 Feb. 15 Apr. 15

May 15

Cash Dividends (100,000 X $1) ............. Dividends Payable .........................

100,000

Dividends Payable ................................. Cash ................................................

100,000

Stock Dividends (15,000 X $15) ............ Common Stock Dividends Distributable (15,000 X $10) ...... Paid-in Capital in Excess of Par—Common Stock (15,000 X $5) ...............................

225,000

Common Stock Dividends Distributable ...................................... Common Stock (15,000 X $10) ......

100,000 100,000

150,000 75,000 150,000 150,000

July

Memo—two-for-one stock split increases the number of shares outstanding to 230,000, or (115,000 X 2) and reduces par value to $5 per share.

Dec.

Cash Dividends (230,000 X $.50) .......... Dividends Payable .........................

115,000

Income Summary .................................. Retained Earnings .........................

200,000

Retained Earnings ................................. Cash Dividends ..............................

215,000

Retained Earnings ................................. Stock Dividends .............................

225,000

115,000 200,000 215,000 225,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-4C (Continued) (b) Common Stock Date Jan. 1 May 15 July 1

Explanation Balance

Ref.

Debit

Credit 150,000

Balance 1,000,000 1,150,000

2 for 1 stock split— new par value = $5

Common Stock Dividends Distributable Date Apr. 15 May 15

Explanation

Ref.

Debit

Credit 150,000

Balance 150,000 0

Credit

Balance 200,000 275,000

150,000

Paid-in Capital in Excess of Par—Common Stock Date Jan. 1 Apr. 15

Explanation Balance

Ref.

Debit

75,000

Retained Earnings Date Jan. 1 Dec. 31 31 31

Explanation Balance Net income Cash dividends Stock dividends

Ref.

Debit

Credit 200,000

215,000 225,000

Balance 540,000 740,000 525,000 300,000

Cash Dividends Date Jan. 15 Dec. 1 31

Explanation

Ref.

Debit 100,000 115,000

Credit

215,000

Balance 100,000 215,000 0

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-4C (Continued) Stock Dividends Date Apr. 15 Dec. 31

Explanation

(c)

Ref.

Debit 225,000

Credit 225,000

Balance 225,000 0

GLADOW CORPORATION Balance Sheet (Partial) December 31, 20192022 Stockholders’ equity Paid-in capital Capital stock Common stock, $5 par value, 230,000 shares issued and outstanding .............. Additional paid-in capital In excess of par—common stock ............... Total paid-in capital.............................. Retained earnings ....................................................... Total stockholders’ equity ...................

$1,150,000 275,000 1,425,000 300,000 $1,725,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-5C

(a)

(b)

Retained Earnings Nov. 1 Cash Dividends 500,000 Jan. 1 Balance Dec. 31 Stock Dividends 360,000 Dec. 31 Net Income Dec. 31 Balance

JENNINGS CORPORATION Retained Earnings Statement For the Year Ended December 31, 2019 Balance, January 1 ......................................... Add: Net income ........................................... Less: Cash dividends .................................... Stock dividends .................................. Balance, December 31....................................

(cb)

2,450,000 970,000 2,560,000

$2,450,000 970,000 3,420,000 $500,000 360,000

860,000 $2,560,000

JENNINGS CORPORATION Partial Balance Sheet December 31, 20192022 ____________________________________________________________ Stockholders’ equity Paid-in capital Capital stock 6% Preferred stock, $100 par value, noncumulative, callable at $125, 20,000 shares authorized, 10,000 shares issued and outstanding............................ $1,000,000 Common stock, no par, $5 stated value, 600,000 shares authorized, 400,000 shares issued and outstanding ........ $2,000,000 Common stock dividends distributable ........................... 200,000 2,200,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-5C (Continued) Total capital stock .............. Additional paid-in capital In excess of par— preferred stock ...................... In excess of stated value— common stock ....................... Total additional paid-in capital .............................. Total paid-in capital ............ Retained earnings (see Note A) ............. Total stockholders’ equity ..............................

3,200,000 $ 200,000 1,180,000 1,380,000 4,580,000 2,560,000 $7,140,000

PROBLEM 11-5C (Continued) Note A: Retained earnings is restricted for plant expansion, $100,000. (d) Total dividend ........................................................................ Allocated to preferred stock—current year only ................. 60,000120,000* Remainder to common stock................................................ $440,000380,000

$500,000

*10,000 shares x $100 par x 6% = 60,000 x 2 years (2021 and 2022) = $120,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-6C

(a)

HARPO CORPORATION Stockholders’ equity Paid-in capital Capital stock 8% Preferred stock, $50 par noncumulative, 16,000 shares issued ............ Common stock, no par, $5 stated value, 500,000 shares issued and 485,000 outstanding ........................... Total capital stock ............. Additional paid-in capital In excess of par value— preferred stock ..................... In excess of stated value— common stock ...................... From treasury stock ................. Total additional paid-in capital ............................. Total paid-in capital ........... Retained earnings .................................. Total paid-in capital and retained earnings ...........

$ 800,000

2,500,000 3,300,000 $ 679,000 1,600,000 10,000

Less: Treasury stock (15,000 shares) ........................................ Total stockholders’ equity ..............................

2,289,000 5,589,000 1,448,000 7,037,000 130,000 $6,907,000

*(b) The book value of the common stock is $12.14 computed as follows: Total stockholders’ equity.............................................. Less: Preferred stock equity Call price (16,000 X $60) ................................... Common stock equity .................................................... Copyright © 20172020 John Wiley & Sons, Inc, (Instructor Use Only)

$6,907,000 960,000 $5,947,000

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

PROBLEM 11-6C (Continued) Common shares outstanding ........................................

485,000

Book value per share ($5,947,000 ÷ 485,000) ................

$12.26

Note: No preferred dividends are assigned to the preferred stock equity because the preferred stock is noncumulative.

Weygandt, Financial Accounting, 10e11e, Solutions Problems: Set C

CHAPTER 12 SOLUTIONS TO PROBLEMS—SET C PROBLEM 12-1C

(a) (b) (c) (d) (e) (f)

(g) (h) (i) (j)

Transaction Recorded depreciation expense on the plant assets. Incurred a loss on disposal of plant assets. Acquired a building by paying cash. Made principal repayments on a mortgage. Issued common stock Purchased shares of another company to be held as a long-term equity investment. Paid cash dividends to common stockholders. Sold inventory on credit. The company uses a perpetual inventory system. Purchased inventory on credit. Paid wages to employees.

SCF Activity Affected O

Cash inflow, outflow, or no effect? No cash flow effect

No cash flow effect

I F

Cash outflow Cash outflow

F I

Cash inflow Cash outflow

Cash outflow

No cash flow effect

O O

No cash flow effect Cash outflow

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-2C

(a) Cash inflows (outflows) related to plant assets 2022: Equipment purchase Land purchase Proceeds from equipment sales

($90,000) (30,000) 9,000*

*Cost of equipment sold $240,000 + $90,000 – $300,000 = $30,000 Accumulated depreciation removed from accounts for sale of equipment Accumulated depreciation— Equipment 96,000 Plug 16,000 64,000 Depreciation Expense 144,000 Cash proceeds = Cost $30,000 – accumulated depreciation $16,000 – loss $5,000 = $9,000 Note to instructor—some students may find journal entries helpful in understanding this exercise. Equipment .............................................................. Cash ................................................................

90,000

Land........................................................................ Cash ................................................................

30,000

Cash (plug)............................................................. Accumulated Depreciation—Equipment.............. Loss on Disposal of Plant Assets ........................ Equipment ......................................................

9,000 16,000 5,000

(b) Equipment purchase Land purchase Proceeds from equipment sale

90,000 30,000

30,000

Investing activities (outflow) Investing activities (outflow) Investing activities (inflow)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-3C

DUQUETTE COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ......................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ................................ $105,000 Amortization expense ................................ 20,000 Decrease in accounts receivable .............. 520,000 Increase in inventory ................................. (140,000) Increase in prepaid expenses ................... (175,000) Increase in accounts payable.................... 50,000 Increase in accrued expenses payable ....... 165,000 Net cash provided by operating activities ....

$1,040,000

545,000 $1,585,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-4C

DUQUETTE COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers......... Less cash payments: To suppliers ............................... For operating expenses ............ Net cash provided by operating activities ........................................

$5,920,000 (1) $3,380,000 (2) 955,000 (3)

4,335,000 $1,585,000

$5,400,000 520,000 $5,920,000

(2) Cash payments to suppliers Cost of goods sold ........................................... Add: Increase in inventory ............................. Cost of purchases ............................................ Deduct: Increase in accounts payable........... Cash payments to suppliers ............................

$3,290,000 140,000 3,430,000 (50,000) $3,380,000

(3) Cash payments for operating expenses Operating expenses ($420,000 + $525,000) ............ Add: Increase in prepaid expenses .......................... $ 175,000 Deduct: Increase in accrued expenses payable ...... (165,000) Cash payments for operating expenses ................................

$ 945,000

10,000 $ 955,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-5C

PAYTON INC. Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income .......................................................... Adjustments to reconcile net income to net cash provided by operating activities: Decrease in accounts receivable ............... Decrease in accounts payable ................... Increase in income taxes payable .............. Net cash provided by operating activities ...................................................

$102,000 $ 25,000 (16,000) 6,000

15,000 $117,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-6C

PAYTON INC. Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers............. Less cash payments: For operating expenses ................ For income taxes ........................... Net cash provided by operating activities ............................................

$570,000 (1) $416,000 (2) 37,000 (3)

(1) Cash receipts from customers Revenues ......................................................................... Add: Decrease in accounts receivable ($75,000 – $50,000)................................................ Cash receipts from customers....................................... (2) Cash payments for operating expenses Operating expenses........................................................ Add: Decrease in accounts payable ($51,000 – $35,000)................................................ Cash payments for operating expenses .......................

453,000 $117,000

$545,000 25,000 $570,000

$400,000 16,000 $416,000

(3) Cash payments for income taxes Income tax expense ........................................................ Deduct: Increase in income taxes payable .................. ($10,000 – $4,000) ............................................ Cash payments for income taxes ..................................

$ 43,000 6,000 $ 37,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-7C

(a)

ROGERS COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income.................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense........................... Increase in accounts receivable .......... Increase in inventory ............................ Decrease in accounts payable............. Increase in income taxes payable ....... Net cash provided by operating activities ............................................ Cash flows from investing activities Sale of equipment ........................................ Purchase of equipment................................ Net cash provided by investing activities ............................................ Cash flows from financing activities Issuance of bonds ........................................ Payment of cash dividends ......................... Net cash used by financing activities ............................................ Net decrease in cash ........................................... Cash at beginning of period ............................... Cash at end of period ..........................................

$ 38,000

$ 6,000 (9,000) (16,000) (12,000) 6,000

(25,000) 13,000

10,000 (5,000) 5,000 10,000 (33,000) (23,000) (5,000) 33,000 $ 28,000

(b) $13,000 – $5,000 – $33,000 = ($25,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-8C

(a)

ROGERS COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers ........ Less cash payments: To suppliers .............................. For operating expenses ($37,000 – $6,000) ................. For interest ................................ For income taxes ...................... Net cash provided by operating activities ............... Cash flows from investing activities Sale of equipment ............................ Purchase of equipment .................... Net cash provided by investing activities ................ Cash flows from financing activities Issuance of bonds ............................ Payment of cash dividends ............. Net cash used by financing activities ................................

$277,000 (1) $222,000 (2) 31,000 7,000 4,000 (3)

264,000 13,000

10,000 (5,000) 5,000 10,000 (33,000)

Net decrease in cash ............................... Cash at beginning of period .................... Cash at end of period ..............................

(23,000) (5,000) 33,000 $ 28,000

Computations: (1) Cash receipts from customers Sales........................................................................ Deduct: Increase in accounts receivable ............ Cash receipts from customers .............................. Copyright © 2020 John Wiley & Sons, Inc, (Instructor Use Only)

$286,000 (9,000) $277,000

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-8C (Continued) (2) Cash payments to suppliers Cost of goods sold ....................................................... Add: Increase in inventory ......................................... Cost of purchases ........................................................ Add: Decrease in accounts payable .......................... Cash payments to suppliers .......................................

$194,000 16,000 210,000 12,000 $222,000

(3) Cash payments for income taxes Income tax expense ..................................................... Deduct: Increase in income taxes payable................ Cash payments for income taxes ...............................

$ 10,000 6,000 $ 4,000

(b) $13,000 – $5,000 – $33,000 = ($25,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-9C

WANWRIGHT COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ....................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense .............................. Gain on sale of plant assets .................... Increase in accounts receivable.............. Increase in inventory ............................... Increase in accounts payable .................. Decrease in accrued expenses payable .................................................. Net cash provided by operating activities ................................................ Cash flows from investing activities Sale of investments ......................................... Sale of plant assets ......................................... Purchase of plant assets ................................. Net cash used by investing activities ................................................ Cash flows from financing activities Issuance of bonds ........................................... Sale of common stock ..................................... Payment of cash dividends ............................. Net cash provided by financing activities ................................................ Net increase in cash ................................................ Cash at beginning of period ................................... Cash at end of period ..............................................

$ 102,660

$ 35,500 (5,000) (33,800) (29,250) 14,420 (3,730)

(21,860) 80,800

22,500 15,000 (141,000) (103,500) 70,000 50,000 (38,000) 82,000 59,300 33,400 $ 92,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-10C

WANWRIGHT COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Cash receipts from customers ............. Less cash payments: To suppliers.................................... For operating expenses ................. For income taxes............................ For interest ..................................... Net cash provided by operating activities...................................... Cash flows from investing activities Sale of investments ............................... Sale of plant assets ............................... Purchase of plant assets....................... Net cash used by investing activities...................................... Cash flows from financing activities Issuance of bonds ................................. Sale of common stock ........................... Payment of cash dividends................... Net cash provided by financing activities ..................... Net increase in cash...................................... Cash at beginning of period ......................... Cash at end of period ....................................

$263,700 (1) $ 134,290 (2) 18,400 (3) 27,270 2,940

182,900 80,800

22,500 15,000 (141,000) (103,500) 70,000 50,000 (38,000) 82,000 59,300 33,400 $ 92,700

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

*PROBLEM 12-10C (Continued) Computations: (1) Cash receipts from customers Sales............................................................................... Deduct: Increase in accounts receivable ................... Cash receipts from customers .....................................

$297,500 33,800 $263,700

$119,460 29,250 148,710 14,420 $134,290

$ 14,670 3,730 $ 18,400

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

PROBLEM 12-11C

BOWDEN COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net income ........................................................... Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense .................................. Gain on sale of equipment .......................... Increase in accounts receivable ................. Increase in inventory ................................... Decrease in prepaid expenses .................... Increase in accounts payable...................... Net cash provided by operating activities ..... Cash flows from investing activities Sale of land .......................................................... Sale of equipment ................................................ Purchase of equipment ....................................... Net cash used by investing activities .........

$32,890 $ 65,000 (2,000)* (13,000) (52,000) 4,400 13,000

15,400 48,290

50,000 25,000 (80,000) (5,000)

Cash flows from financing activities Payment of cash dividends.................................

(69,290)

(26,000) 57,000 $31,000

Noncash investing and financing activities Conversion of bonds by issuance of stock .......

$30,000

*($25,000 – $23,000)

Weygandt, Financial Accounting, 11e, Solutions Problems: Set C

CHAPTER 13 SOLUTIONS TO PROBLEMS—SET C PROBLEM 13-1C

(a)

Condensed Income Statement For the Year Ended December 31, 2022 Martin Company Lewis Company Dollars Percent Dollars Percent $350,000 100.0% $1,200,000 100.0% 180,000 51.4% 648,000 54.0% 170,000 48.6% 552,000 46.0% 72,000 20.6% 266,000 22.2% 98,000 28.0% 286,000 23.8%

Net sales Cost of goods sold Gross profit Operating expenses Income from operations Other expenses and losses Interest expense 5,000 Income before income taxes 93,000 Income tax expense 17,000 Net income $ 76,000

1.4% 10,000 26.6% 276,000 4.9% 54,000 21.7% $ 222,000

.8% 23.0% 4.5% 18.5%

(b) Martin Company appears to be more profitable. It has higher relative income from operations, income before taxes, and net income. Lewis’s a

return on assets of 14.3% return on assets of 16.9% stockholders’ equity of 20.0%

is lower than Martin Company’s

, and Lewis’s return on common c

on common stockholders’ equity of 23.0%

Kimmel Financial Accounting, 11e

is lower than Martin’s return d

(For Instructor Use Only)

13-1

PROBLEM 13-1C (Continued) a

$222,000 is Lewis’s 2022 net income. $1,550,000 is Lewis’s 2022 average assets: Return on assets = ($222,000 ÷ $1,550,000) = 14.3% Current assets Plant assets Total assets

2022 2013 $ 700,000 $ 650,000 1,000,000 750,000 $1,700,000 + $1,400,000 =

$76,000 is Martin’s 2022 net income. $450,000 is Martin’s 2022 average assets: Return on assets = ($76,000 ÷ $450,000) = 16.9% Current assets Plant assets Total assets

2022 $130,000 400,000 $530,000

2013 $100,000 270,000 $370,000

$222,000 is Lewis’s 2022 net income. $1,112,500 is Lewis’s 2022 average stockholders’ equity: Return = $222,000 ÷ $1,112,500 = 20.0% Common stock Retained earnings Stockholders’ equity

2022 $ 950,000 300,000

2013 $700,000 275,000

$1,250,000 +

$975,000

$76,000 is Martin’s 2022 net income. $330,000 is Martin’s 2022 average stockholders’ equity: Return = $76,000 ÷ $330,000 = 23% Common stock Retained earnings Stockholders’ equity

13-2

2022 $340,000 80,000 $420,000

2013 $200,000 40,000 +

$240,000

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

PROBLEM 13-2C

(a) Earnings per share =

= $8.51

(1) [13,000 + 15,000] ÷ 2

(b) Return on common stockholders’ equity =

$119,200  $376,000 + $480,300    2

= = 27.8%

(d) Current ratio =

= 1.78:1

(e) Receivables turnover =

(f)

= 16.7%

= 8.2 times

Average collection period = 365 days ÷ 8.2 = 44.5 days

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

13-3

PROBLEM 13-2C (Continued)

(g) Inventory turnover =

= 4.6 times

(h) Days in inventory = 365 days ÷ 4.6 = 79.3 days

(i)

Times interest earned =

(j)

Asset turnover =

(k) Debt to assets =

(l)

= 16.4 times

= 1.09 times

= 38%

Current cash debt coverage =

(m) Cash debt coverage =

= .68 times

= .38 times

(n) Free cash flow = $108,000 – $47,000 – $30,900 = $30,100.

13-4

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

PROBLEM 13-3C

(a)

2022 (1)

2021

Profit margin. = 14.5%

(2)

= 12.1%

Gross profit rate. = 42%

= 45% (3)

Asset turnover. = 1.06 times

(4)

= 1.21 times

Earnings per share. = $2.97

(5)

Price-earnings ratio. = 0.94 times

(6)

= 1.31 times

Payout ratio. = 50% **($130,000 + $110,000 – $185,000)

(7)

= $2.66

= 70.6% *($105,000 + $85,000 – $130,000)

Debt to assets. = 28%

Kimmel Financial Accounting, 11e

= 24%

(For Instructor Use Only)

13-5

PROBLEM 13-3C (Continued) (b) The underlying profitability of the corporation has improved. For example, the profit margin and gross profit rate have both improved. In addition, the corporation’s earnings per share has increased, which suggests that investors will be looking more favorably at the corporation. Also, its payout ratio has decreased, which should have a positive effect on its solvency. However, the debt to assets ratio has increased, indicating a heavier reliance on debt. Also, the asset turnover ratio has declined, indicating management has not managed assets well in generating sales. And, finally, the price-earnings ratio has declined, perhaps suggesting that investors are not impressed with the company’s future prospects.

13-6

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

PROBLEM 13-4C

(a)

LIQUIDITY 2021

2022

Change

Current

= 3.15:1

= 2.03:1

Decrease

Receivables turnover

= 12.0 times

= 11.9 times

Decrease

Inventory turnover

= 1.95 times

= 1.86 times

Decrease

An overall decrease in short-term liquidity exists.

PROFITABILITY Profit margin

= 9.6%

= 12.4%

Increase

Asset turnover

= .87 times

= .91 times

Increase

Return on assets

= 8.3%

= 11.3%

Increase

Earnings per share

= $.90

= $1.30

Increase

Overall profitability has improved.

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

13-7

PROBLEM 13-4C (Continued) (b)

2022 1.

2023

Change

Return on common stockholders’ equity

= 16.9%

= 12.6% Decrease

Debt to assets ratio

= 39%

= 27%

Decrease

Priceearnings ratio

= 3.8 times

= 5.0 times

Increase

(a) ($500,000 + $305,000 + $500,000 + $230,000) ÷ 2. (b) ($750,000* + $430,000** + $500,000 + $305,000) ÷ 2. (c) $125,000 ÷ 100,000. **$500,000 + (50,000 X $5/share) **$305,000 + $125,000

13-8

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

PROBLEM 13-5C (a)

Ratio

Stanley Black & Decker, Inc

Snap-On Tools

(All Dollars Are in Millions) (1) Current ratio 1.18:1 ($1,411.9 ÷ $1,192.0) (2) Accounts receivable 6.2 ($3,737.1 ÷ $604.9) turnover (3) Average collection 58.9 (365 ÷ 6.2) period (in days) (4) Inventory turnover 5.1 ($2,228.8 ÷ $440.5) (5) Days in inventory 71.6 (365 ÷ 5.1) (6) Profit margin 6.0% ($224.3 ÷ $3,737.1) (7) Asset turnover .78 ($3,737.1 ÷ $4,817.9a) (8) Return on assets 4.7% ($224.3 ÷ $4,817.9a) (9) Return on common stockholders’ equity 12.1% ($224.3 ÷ $1,846.2b) (10) Debt to assets 58% ($2,783 ÷ $4,769.1) (11) Times interest earned 5.4 ($342.5c ÷ $63.7) (12) Current cash debt coverage .45 ($539.4 ÷ $1,192.6d) (13) Cash debt coverage .18 ($539.4 ÷ $2,971.7e) (14) Free cash flow $362.9 ($539.4 – $72.9 – $103.6) a

$4,769.1 + $4,866.6 ÷ 2 $1,986.1 + $1,706.3 ÷ 2 c $224.3 + $54.5 + $63.7 d $1,192 + $1,193.2 ÷ 2 e $2,783 + $3,160.3 ÷ 2

2.27:1 ($1,676.1 ÷ $739.9) 4.0 ($2,420.8 ÷ $612.7) 91.3

(365 ÷ 4.0)

4.2 ($1,345.7 ÷ $316.9) 86.9 (365 ÷ 4.2) 5.5% ($134.2 ÷ $2,420.8) .79 ($2,420.8 ÷ $3,078.9f) 4.4% ($134.2 ÷ $3,078.9f) 10.8% ($134.2 ÷ $1,238.3g) 63% ($2,157.4 ÷ $3,447.4) 5.1 ($244.6h ÷ $47.7) .54 .19 $213.7

($347.1 ÷ $643.7i) ($347.1 ÷ $1840.6j) ($347.1 – $64.4 – $69.0)

$3,447.4 + $2,710.3 ÷ 2 $1,290.0 + $1,186.5 ÷ 2 h $134.2 + $62.7 + $47.7 i $739.9 + $547.5 ÷ 2 j $2,157.4 + $1,523.8 ÷ 2

(b) The comparison of the two companies shows the following: Liquidity—Stanley Black and Decker’s current ratio is only 1.18:1 compared to Snap-On Tools’ 2.27:1 but its accounts receivable turnover is 6.2 times compared to Snap-On’s 4.0 times. Stanley Black and Decker also has a better inventory turnover (5.1 vs. 4.2). Stanley Black and Decker’s current cash debt coverage is less than Snap-On Tool’s (.45 vs .54). In sum, the results are mixed. Solvency—Stanley Black and Decker’s debt to assets ratio is 58% compared to Snap-On Tools’ 63%, indicating that Snap-On Tools is less solvent. In addition, comparing times interest earned, cash debt coverage, and free cash flow, Stanley Black and Decker appears more solvent. Profitability—Stanley Black and Decker is more profitable than Snap-On Tools. It betters Snap-On in 3 of 4 profitability ratios. Copyright © 2020 Wiley

Kimmel Financial Accounting, 11e

(For Instructor Use Only)

13-9

This sample from the 10th edition is for demonstration purposes only. This content is in the process of being revised for the 11th edition.

Chapter Three Challenge Exercise 1 Expands on: E3-3 LO: 1 O’Brien Industries collected $200,000 from customers in 2019. Of the amount collected, $40,000 was from revenue accrued from services performed in 2014, and $20,000 was received in advance for 2020 revenue. In addition, O’Brien earned $70,000 of revenue in 2019, which will not be collected until 2020. O’Brien also recognized $25,000 of revenue in 2018 which had been collected in 2018. O’Brien Industries paid $140,000 for expenses in 2019. Of the amount paid, $50,000 was for expenses incurred on account in 2018, $22,000 was paid in advance for 2020 expenses. In addition, O’Brien incurred $78,000 of expenses in 2019, which will not be paid until 2020. O’Brien also incurred $29,000 of expenses in 2019 which had been paid in 2018. Instructions : (a) Compute 2019 cash-basis net income. (b) Compute 2019 accrual-basis net income.

Challenge Exercise 1 – Solution (a)

Cash received from revenue ...................................................................... Cash paid for expenses ............................................................................. Cash-basis net income ...................................................................

$200,000 (140,000) $ 60,000

(b)

Revenues ($200,000 – $40,000 + $70,000 -$20,000 + $25,000) ............... Expenses ($140,000 – $50,000 + $78,000 - $22,000 + $29,000) ............... Accrual-basis net income................................................................

$235,000 (175,000) $ 60,000

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-1

Challenge Exercise 2 Expands on: E3-5 LO: 3, 4 Craig Ferguson Company has the following balances in selected accounts on December 31, 2019: Accounts Receivable Accumulated Depreciation—Equipment Interest Payable Notes Payable Prepaid Insurance Salaries and Wages Payable Supplies Unearned Service Revenue

-010,000 -020,000 2,700 -03,500 50,000

All the accounts have normal balances. The information below has been gathered at December 31, 2019. 1. Craig Ferguson Company borrowed $20,000 by signing a 12%, one-year note on August 1, 2019. 2. A count of supplies on December 31, 2019, indicates that supplies of $900 are on hand. 3. Depreciation on the equipment for 2019 is $2,000. 4. Craig Ferguson Company paid $2,700 for 12 months of insurance coverage on May 1, 2019. 5. On November 1, 2019, Craig Ferguson collected $50,000 for consulting services to be performed from November 1, 2019, through March 31, 2020. 6. Craig Ferguson performed consulting services for a client in December 2019. The client will be billed $6,300. 7. Craig Ferguson Company pays its employees total salaries of $13,000 every Monday for the preceding 5day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2019. Instructions: A. Prepare adjusting entries for the seven items described above. B. Prepare the 2020 entries for items 6 and 7.

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-2

Challenge Exercise 2 – Solution A 1.

Interest Expense ............................................................................ Interest Payable .................................................................... ($20,000 X 12% X 5/12)

1,000

Supplies Expense .......................................................................... Supplies ................................................................................ ($3,500 – $900)

2,600

Depreciation Expense .................................................................... Accumulated Depreciation—Equipment ................................

2,000

Insurance Expense ........................................................................ Prepaid Insurance ................................................................. ($2,700 X 8/12)

1,800

Unearned Service Revenue ........................................................... Service Revenue ................................................................... ($50,000 X 2/5)

20,000

Accounts Receivable...................................................................... Service Revenue ...................................................................

6,300

Salaries and Wages Expense ........................................................ Salaries and Wages Payable................................................. ($13,000 X 3/5)

7,800

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

6,300

Salaries and Wages Payable ......................................................... Salaries and Wages Expense ........................................................ Cash…………. ......................................................................

7,800 5,200

1,000

2,600

2,000

1,800

20,000

6,300

7,800

B. 6.

6,300

13,000

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-3

Expands on: E3-7 LO: 2, 3 The ledger of Laurie Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. Debit Prepaid Insurance $ 5,400 Supplies 4,500 Equipment 40,000 Accumulated Depreciation—Equipment Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense –0– Salaries and Wages Expense 20,000

Credit

$12,600 25,000 11,100 90,000

An analysis of the accounts shows the following. 1. The equipment depreciates $600 per month. 2. Two-thirds of the unearned rent revenue was earned during the quarter. 3. The note payable is dated January 1 and bears 12% interest. 4. Supplies on hand total $800. 5. The insurance policy is a two-year policy dated January 1. Instructions : A. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense. B. Compute the ending balances for Prepaid Insurance, Unearned Rent Revenue, and Rent Revenue, and indicate in which financial statement those items will be reported.

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-4

Challenge Exercise 3 – Solution A. 1.

Mar. 31

Depreciation Expense ($600 X 3)....................................... Accumulated Depreciation—Equipment ...................

1,800

Unearned Rent Revenue.................................................... Rent Revenue ($11,100 X 2/3) .................................

7,400

Interest Expense ($25,000 X 12% X 3/12) ......................... Interest Payable .......................................................

750

Supplies Expense .............................................................. Supplies ($4,500 – $800)..........................................

3,700

Insurance Expense ($5,400 X 3/24) ................................... Prepaid Insurance………………………………………………..

1,800

7,400

750

3,700 675 675

B. Prepaid insurance has a balance of $4,725 ($5,400 - $675) and is reported as an asset in the balance sheet. Unearned rent revenue has a balance of $3,700 ($11,100 - $7,400) and is reported as a liability in the balance sheet. Rent Revenue has a balance of $97,400 ($90,000 + $7,400) and is reported as revenue in the income statement.

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-5

Challenge Exercise 4 Expands on: E3-8 LO: 2, 3 Cyrene Sexton, D.D.S., opened a dental practice on January 1, 2019. During the first month of operations the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $1,900 of such services were performed but not yet recorded. 2. Utility expenses incurred but not paid prior to January 31 totaled $760. 3. Purchased dental equipment on January 1 for $92,000, paying $20,000 in cash and signing a $72,000, 12%, 3-year note payable. The equipment depreciates $750 per month. 4. Purchased a one-year malpractice insurance policy on January 1 for $13,200. 5. Purchased $1,900 of dental supplies. On January 31, determined that $400 of supplies were on hand. Instructions: A. Prepare the adjusting entries on January 31. Account titles are: Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable. B. Prepare the following February journal entries. 1. The cash is received for the services described in transaction 1. . 2. The utility bill from transaction 2 is paid. 3. On February 1, the interest accrued in transaction 3., and the $2,000 in principal is paid.

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-6

Challenge Exercise 4 – Solution A. 1.

Jan.

5. B. 1.

Accounts Receivable.......................................................... Service Revenue ......................................................

1,900

Utilities Expense ................................................................ Utilities Payable ........................................................

760

Depreciation Expense ........................................................ Accumulated Depreciation—Equipment ...................

750

Interest Expense ($72,000 X .12 X 1/12) ............................ Interest Payable .......................................................

720

Insurance Expense ($13,200 ÷ 12) .................................... Prepaid Insurance ....................................................

1,100

Supplies Expense ($1,900 – $400) .................................... Supplies ...................................................................

1,500

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

1,900

Utilities Payable ................................................................. Cash ........................................................................

760

Notes Payable ........................................................... Interest Expense ....................................................... Cash…………. ..................................................

1,900

760

750

720

1,100

1,500

1,900

760 2,000 720 2,720

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-7

Challenge Exercise 5 Expands on: E3-10 LO: 1, 2, 3, 4 The income statement of Annette Co. for the month of July 2019 shows net income of $3,200 based on Service Revenue $7,700, Salaries and Wages Expense $2,600, Supplies Expense $1,400, and Utilities Expense $500. In reviewing the statement, you discover the following. 1. Insurance expired during July of $500 was omitted. 2. Supplies expense includes $300 of supplies that are still on hand at July 31. 3. Depreciation on equipment of $250 was omitted. 4. Accrued but unpaid salaries and wages at July 31 of $400 were not included. 5. Services provided but unrecorded totaled $700. Instructions: A. Prepare a correct income statement for July 2019. B. What effect do the corrections have on the amount reported as total assets on the balance sheet? B. What effect do the corrections have on the amount reported as total liabilities on the balance sheet?

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-8

Challenge Exercise 5 – Solution A. ANNETTECO. Income Statement For the Month Ended July 31, 2019 Revenues Service revenue ($7,700 + $700) ..................................................... Expenses Salaries and Wages expense ($2,600 + $400)................................. Supplies expense ($1,400 – $300) ................................................... Utilities expense ............................................................................... Insurance expense........................................................................... Depreciation expense ...................................................................... Total expenses ....................................................................... Net income ............................................................................................... B. Decrease in Prepaid insurance Increase in Supplies Decrease in Equipment due to depreciation Increase in Accounts Receivable Increase in Assets Challenge Exercise 5 – Solution (Continued)

$ (500) 300 (250) 700 $ 250

C. Increase in Salaries and Wages Payable

$ 400

$8,400 $3,000 1,100 500 500 250 5,350 $3,050

Note to instructor: Net income decreased by $150, from $3,200 to $3,050. This would decrease stockholders’ equity. You can verify your computations with the accounting equation: Assets = Liabilities + Stockholders’ Equity + $250 = +400 + -$150

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-9

Expands on: E3-20 LO: 5 Ryan Stiles Company has the following balances in selected accounts on December 31, 2019. Service Revenue $54,000 Insurance Expense 3,120 Supplies Expense 3,350 All the accounts have normal balances. Ryan Stiles Company debits prepayments to expense accounts when paid, and credits unearned revenues to revenue accounts when received. The following information below has been gathered at December 31, 2019. 1. Ryan Stiles Company paid $3,120 for 12 months of insurance coverage on April 1, 2019. 2. On November 1, 2019, Ryan Stiles Company collected $54,000 for consulting services to be performed from November 1, 2019 through April 30, 2020. 3. A count of supplies on December 31, 2019 indicates that supplies of $1,100 are on hand. Instructions: A. B.

Prepare the adjusting entries needed at December 31, 2019. Indicate the amounts to be reported in the 2019 income statement and the 12/31/19 balance sheet for the items from the adjusting entries in part A.

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-10

Challenge Exercise 6– Solution A. 1.

Prepaid Insurance ........................................................................... Insurance Expense................................................................. ($3,120 X 3/12)

780

Service Revenue ........................................................................... Unearned Service Revenue ................................................... ($54,000 X 4/6)

36,000

Supplies .... ..................................................................................... Supplies Expense……………………………………………

1,100

B. Income Statement Insurance Expense Service Revenue Supplies Expense

780

36,000

1,100

$ 2,340 ($3,120 - $780; or $3,120 X 9/12) $ 18,000 ($54,000 - $36,000; or, $54,000 X 2/6) $ 2,250 ($3,350 - $1,100)

Balance Sheet Prepaid Insurance $ 780 Unearned Service Revenue $ 36,000 Supplies $ 1,100

Weygandt, Financial Accounting 10e, Challenge Exercises Page 3-11