SOLUTIONS MANUAL for College Accounting A Contemporary Approach 3re Edition, David Haddock, John Ell

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College Accounting A Contemporary Approach 3e David Haddock John Ellis Price Michael Farina (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file.

CHAPTER 1 ACCOUNTING: THE LANGUAGE OF BUSINESS Chapter Opener: Thinking Critically Stockholders, the IRS, SEC, banks, lenders and creditors are all examples of organizations that would be interested in how Google is performing.

Fast Facts • Google’s mission is to organize the world’s information and make it universally accessible and useful. • “Googol” is the mathematical term for a 1 followed by 100 zeros. Google’s play on the term reflects the company’s mission to organize the immense amount of information available on the web. • Google’s interface can be customized into more than 100 languages. • Google’s culture is unlike any in corporate America—lava lamps and large rubber balls dot company headquarters and the company’s chef used to cook for the Grateful Dead. Google Inc. puts employees first when it comes to daily life in all of their offices. Managerial Implications: Thinking Critically Managers use financial information to make decisions about adding new products and services, offering current products and services, and choosing vendors. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Public, managerial, and governmental. 2. Auditing, tax, and management advisory services. 3. Advice on how to structure financial affairs in order to reduce taxes without violating tax laws. 4. Establish accounting policies, direct the accounting system, prepare and interpret financial statements, provide financial advice, prepare tax forms. 5. Sole proprietorship (owned by one person). Partnership (owned by two or more people). Corporation (can be owned by one person or many). 6. Measure business performance; separate entity. 7. Owners and managers: evaluate operations. Suppliers: assess ability of a firm to pay debts. Banks: ability to repay loans. Tax authorities: determine a tax base. Governmental agencies: legal compliance. Employees: wage levels and profit-sharing plans. 8. Statements of Financial Accounting Standards. 9. SEC, AICPA, AAA. 10. Regulation of financial reporting by publicly owned corporations. 11. The Public Company Accounting Reform and Investor Protection Act of 2002 was passed in response to the wave of corporate accounting scandals starting with the demise of Enron Corporation in 2001, the arrest of top executives at WorldCom and Adelphia Communications Corporations, and ultimately, the demise of Arthur Andersen, an international public accounting firm. 12. The purpose of the Public Company Accounting Oversight Board is to oversee the accounting profession through its investigative and enforcement powers and to discipline corrupt accountants and auditors. © 2015 McGraw-Hill Education. This is proprietary material soley for instructor use. Not authorized for sale or distribution in any manner.

1-1


CRITICAL THINKING PROBLEM 1.1 Student answers will vary. The student’s reasons for choosing one form of ownership over another are more important than the specific choice made. Generate a discussion on the proposed name of the business. Ask the students if they think the name is creative. Sole proprietorship: Advantage—Heidi would be her own boss and could direct the business as she wants. Disadvantages—Heidi would be responsible for the debts and taxes of the business and may be limited in the amount of capital she could borrow to finance the business. Partnership: Advantage—Heidi would have one or more partners to assist with business operations and to contribute capital. Disadvantages—Heidi would have to share control of the business, as well as its profits. Heidi could be liable for the debts of the partnership. Corporation: Advantages—The business would be a separate entity. Capital would be easier to raise and liability would be limited to the assets of the business. Disadvantages—A corporation is a more complicated form of ownership and is usually more expensive to form. There is also more government regulation and, consequently, more paperwork with a corporation.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Questions asked might include: What is the profit or loss?, How much cash does the business have?, How much money do customers owe the business?.How much money is owed to suppliers?, What is the change in sales volume?, and what is the cost of merchandise sold? 2. 3. 4. 5.

6. 7. 8.

Financial information is used to evaluate performance and make decisions about a business or a nonprofit Keep your employees, creditors, and investors happy. Yes, financial information is a tool for making business decisions that will yield the above results. Inaccurate accounting records and poor business decisions. Every business needs an efficient accounting system which accumulates financial data, classifies and summarizes the information. Without an accounting system, suppliers, lenders, investors, and governmental tax authorities would not be able to accurately make decisions based on the financial information of the company. The manager makes financial decisions based upon the financial information provided by the accountant. Yes. The firm’s financial records need to be separate from the owner’s personal financial records in order to evaluate and measure the performance of the business. These standards are important to management because they enhance comparability of reporting practices.

Ethical Dilemma: Yes. Ethics and accounting are intertwined. Financial Statement Analysis: Analyze Online: 1. Clothing, accessories, outerwear and footwear. 2. Investors, suppliers, and banks. To assist the users when making financial decisions. 3. 15 to 25 year-olds. 4. Economic entity because it is a business for profit. Teamwork: The bank will ask for information to assess the firm's finanacial position. Questions such as how much property does the firm own?; how much debt does the firm owe?; how much cash does the firm have? Anticipated cost of expansion and future income projections may also be requested. Banks might also require a list of your customers and vendors. There is no requirement to indicate to the bank problems you are having with certain customers and vendors. Internet Connection: The number of Accounting Standards Update used will vary from year to year. Accounting Standards Update are cited as “ASU2016-1 (year) (standard number in chronological order).

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. FALSE 3. FALSE 4. TRUE 5. FALSE 6. FALSE 7. FALSE 8. TRUE 9. TRUE 10. TRUE 11. FALSE 12. FALSE Part B Completion 1. language of business 2. international accounting 3. FBI 4. governmental accounting 5. AAA 6. AICPA 7. generally accepted accounting principles 8. SEC 9. IRS 10. stockholders or shareholders 11. shares of stock 12. partnerships 13. social entity 14. recording, classifying 15. financial statements

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CHAPTER 2 ANALYZING BUSINESS TRANSACTIONS Chapter Opener: Thinking Critically The individuals in charge of keeping track of these transactions at Southwest as well as in other companies, are known as accountants. When recording the transactions, accountants are required to follow a set of rules and regulations known as GAAP. For every financial transaction that Southwest has, their accountants determine the accounts that were affected and then they record, report and then analyze these transactions. By doing so they can, at a specific point in time and over a stipulated period, be able to assess the company’s financial performance including profitability of the airline, assets owned by the company and of course the amount owed to creditors and owners.

Fast Facts • Southwest Airlines opened in 1971 with three planes flying between Houston, Dallas, and San Antonio. Southwest Airlines currently flies over 100 million passengers a year to 97 cities all across the country. • For the fiscal year 2012, the company’s net income was $421 million while its total operating revenue was $17.09 billion. • In 2012 Southwest served 63.3 million cans of soda, juices, and water; 14.1 million alcoholic beverages; 37.2 million bags of pretzels; 88.3 million bags of peanuts; 22.9 million Select-ASnacks; and 45.5million other snacks. Managerial Implications: Thinking Critically Answers will vary. Students should mention total assets and the type of assets, the liabilities the business would be responsible for, and whether the business is making a profit. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Assets = Liabilities + Owner’s Equity 2. Assets: property owned. Liabilities: debts. Owners’ equity: owner’s financial interest. 3. Assets, liabilities, and owner’s equity. 4. Revenue and expenses; net income or loss 5. Beginning-of-period capital balance, additional investments, net income/loss for period, less withdrawals ending capital balance. 6. Firm name, title of statement, date of statement or the period of time covered 7. Balance sheet shows position at particular date; increase of operations for a period of time 8. Inflow of money/assets resulting from sales or use of property. 9. Outflow of money/assets for costs used to produce revenue.

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Discussion Questions (continued) 10. Subtract total expenses from revenue 11. Increases owner's equity 12. a. assets increase, owner’s equity increase b. one asset increase and another decrease; no change in total assets c. assets decrease, liabilities decrease d. assets increase, owner’s equity increase e. assets decrease, owner’s equity decrease f. assets decrease, owner’s equity decrease EXERCISE 2.1 Assets: Liabilities: Owners’ Equity

$125,900 $26,225 $99,675

EXERCISE 2.2 1. 2. 3. 4. 5.

$22,240 $19,020 $5,675 $36,725 $8,875

EXERCISE 2.3 Transaction 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Assets I I I/D I/D I D I I/D D D

=

Liabilities

+

Owners’ Equity I

I

I = Increase (-) D = Decrease (+)

I D I D D

EXERCISE 2.4

1. 2. 3. 4. 5.

Assets Cash $13,500 Dental Supplies 3,650 Dental Equipment 26,550 Office Furniture 8,000 Total $51,700

= = = = =

Liabilities Accounts Payable $23,180

$23,180

+ Owner’s Equity + David Malone, Capital $28,520 + + + + $28,520

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EXERCISE 2.5 Assets Cash 1.

= +

Accounts Receivable

+

Liabilities

+

Equipment

Accounts = Payable

+

Owner’s Equity John Amos Capital + Revenue

+$60,000

2.

+22,000

3.

+3,100

4.

-4,600

+22,000 +3,100

+5,050 -4,450

7.

+3,200

8. Totals

-13,000 $44,250

+5,050 4,450

-3,200 +

$,1,850

+

$26,600

=

-13,000 $9,000

+

$60,000

+

$8,150

-

EXERCISE 2.6 Net income of $23,000 Revenue Repair Fees ………………………………………….. $51,150 Expenses Advertising Expense ………………………………………….. $6,300 Salaries Expense ………………………………………….. 19,100 Telephone Expense ………………………………………….. 1,150 Utilities Expense ………………………………………….. 1,600 Total Expenses ………………………………………….. $28,150 Net Income ………………………………………….. $23,000 EXERCISE 2.7 1. 2. 3. 4. 5. 6. 7.

Expenses

+4,600

5. 6.

-

+$60,000

Services were performed for cash. Equipment was purchased for cash. A payment was made on the amount owed to a creditor. An expense was paid in cash. Cash was received from charge customer. Services were performed on credit. An expense was paid in cash.

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$4,450


EXERCISE 2.8 Perez Investment Services Income Statement Month Ended September 30, 2016 Revenue Fees Income

77 9 0 0 00

Expenses Advertising Expense Salaries Expense Telephone Expense Total Expenses

6 5 0 0 00 16 0 0 0 00 8 0 0 00 23 3 0 0 00 54 6 0 0 00

Net Income

EXERCISE 2.9 NetNet Loss loss of of $1,150 $950 Revenue Service Revenue ………………………………………….. $5,800 Expenses Advertising Expense………………………………………….. $3,100 Telephone Expense………………………………………….. 800 Salaries Expense ………………………………………….. 2,600 Cleaning Expense ………………………………………….. 450 Total Expense ………………………………………….. $6,950 Net Loss ……………………………………………….. -$1,150 EXERCISE 2.10 Perez Investment Services Statement of Owner’s Equity Month Ended September 30, 2016 Alexandria Perez, Capital, September 1, 2016 Net Income for September Less Withdrawals for September Increase in Capital Alexandria Perez, Capital, September 30, 2016

26 7 0 0 00 54 6 0 0 00 9 0 0 0 00 45 6 0 0 00 72 3 0 0 00

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EXERCISE 2.10 (continued) Perez Investment Services Balance Sheet September 30, 2016 Assets Cash Accounts Receivable Office Supplies Office Equipment Total Assets

Liabilities 33 1 0 0 00 Accounts Payable 4 0 0 0 00 3 4 0 0 00 Owner's Equity 37 5 0 0 00 Alexandria Perez, Capital 78 0 0 0 00 Total Liabilities and Owner's Equity

5 7 0 0 00

72 3 0 0 00 78 0 0 0 00

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PROBLEM 2.1A

Cash +$97,000 -$19,750

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Totals

Assets Accounts + Receivable + Supplies

-$11,800 +$30,000 +$8,200 +$6,300 -$4,000 +$3,500 -$6,460 -$9,000 $87,690

= Liabilities + Owner's Equity Accounts Owner’s Capital + Equipment = Payable + +$97,000 +$19,750 +$14,400 +$14,400 -$11,800 +$30,000 +$8,200 +$6,300 -$4,000

-$3,500 + $6,460 +

$2,800 +

$6,460

+

$2,600 +

-$9,000 $128,500

= Liabilities + Accounts = Payable +

M. Dickey Capital

+

Revenue

-

Expenses

$34,150 =

Analyze: The ending balance in the Cash account is $87,690. PROBLEM 2.2A

Cash Beginning Balances

Assets Accounts Office + Receivable + Furniture +

$61,000

+

$16,600 +6,680

+

$35,800

+ $23,500

=

$11,200

+

$91,500

+

$58,600 +6,680

-

$24,400

+

23,280

+

35,800 +1,700

+ $23,500

=

11,200

+

91,500

+

65,280

-

24,400

2.

61,000 -1,700

+

23,280 -11,200

+

37,500

+ $23,500

=

11,200

+

91,500

+

65,280

-

24,400

3.

59,300 +11,200

1. New Balances New Balances

.

Auto

Owner’s Equity

2-6


PROBLEM 2.2A (continued)

Cash New Balances

Owner’s Equity M. Dickey Capital

+

Revenue

-

Expenses

70,500 -880

+

12,080

+

37,500

+ $23,500

=

11,200

+

91,500

+

65,280

-

24,400 +880

69,620 -4,500

+

12,080

+

37,500

+ $23,500

=

11,200 -4,500

+

91,500

+

65,280

-

25,280

5.

+

12,080

+

37,500

+ $23,500

=

6,700

+

91,500

+

65,280

-

6.

65,120 -9,700

25,280 +9,700

55,420 -1,120

+

12,080

+

37,500

+ $23,500

=

6,700

+

91,500

+

65,280

-

7.

34,980 +1,120

54,300 +10,500

+

12,080

+

37,500

+ $23,500

=

6,700

+

91,500

+

65,280 +10,500

-

36,100

8.

+

12,080

+

37,500

+ $23,500

=

6,700

+

91,500

+

75,780

-

9.

64,800 -2,350

36,100 +2,350

62,450

+ +

12,080 +12,500

+

37,500

+ $23,500

=

6,700

+

91,500

+

75,780 +12,500

-

38,450

$62,450

+

$24,580

+

$37,500

+ $23,500

=

$6,700

+

$91,500

+

$88,280

-

$38,450

New Balances New Balances New Balances New Balances New Balances 10.

Analyze: Total assets equal $148,030.

.

Auto

= Liabilities + Accounts = Payable +

4. New Balances

New Balances

Assets + Accounts + Office Receivable Furniture +

2-7


PROBLEM 2.3A Brown Equipment Repair Service Balance Sheet February 29, 2016 Assets Cash Supplies Accounts Receivable Equipment Total Assets

Liabilities 34 3 0 0 00 Accounts Payable 24 0 0 0 00 6 3 8 0 00 13 2 0 0 00 Owner's Equity 78 0 0 0 00 James Brown, Capital 107 8 8 0 00 131 8 8 0 00 Total Liabilities and Owner's Equity 131 8 8 0 00

Analyze: Owner's Equity is $107,880 at February 29, 2016. PROBLEM 2.4A Cotton Cleaning Service Income Statement Month Ended May 31, 2016 Revenue Fees Income Expenses Utilities Expense Salaries Expense Telephone Expense Total Expenses Net Loss

7 8 8 0 00 9 8 0 00 8 9 0 0 00 3 1 4 00 10 1 9 4 00 (2 3 1 4 00)

Cotton Cleaning Service Statement of Owner's Equity Month Ended May 31, 2016 Taylor Cotton, Capital, May 1, 2016 Net Loss for May (2 3 1 4 00) Less Withdrawal for May 3 0 0 0 00 Decrease in Capital Taylor Cotton, Capital, May 31, 2016

50 6 0 0 00

5 3 1 4 00) 45 2 8 6 00

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PROBLEM 2.4A (continued) Cotton Cleaning Service Balance Sheet May 31, 2016 Assets Cash Accounts Receivable Supplies Equipment Total Assets

4 6 8 6 00 5 9 0 0 00 5 8 0 0 00 33 8 0 0 00 50 1 8 6 00

Liabilities Accounts Payable

4 9 0 0 00

Owner's Equity Taylor Cotton, Capital Total Liabilities and Owner's Equity

45 2 8 6 00 50 1 8 6 00

Analyze: Analyze: The Theamount amountofof$43,296 $45,286(Carol (Taylor West, Cotton, Capital) Capital) waswas transferred transferred to the to balance the balance sheet. sheet.

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or 2-9 distribution in any manner.


PROBLEM 2.1B

Cash +$72,000 -$32,000

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Totals

Assets Accounts + Receivable + Supplies

-$6,000 +$12,000 +$8,400 +$7,300 -$5,200 +$5,000 -$6,300 -$10,000 $37,900

= Liabilities + Owner's Equity Accounts Owner’s Capital + Equipment = Payable + +$72,000 +$32,000 +$12,000 +$12,000 -$6,000 +$12,000 +$8,400 +$7,300 -$5,200

-$5,000 + $6,300 +

$2,300

+

$6,300

+

$44,000

=

$6,000

+

-$10,000 $84,500

Analyze: Transaction 3 increased the Company's debt by $12,000. PROBLEM 2.2B Assets Accounts + Receivable +

Supplies

+

$38,000

+

$12,000 +8,000

+

$12,800

38,000 -2,880

+

20,000

+

2.

35,120 +10,000

+

20,000

+

3.

Cash Beginning Balances 1. New Balances New Balances

.

Owner’s Equity

Office Furniture

= Liabilities + Accounts = Payable +

S. Cravens Capital

+

Revenue

-

Expenses

+

$24,000

=

$10,000

+

$49,800

+

$52,000 +8,000

-

$25,000

12,800

+

24,000

=

10,000

+

49,800

+

60,000

-

25,000 +2,880

12,800

+

24,000

=

10,000

+

49,800

+

60,000 +10,000

-

27,880

2-10


PROBLEM 2.2B (continued) Assets + Accounts + Receivable

Supplies

+

Office Furniture

= Liabilities + Accounts = Payable +

+

20,000

+

12,800

+

24,000

=

10,000

4.

45,120 -1,600 43,520 -4,800

+

20,000

+

12,800

+

24,000

=

5.

38,720 -1,920

+

20,000

+

12,800

+

24,000

6.

+

20,000

+

12,800

+

7.

36,800 -14,000

+

20,000

+

12,800

8.

22,800 +11,200 34,000

+

20,000

+

34,000 +6,000

+ +

20,000 -6,000

$40,000

+

$14,000

Cash New Balances New Balances New Balances New Balances New Balances New Balances

S. Cravens Capital

+

Revenue

-

Expenses

+

49,800

+

70,000

-

27,880 +1,600

10,000 -4,800

+

49,800

+

70,000

-

29,480

=

5,200

+

49,800

+

70,000

-

29,480 +1,920

24,000

=

5,200

+

49,800

+

70,000

-

31,400 +14,000

+

24,000

=

5,200

+

49,800

+

70,000 +11,200

-

45,400

12,800 +2,000

+

24,000

=

5,200 +2,000

+

49,800

+

81,200

-

45,400

+

14,800

+

24,000

=

7,200

+

49,800

+

81,200

-

45,400

+

$14,800

+

$24,000

=

$7,200

+

$49,800

+

$81,200

-

$45,400

9. New Balances 10. New Balances

Analyze: Owner's Equity balance is $85,600; $49,800 + ($81,200 - $45,400).

.

Owner’s Equity

2-11


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PROBLEM 2.3B Smith's Tax Service Balance Sheet December 1, 2016 Assets

Liabilities

Cash

50 0 0 0 00

Furniture

10 0 0 0 00

Equipment

12 0 0 0 00 Owner's Equity Douglas Smith, Capital

72 0 0 0 00

72 0 0 0 00 Total Liabilities and Owner's Equity

72 0 0 0 00

Total Assets

Analyze: The amount reported on the balance sheet for owner’s equity would be $56,000. PROBLEM 2.4B Kathryn Proctor, Attorney and Counselor of Law Income Statement Month Ended August 31, 2016 Revenue Fees Income

10 8 0 0 00

Expenses Utilities Expense Salaries Expense Telephone Expense

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

Total Expenses

6 6 0 0 00

Net Income

4 2 0 0 00

Kathryn Proctor, Attorney and Counselor of Law Statement of Owner's Equity Month Ended August 31, 2016 Kathryn Proctor, Capital, Aug. 1, 2016 Net Income for August Less Withdrawals for August

23 2 0 0 00 4 2 0 0 00 1 2 0 0 00

Increase in Capital

3 0 0 0 00

Kathryn Proctor, Capital, Aug. 31, 2016

26 2 0 0 00

Analyze: Net Income of $4,200 was transferred from the income statement. © 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or 2-12 distribution in any manner.


PROBLEM 2.4B (continued) Kathryn Proctor, Attorney and Counselor at Law Balance Sheet August 31, 2016 Assets Cash Accounts Receivable Supplies Equipment Total Assets

Liabilities 4 8 0 0 00 Accounts Payable 6 6 0 0 00 5 4 0 0 00 Owner's Equity 10 0 0 0 00 Kathryn Proctor, Capital 26 8 0 0 00 Total Liabilities and Owner's Equity

6 0 0 00

26 2 0 0 00 26 8 0 0 00

Analyze: Net income of $4,200 was transferred from the income statement.

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or 2-13 distribution in any manner.


CRITICAL THINKING PROBLEM 2.1 Determine the balance for Carl Nicholson, April 30, 2016. Assets

Cash $30,000

Accounts + Receivable + Machinery = + $12,000 + $21,000 =

Accounts Payable $13,200

= Liabilities + Owner’s Equity C. Nicholson C. Nicholson Drawing + Capital + Revenue + ? $6,800 + $26,800 -

Let Carl Nicholson, Capital = X. Solving for X: $63,000 (Total Assets) = $13,200 (Accounts Payable) - $6,800 (Drawing) + $26,800 (Revenue) - $21,490 (Expenses) + X

$63,000 Carl Nicholson, Capital, April 1, 2016 Advertising Expense Maintenance Expense Salaries Expense Total Expenses

.

=

$63,000 = $11,710 = $51,290 = $51,290

$11,710 $11,710 X

$3,890 4,600 13,000 $21,490

2-14

+ -

X $11,710

+

X

Expenses $21,490


CRITICAL THINKING PROBLEM 2.1 (continued) Carl Nicholson, Certified Public Accountant Income Statement Month Ended April 30, 2016 Revenue Fees Earned

26 8 0 0 00

Expenses Advertising Expense Maintenance Expense Salaries Expense

3 8 9 0 00 4 6 0 0 00 13 0 0 0 00

Total Expenses

21 4 9 0 00

Net Income

5 3 1 0 00

Carl Nicholson, Certified Public Accountant Statement of Owner's Equity Month Ended April 30, 2016 Carl Nicholson, Capital, April 1, 2016 Net Income for April Less Withdrawals for April

51 2 9 0 00 5 3 1 0 00 6 8 0 0 00

Decrease in Capital

(1 4 9 0 00)

Carl Nicholson, Capital, April 30, 2016

49 8 0 0 00

Carl Nicholson, Certified Public Accountant Balance Sheet April 30, 2016 Assets Cash Accounts Receivable Equipment

Liabilities 30 0 0 0 00 Accounts Payable 12 0 0 0 00 Owner's Equity 21 0 0 0 00 Carl Nicholson, Capital

Total Assets

63 0 0 0 00 Total Liabilities and Owner's Equity

13 2 0 0 00 49 8 0 0 00 63 0 0 0 00

Analyze: Analyze:The The increase decrease in in owner's owner's equity equity was was $1,450. $1,490.

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CRITICAL THINKING PROBLEM 2.2 Body Builders Fitness Center Income Statement Two Months Ended December 31, 2016 Revenue Fees Earned Expenses Rent Expense Cleaning Expense Advertising Expense

9 7 6 0 00 8 0 0 0 00 2 1 0 0 00 8 0 0 00 Total Expenses

Net Loss

10 9 0 0 00 (1 1 4 0 00)

Some students may include the warm-up suits as a business expense. If the suits are a type of uniform, their inclusion is appropriate; if they are to be worn at home and at work, their cost is not a business expense. The parking ticket is a personal expense. The cleaning of the studio and the printing of the flyers are business expenses. Payment of expenses with the owner’s personal credit card would be considered an additional investment by the owner. It is not unusual for new businesses to operate at a loss. James should project his income and expenses for the next several months to determine how much new business he will need to earn an income. Students’ suggestions for improving the accounting system might include opening a business checking account, not using a personal credit card for business expenses, setting up a filing system for business records, and purchasing a computer to maintain financial records.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Not necessarily. Reinvestments in assets or use of cash to pay debts affect cash. In addition, sales or revenue may have been "on account." 2. No. Early development is expensive, risky, and time consuming. Profits may not be achieved for a year or more. 3. The firm’s obligations must be met as they become due. 4. Organized financial information can be used to evaluate operating efficiency and to make decisions about current and future activities. Ethical JuliaDilemma: should not record the sale until she receives the purchase order from the customer and the goods are shipped. If she enters the sale and for some reason the customer doesn’t make the order or the goods are not available for shipment, Carol would need to pay the bonus back. Julia’s job would be in jeopardy. Financial Statement Analysis: 1. Southwest Airlines Co., Consolidated Statement of Income, Years Ended December 31, 2. Passenger, Freight, Other. 3. Statement of Owner’s Equity (Consolidated Statement of Stockholders’ Equity). 4. Total operating revenue was $4.2 billion for the quarter ended December 31, 2012. 5. See current topic on website. Internet Connection: Macy’s, Bloomingdales, and now May is included in the Federated Corporation. Shopping online is on every home page. To record an online sale it must debit a credit card receivable and credit sales. A general job announcement and requirements are given at the site. Team Work: Accounts Payable Clerk would use Purchases (Increase), A/P (increase and decrease) and Cash (decrease). Accounts Receivable Clerk would use Sales (increase), A/R (increase and decrease) and Cash (increase). Full charge bookkeeper would use accounts Cash (increase and decrease), Bank Charges (increase) and Miscellaneous account (increase), Interest Income (increase), Interest Expense (increase). Accurate numbers are developed when it is determined that all transactions have been entered and that total assets equal total liabilities plus owner’s equity.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. FALSE 4. TRUE 5. FALSE 6. 7. 8. 9. 10.

TRUE FALSE TRUE FALSE TRUE

Part B Matching 1. b 2. f 3. e 4. c 5. h 6. 7. 8.

d g a

Part C Completion 1. profit 2. credit or on account 3. reduced or decreased 4. assets 5. asset or property 6. equal 7. accounts payable or liability 8. analyze

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CHAPTER 3 ANALYZING BUSINESS TRANSACTIONS USING T ACCOUNTS Chapter Opener: Thinking Critically Cash or Accounts Receivable would have increased and Equity or the Service Revenue account would have also increased. The equation would increase by the same amount on both sides. (Assets would increase and Owners Equity would increase.) Fast Facts • Mobile data traffic on AT&T’s network grew more than 20,000 percent, more than doubling in 2011 alone. Mobile data speeds on AT&T’s network increased dramatically. The download speeds available on AT&T’s 4G LTE network today are more than 50X faster than AT&T’s 2G network five years ago. • The number of smartphones, tablets and other advanced mobile Internet devices on AT&T’s network soared to more than 43 million. • Total mobile data connections on AT&T’s network more than doubled to more than 74 million, and mobile data revenues increased 5X, from just over $4 billion to more than $22 billion. •

AT&T’s total wireless subscribers grew nearly to 107 million in 2012, and AT&T’s wireless revenues increased 17.8 percent.

Managerial Implications: Thinking Critically Answers will vary but could include the following: • Cash is overstated and checks bounce. • The credit rating of the business is affected. • The business loses customers because payments on account are not recorded properly. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Written records for all assets, liabilities, and owner’s equity of a business. 2. Adding the figures on both sides of the account and subtracting the smaller total from the larger total. 3. a. debit b. credit c. credit d. credit e. debit 4. To provide a classified list of the names and numbers of a firm’s accounts. 5. Order in which they appear on financial statements. Balance sheet accounts listed first, followed by income statement accounts. 6. Additional accounts can be added when needed. 7. Permanent account balances are carried forward to start a new accounting period. Temporary account balances are transferred to a summary account at the end of the period and are zero at the start of a new accounting period. 8. a, b, h, i, k: temporary c, d, e, f, g, j, l: permanent 9. Debit: entry on the left side of an account. Credit: entry on the right side of an account. 10. Payment of rent in advance affords the right to occupy the facility the number of months covered by the payment. 11. Each transaction produces at least two effects.

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EXERCISE 3.1 Cash 19,000

Equipment 46,000

Accounts Payable

James Wilson, Capital 40,800

24,200

EXERCISE 3.2

(1) (3)

Cash 90,000 (2) 9,000 (4) (5)

Fees Income (3)

(5)

Supplies 3,000

30,000 3,800 3,000

9,000

(2)

Equipment 30,000

(4)

Advertising Expense 3,800

Denise Carswell, Capital (1) 90,000

EXERCISE 3.3 1. Credit 2. Debit 3. Credit 4. Credit

5. Debit 6. Debit 7. Debit 8. Debit

EXERCISE 3.4 1 Credit, Credit, Debit 2 Debit, Debit, Credit 3 Debit, Debit, Credit 4 Credit, Credit, Debit 5 Credit, Credit, Debit

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EXERCISE 3.5 Cash, $160,300 Dr. Accounts Receivable, $7,000 Dr. Supplies, $46,000 Dr. Equipment, $80,000 Dr. Accounts Payable, $80,000 Cr.

Wade Wilson, Capital $190,000 Cr. Fees Income, $40,000 Cr. Telephone Expense, $700 Dr. Salaries Expense, $11,000 Dr. Wade Wilson, Drawing, $5,000 Dr.

EXERCISE 3.6 Housing Locators Trial Balance December 31, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Equipment Accounts Payable Wade Wilson, Capital Wade Wilson, Drawing Fees Income Salaries Expense Telephone Expense Totals

160 7 46 80

DEBIT 3 0 0 00 0 0 0 00 0 0 0 00 0 0 0 00

CREDIT

80 0 0 0 00 190 0 0 0 00 5 0 0 0 00 40 0 0 0 00 11 0 0 0 00 7 0 0 00 310 0 0 0 00

310 0 0 0 00

Housing Locators Income Statement Month Ended December 31, 2016 Revenue Fees Income Expenses Salaries Expense Telephone Expense

40 0 0 0 00 11 0 0 0 00 7 0 0 00 Total Expenses

Net Income

11 7 0 0 00 28 3 0 0 00

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EXERCISE 3.7 Housing Locators Statement of Owner's Equity Month Ended December 31, 2016 Wade Wilson, Capital, Dec. 1, 2016 Net Income for December Less Withdrawals for December Increase in Capital Wade Wilson, Capital, Dec. 31, 2016

190 0 0 0 00 28 3 0 0 00 5 0 0 0 00 23 3 0 0 00 213 3 0 0 00

Housing Locators Balance Sheet December 31, 2016 Assets Cash Accounts Receivable Supplies Equipment Total Assets

Liabilities 160 3 0 0 00 Accounts Payable 7 0 0 0 00 46 0 0 0 00 Owner's Equity 80 0 0 0 00 Wade Wilson, Capital 293 3 0 0 00 Total Liabilities & Owner's Equity

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80 0 0 0 00

213 3 0 0 00 293 3 0 0 00


EXERCISE 3.8

Account Number 100-199 101 111 121 131 141 200-299 202

Three Brothers Moving Company Chart of Accounts Account Name Account Number ASSETS 300-399 Cash 301 Accounts Receivable 302 Office Supplies 400-499 Prepaid Rent 401 Office Equipment 500-599 LIABILITIES 511 Accounts Payable 514 517

Account Name OWNER'S EQUITY Trey Calhoun, Capital Trey Calhoun, Drawing REVENUE Fees Income EXPENSES Salaries Expense Utilities Expense Telephone Expense

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PROBLEM 3.1A 1.

Cash + 21,000

Hunter Thompson, Capital + 21,000

2.

Equipment + 10,000

Cash - 10,000

3.

Cash + 1,700

Office Furniture - 1,700

4.

Office Equipment + 3,700

Accounts Payable + 3,700

5.

Office Equipment + 11,200

Accounts Payable + 11,200

6.

Nancy Fowler, Drawing + 6,000

7.

Delivery Truck + 37,000

8.

Accounts Payable - 3,500

Cash - 6,000

Accounts Payable + 37,000

Cash - 3,500

Analyze: Transactions 1 and 6 directly affect the owner's equity account.

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PROBLEM 3.2A 1.

Cash + 70,000

2.

Office Furniture + 17,000

Gloria Williams, Capital + 70,000

Cash - 17,000

3.

Office Equipment +1,050

Accounts Payable +1,050

4.

Automobile + 17,000

Cash

5.

Cash + 11,000

Gloria Williams, Capital + 11,000

6.

Office Equipment + 4,000

7.

Accounts Payable -1,050

Cash

8. Gloria Williams, Drawing + 5,000

Cash

- 17,000

Accounts Payable + 4,000

-1,050

- 5,000

Analyze: All transactions affected asset accounts.

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PROBLEM 3.3A 1.

Office Supplies + 3,000

2.

Cash + 26,000

3.

Rent Expense + 5,000

4.

Accounts Receivable + 4,000

Cash - 3,000

Fees Income + 26,000

Cash - 5,000

Fees Income + 4,000

5.

Cash + 2,000

6.

Salaries Expense + 4,600

Cash

Telephone Expense + 580

Cash

7.

Accounts Receivable - 2,000

- 4,600

- 580

8.

Accounts Receivable + 3,000

Fees Income + 3,000

9.

Office Supplies + 1,100

Accounts Payable + 1,100

10.

Salaries Expense + 4,600

Cash - 4,600

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PROBLEM 3.3A (continued) 11.

Cash + 3,000

Accounts Receivable - 3,000

12.

Cash + 9,100

Fees Income + 9,100

Analyze: $17,780 in cash was spent in June.

PROBLEM 3.4A

Bal.

Cash + 160,000 (b) + 8,200 (c) + 7,000 (e) + 14,500 (g) + 8,000 (i) (k) (l) (p) (q) (r) 113,510 (s)

(g) (k) Bal.

Office Equipment + 38,000 + 40,000 78,000

(a) (d) (h) (m) (o)

(p)

Accounts Payable - 2,900 (g) (j) (k) Bal.

- 6,000 - 16,720 - 1,250 - 13,000 - 4,000 - 20,000 - 9,400 - 2,900 - 700 - 1,220 - 9,000

+ 25,000 + 5,800 + 20,000 47,900

(f) (n) Bal.

Accounts Receivable + 14,000 (h) + 16,000 (o) 15,000

(c) (j) Bal.

Office Furniture + 16,720 + 5,800 22,520

Horace Brock, Capital (a)

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- 7,000 - 8,000

+ 160,000


PROBLEM 3.4A (continued) Horace Brock, Drawing (s) + 9,000

(r)

Utilities Expense + 1,220

Fees Income (d) + 8,200 (f) + 14,000 (m) + 14,500 (n) + 16,000 Bal. 52,700

(l)

Salaries Expense + 9,400

(b)

Rent Expense + 6,000

Telephone Expense (e) + 1,250

Miscellaneous Expense (i) + 4,000 (q) + 700 Bal. 4,700

Analyze: The company owes $47,900 (accounts payable).

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PROBLEM 3.5A Horace Brock, Landscape Consultant Trial Balance June 30, 2016 ACCOUNT NAME Cash Accounts Receivable Office Equipment Office Furniture Accounts Payable Horace Brock, Capital Horace Brock, Drawing Fees Income Miscellaneous Expenses Rent Expense Salaries Expense Telephone Expense Utilities Expense Total

DEBIT 113 5 1 0 00 15 0 0 0 00 78 0 0 0 00 22 5 2 0 00

CREDIT

47 9 0 0 00 160 0 0 0 00 9 0 0 0 00 52 7 0 0 00 4 7 0 0 00 6 0 0 0 00 9 4 0 0 00 1 2 5 0 00 1 2 2 0 00 260 6 0 0 00

260 6 0 0 00

Horace Brock, Landscape Consultant Income Statement Month Ended June 30, 2016 Revenue Fees Income Expenses Miscellaneous Expenses Rent Expense Salaries Expense Telephone Expense Utilities Expense Total Expenses Net Income

52 7 0 0 00 4 7 0 0 00 6 0 0 0 00 9 4 0 0 00 1 2 5 0 00 1 2 2 0 00 22 5 7 0 00 30 1 3 0 00

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PROBLEM 3.5A (Continued) Horace Brock, Landscape Consultant Statement of Owner's Equity Month Ended June 30, 2016 Horace Brock, Capital, June 1, 2016 Net Income for June Less Withdrawals for June Increase in Capital Horace Brock, Capital, June 30, 2016

160 0 0 0 00 30 1 3 0 00 9 0 0 0 00 21 1 3 0 00 181 1 3 0 00

Horace Brock, Landscape Consultant Balance Sheet June 30, 2016 Assets Cash Accounts Receivable Office Equipment Office Furniture Total Assets

113 5 1 0 00 15 0 0 0 00 78 0 0 0 00 22 5 2 0 00 229 0 3 0 00

Liabilities Accounts Payable

47 9 0 0 00

Owner's Equity Horace Brock, Capital 181 1 3 0 00 Total Liabilities & 229 0 3 0 00 Owner's Equity

Analyze: The net increase in owner's equity during the month of June was $21,130.

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PROBLEM 3.1B 1.

Equipment + 32,000

Cash

2. Gloria Bahamon, Drawing + 8,000

Cash

3.

4.

5.

Cash + 6,000

- 32,000

- 8,000

Equipment - 6,000

Delivery Truck + 24,000

Cash

Accounts Payable - 7,200

Cash

6.

Office Equipment + 10,000

7.

Cash + 40,000

8.

Accounts Payable - 3,000

-24,000

- 7,200

Accounts Payable + 10,000

Kevin Fralicks, Capital + 40,000

Cash - 3,000

Analyze: The transactions that affect the liability accounts are transactions 5, 6 and 8.

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PROBLEM 3.2B 1.

Cash + 40,000

2.

Shop Equipment + 3,600

3.

Store Equipment + 2,400

4.

Truck + 20,000

Royce West, Capital + 40,000

Cash - 3,600

Accounts Payable + 2,400

Cash - 20,000

5.

Shop Equipment + 6,000

Royce West, Capital + 6,000

6.

Store Equipment + 5,000

Accounts Payable + 5,000

7.

Accounts Payable - 800

Cash

Royce West, Drawing + 3,200

Cash

8.

- 800

- 3,200

Analyze: The transactions that affect the cash account are transactions 1, 2, 4, 7, and 8.

PROBLEM 3.3B 1.

Rent Expense + 7,500

Cash - 7,500

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PROBLEM 3.3B (continued) 2.

Cash + 9,000

3.

Salaries Expense + 6,800

4.

Accounts Receivable + 12,200

5.

Telephone Expense + 1,580

Fees Income + 9,000

Cash - 6,800

Fees Income + 12,200

Cash - 1,580

6.

Cash + 8,000

Accounts Receivable - 8,000

7.

Cash - 380

Telephone Expense - 380

8.

Accounts Receivable + 8,560

9.

Utilities Expense + 950

Cash

Gasoline Expense + 1,590

Cash

10.

11.

Cash + 6,250

Fees Income + 8,560

- 950

- 1,590

Accounts Receivable - 6,250

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PROBLEM 3.3B (continued) 12.

Cash + 9,400

Fees Income +9,400

Analyze: The total cash collected for Accounts Receivable during the month was $14,250.00.

PROBLEM 3.4B Cash (a) + 140,000 (b) (d) +10,500 (c) (h) + 5,400 (e) (m) + 7,450 (i) (p) + 4,200 (j) (k) (l) (o) (r) Bal. 73,843 (s)

(k) (q) Bal.

(i)

- 7,800 - 38,500 - 1,850 - 3,800 - 1,590 - 11,400 - 18,900 - 967 - 900 - 8,000

Office Equipment + 22,800 + 6,880 29,680

Accounts Payable - 3,800 (g) + 6,500 (k) + 11,400 (q) +6,880 Bal. 20,980

(f) (n) Bal.

Accounts Receivable + 11,280 (h) - 5,400 +6,500 (p) - 4,200 8,180

(g)

Office Furniture +6,500

(c)

Automobile + 38,500

Conner McAllister, Capital (a) + 140,000

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PROBLEM 3.4B (continued) Conner McAllister, Drawing (s) + 8,000

(e) (r) Bal.

Auto Expense + 1,850 +900 2,750

(o)

Telephone Expense + 967

Fees Income (d) + 10,500 (f) + 11,280 (m) +7,450 (n) + 6,500 Bal. 35,730

(j)

Utilities Expense + 1,590

(b)

Rent Expense + 7,800

Salaries Expense (l) + 18,900

Analyze: Credit customers owe the company $8,180 (Accounts Receivable).

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PROBLEM 3.5B Conner McAllister, Counselor and Attorney at Law Trial Balance April 30, 2016 ACCOUNT NAME Cash Accounts Receivable Automobile Office Equipment Office Furniture Accounts Payable Conner McAllister, Capital Conner McAllister, Drawing Fees Income Auto Expense Rent Expense Salaries Expense Utilities Expense Telephone Expense Total

DEBIT 73 8 4 3 00 8 1 8 0 00 38 5 0 0 00 29 6 8 0 00 6 5 0 0 00

CREDIT

20 9 8 0 00 140 0 0 0 00 8 0 0 0 00 35 7 3 0 00 2 7 5 0 00 7 8 0 0 00 18 9 0 0 00 1 5 9 0 00 9 6 7 00 196 7 1 0 00

196 7 1 0 00

Conner McAllister, Counselor and Attorney at Law Income Statement Month Ended April 30, 2016 Revenue Fees Income Expenses Auto Expense Rent Expense Salaries Expense Utilities Expense Telephone Expense Total Expenses Net Income

35 7 3 0 00 2 7 5 0 00 7 8 0 0 00 18 9 0 0 00 1 5 9 0 00 9 6 7 00 32 0 0 7 00 3 7 2 3 00

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PROBLEM 3.5B (continued) Conner McAllister, Counselor and Attorney at Law Statement of Owner's Equity Month Ended April 30, 2016 C. McAllister, Capital, April 1, 2016 Net Income for April Less Withdrawals for April Decrease in Capital C. McAllister, Capital, April 30, 2016

140 0 0 0 00 3 7 2 3 00 8 0 0 0 00 (4 2 7 7 00) 135 7 2 3 00

Conner McAllister, Counselor and Attorney at Law Balance Sheet April 30, 2016 Assets Cash Accounts Receivable Automobile Office Equipment Office Furniture Total Assets

Liabilities 73 8 4 3 00 Accounts Payable 8 1 8 0 00 38 5 0 0 00 29 6 8 0 00 Owner's Equity 6 5 0 0 00 Conner McAllister, Capital 156 7 0 3 00 Total Liabilities & Owner's Equity

Analyze: The net decrease in owner's equity during the month of April was $4,277.

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20 9 8 0 00

135 7 2 3 00 156 7 0 3 00


CRITICAL THINKING PROBLEM 3.1 Cash 6,000 1,200 1,000

Bal.

2,000 3,600 400 1,000 200

Accounts Receivable 2,300

Equipment and Tools 2,000

1,000

Truck 3,600

Jack Walls, Capital 6,000

Fees Income

Bal.

Salary Expense 1,000

Gasoline Expense 400

Advertsing Expense 200

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1,200 2,300 1,000 4,500


CRITICAL THINKING PROBLEM 3.1 (continued) Elegant Lawn Care Income Statement Three Months Ended August 31, 2016 Revenue Fees Income Expenses Salary Expense Gasoline Expense Advertising Expense Total Expenses Net income

4 5 0 0 00 1 0 0 0 00 4 0 0 00 2 0 0 00 1 6 0 0 00 2 9 0 0 00

Elegant Lawn Care Statement of Owner's Equity Three Months Ended August 31, 2016 Jack Wells, Capital, June 1, 2016 Net Income for June-August Jack Wells, Capital, Jaugust 31, 2016

6 0 0 0 00 2 9 0 0 00 8 9 0 0 00

Elegant Lawn Care Balance Sheet August 31, 2016 Assets Cash Accounts Receivable Equipment/Tool Truck Total Assets

Liabilities 1 0 0 0 00 2 3 0 0 00 2 0 0 0 00 3 6 0 0 00 8 9 0 0 00

Owner's Equity Jack Wells, Capital Total Liabilities & Owner's Equity

8 9 0 0 00 8 9 0 0 00

Jack is better off than he would have been had he left his money in the savings account. He earned a profit of $2,900 from his Elegant Lawn Care business, compared to approximately $90.00 in interest his money would have earned over the three summer months (assuming a bank interest rate of 6%; $6,000 × 0.06 × 3/12). Jack needs to look beyond his current checking account balance of $1,000 and realize that this balance will increase to $3,300 when he collects the $2,300 still owed to him. He also owns a truck and power mowers that he could sell for additional cash.

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CRITICAL THINKING PROBLEM 3.2 Cash (a) + 40,000 (b) (d) + 9,100 (c) (i) + 4,260 (e) (m) +4,600 (g) (p) + 1,800 (h) (k) (l) (n) (q) Bal. 33,820 (r)

(g)

- 4,000 - 4,600 - 420 - 150 -1,100 - 8,000 - 550 - 920 - 5,000 -1,200

Office Equipment + 650

Accounts Receivable (f) + 3,120 (i) - 4,260 (0) + 4,300 (p) - 1,800 Bal. 1,360

(l)

John Arrow, Drawing (q) + 5,000

(n)

Utilities Expense +920

Accounts Payable - 550 (g) + 500 (j) +1,090 Bal. 1,040

Fees Income (d) (f) (m) (o) Bal.

(k)

(c) (j) Bal.

+ 9,100 + 3,120 + 4,600 + 4,300 21,120

Salaries Expense +8000

Office Furniture + 4,600 1,090 5,690

John Arrow, Capital (a) + 40,000

(b)

Advertising Expense + 4,000

(e)

Telephone Expense +420

Miscellaneous Expense (h) +1,100 (r) +1,200 Bal. 2,300

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CRITICAL THINKING PROBLEM 3.2 (continued) John Arrow, Architect Trial Balance January 31, 2016 ACCOUNT NAME Cash Accounts Receivable Office Furniture Office Equipment Accounts Payable John Arrow, Capital John Arrow, Drawing Fees Income Advertising Expense Utilities Expense Salaries Expense Telephone Expense Miscellaneous Expense Totals

DEBIT 33 8 2 0 00 1 3 6 0 00 5 6 9 0 00 6 5 0 00

CREDIT

1 0 4 0 00 40 0 0 0 00 5 0 0 0 00 21 1 2 0 00 4 0 0 0 00 9 2 0 00 8 0 0 0 00 4 2 0 00 2 3 0 0 00 62 1 6 0 00

62 1 6 0 00

John Arrow, Architect Income Statement Month Ended January 31, 2016 Revenue Fees Income Expenses Advertising Expense Utilities Expense Salaries Expense Telephone Expense Miscellaneous Expense Total Expenses Net Income

21 1 2 0 00 4 0 0 0 00 9 2 0 00 8 0 0 0 00 4 2 0 00 2 3 0 0 00 15 6 4 0 00 5 4 8 0 00

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CRITICAL THINKING PROBLEM 3.2 (continued) John Arrow, Architect Statement of Owner's Equity Month Ended January 31, 2016 John Arrow, Capital, January 1, 2016 Net Income for January Less Withdrawals for January Increase in Capital John Arrow, Capital, January 31, 2016

40 0 0 0 00 5 4 8 0 00 5 0 0 0 00 4 8 0 00 40 4 8 0 00

John Arrow, Architect Balance Sheet January 31, 2016 Assets Cash Accounts Receivable Office Furniture Office Equipment Total Assets

33 8 2 0 00 1 3 6 0 00 5 6 9 0 00 6 5 0 00 41 5 2 0 00

Liabilities Accounts Payable Owner's Equity John Arrow, Capital Total Liabilities & Owner's Equity

Analyze: Assets ($41,520) = Liabilities ($1,040) + Owner's Equity ($40,480)

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1 0 4 0 00

40 4 8 0 00 41 5 2 0 00


SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Net income (or net loss) for the period. 2. Reduce expenses; increase sales volume or raise sales prices. 3. Review of financial records containing cash available, amounts due, and dates due. 4. Provide summaries of: a. Income Statement—revenues and expenses, b. Balance Sheet—assets, liabilities, and owner’s equity. Ethical Dilemma: Do not open the account New Expenses without approval from the controller. You must identify what expenses will be put into that account. If the account is not monitored, the Accounts Payable clerk might enter personal expenses, which would not be appropriate. Financial Statement Analysis: 1. Financial data, operational information, plans for the future. 2. $4.4 billion. 3. $3,538,353 of cash, cash equivalents, and short-term investments were on hand at December 31, 2012. 4. Financial results are relatively the same. GAAP net income was $832,775 or fiscal year 2012 compared to $832847 in fiscal year 2011. 5. Adobe is targeting revenue of $950 million to $1 billion for the first quarter of 2013. Teamwork: All companies would have a cash account and accounts payable. A plumbing service would have accounts receivable whereas a clothing store would also have a credit card receivable. Both grocery store and clothing store would have inventory. All would have wages expense except the real estate would have sales commission. All would have office supplies expense. Depending on whether the company owned the building most would have rent expense.

Internet Connection: For Fiscal Year 2012, Honeywell is the most profitable, and has the most cash and assets.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. FALSE 4. FALSE 5. FALSE 6. TRUE 7. FALSE 8. FALSE 9. TRUE 10. FALSE 11. TRUE 12. TRUE 13. TRUE 14. TRUE 15. TRUE Part B Matching 1. i 2. c 3. h 4. f 5. b 6. d 7. e 8. g 9. a Part C Completion 1. trial balance 2. normal balance 3. footing 4. transposition 5. slide

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CHAPTER 4 THE GENERAL JOURNAL AND THE GENERAL LEDGER Chapter Opener: Thinking Critically They would probably record (debit) the cost of the arm to their Equipment or Machinery account and credit Accounts Payable. The robotic arm will be used for many years so its cost will be expensed over its years of useful life. Fast Facts • William Boeing founded Pacific Aero Products Company in 1916; the name was changed to Boeing in 1917. • In 1917, the company employed 28 people. In 2013, Boeing employed more than 170,000 people across the United States and in 70 countries. • Boeing is the largest contractor working for NASA. • Along with the ISS, the Boeing Company manufactures and services commercial airplanes, military aircraft, helicopters, a variety of electronic defense systems, and advanced communication systems. • Boeing’s 2012 sales were $81.6 billion from customers in 150 countries. Seventy percent of commercial airplane revenue historically from customers outside the United States. Managerial Implications: Thinking Critically Answers will vary but may include the following. • Exposing the assets of the business to fraud and theft. • Increasing the risk of producing inaccurate financial statements. • Difficulty in auditing transactions. • Research customer billing. (Customer says no invoice was received.) Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Transfer of data from a journal to a ledger. 2. Groups of accounts. 3. Assets, liabilities, and owner’s equity first, followed by revenue accounts, then expenses. They are in order of the financial statements. 4. Notations of the page number of the journal from which a figure comes; number of account to which the figure was posted; to provide cross-references. 5. To record business transactions in chronological order. 6. Helps establish audit trail. 7. Record month, day, debited account/amount, credited account/amount, description. 8. Entry that includes more than a single debit and credit—two or more debits and/or credits. 9. Before entry posted: cross out incorrect item, write correct data above it. After posted: journalize and post a correcting entry. 10. Chain of references; prevents fraud and errors. 11. Steps performed to classify, record, and summarize financial data for a business. © 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 4-1


EXERCISE 4.1

1. 2. 3. 4.

Debit Credit Debit 401 101 5. 202 517 101 6. 101 111 401 7. 101 131 101

Credit 101 401 111

8. 9. 10.

Debit 101 121 511

Credit 301 202 101

EXERCISE 4.2 GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

DATE DESCRIPTION 2016 Sept. 1 Cash Jewell Tucker, Capital Beginning investment of owner

PAGE 1 POST. REF.

DEBIT 60 0 0 0 00

101 301

4 Equipment Accounts Payable Purchased equipment on credit from Den, Inc., Invoice 9823, payable in 30 days

131 202

6 5 0 0 00

16 Automobile Cash Purchased an automobile, Check 1001

141 101

14 5 0 0 00

20 Supplies Cash Purchased supplies, Check 1002

121 101

5 2 0 00

23 Cash Supplies Returned damaged supplies and received cash refund

101 121

1 7 0 00

30 Accounts Payable Cash Paid Den, Inc., on account for Invoice 9823, Check 1003

202 101

4 2 0 0 00

CREDIT 1 2 60 0 0 0 00 3 4 5 6 6 5 0 0 00 7 8 9 10 11 14 5 0 0 00 12 13 14 15 5 2 0 00 16 17 18 19 1 7 0 00 20 21 22 23 24 4 2 0 0 00 25 26 27

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EXERCISE 4.2 (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

DATE DESCRIPTION 2016 Sept. 30 Jewell Tucker, Drawing Cash Owner withdrew cash for personal use

PAGE 2 POST. REF.

DEBIT

302 101

3 0 0 0 00

30 Rent Expense Cash Paid October rent, Check 1004

511 101

1 7 0 0 00

30 Cash

101 401

2 7 5 0 00

517 101

4 3 5 00

Fees Income Performed services for cash 30 Telephone Expense Cash Paid monthly telephone bill, Check 1005

CREDIT 1 2 3 0 0 0 00 3 4 5 6 1 7 0 0 00 7 8 9 10 2 7 5 0 00 11 12 13 14 4 3 5 00 15 16 17 18

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EXERCISE 4.3 GENERAL LEDGER ACCOUNT

Cash

DATE 2016 Sept. 1 16 20 23 30 30 30 30 30

ACCOUNT

DATE

ACCOUNT

POST DESCRIPTION REF. J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

CREDIT

DESCRIPTION

60 0 0 0 00 14 5 0 0 00 45 5 0 0 00 5 2 0 00 44 9 8 0 00 1 7 0 00 45 1 5 0 00 4 2 0 0 00 40 9 5 0 00 3 0 0 0 00 37 9 5 0 00 1 7 0 0 00 36 2 5 0 00 2 7 5 0 00 39 0 0 0 00 4 3 5 00 38 5 6 5 00

ACCOUNT NO. 111

POST REF.

DEBIT

CREDIT

Supplies

BALANCE DEBIT CREDIT

ACCOUNT NO. 121 POST REF. J1 J1

DEBIT

CREDIT

5 2 0 00 1 7 0 00

Equipment

DATE DESCRIPTION 2016 Sept. 4

BALANCE DEBIT CREDIT

60 0 0 0 00

Accounts Receivable

DATE DESCRIPTION 2016 Sept. 20 23

ACCOUNT

ACCOUNT NO. 101

BALANCE DEBIT CREDIT 5 2 0 00 3 5 0 00

ACCOUNT NO. 131 POST REF.

DEBIT

J1

6 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 6 5 0 0 00

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EXERCISE 4.3 (continued) ACCOUNT

Automobile

DATE DESCRIPTION 2016 Sept. 16

ACCOUNT

DATE 2016 Sept. 4 30

ACCOUNT

DATE 2016 Sept. 1

ACCOUNT

DATE 2016 Sept. 30

POST REF.

DEBIT

J1

14 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 14 5 0 0 00

Accounts Payable

ACCOUNT NO. 202

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

POST DESCRIPTION REF.

BALANCE DEBIT CREDIT

6 5 0 0 00

6 5 0 0 00 2 3 0 0 00

4 2 0 0 00

Jewell Tucker, Capital

ACCOUNT NO. 301

DEBIT

J1

CREDIT

BALANCE DEBIT CREDIT

60 0 0 0 00

Jewell Tucker, Drawing

DATE DESCRIPTION 2016 Sept. 30

ACCOUNT

ACCOUNT NO. 141

60 0 0 0 00

ACCOUNT NO. 302

POST REF.

DEBIT

J2

3 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 3 0 0 0 00

Fees Income

ACCOUNT NO. 401

POST DESCRIPTION REF. J2

DEBIT

CREDIT 2 7 5 0 00

BALANCE DEBIT CREDIT 2 7 5 0 00

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EXERCISE 4.3 (continued) ACCOUNT

DATE 2016 Sept. 30

ACCOUNT

DATE

ACCOUNT

DATE 2016 Sept. 30

Rent Expense

DESCRIPTION

ACCOUNT NO. 511 POST REF.

DEBIT

J2

1 7 0 0 00

CREDIT

1 7 0 0 00

Salaries Expense

DESCRIPTION

ACCOUNT NO. 514 POST REF.

DEBIT

CREDIT

Telephone Expense

DESCRIPTION

BALANCE DEBIT CREDIT

BALANCE DEBIT CREDIT

ACCOUNT NO. 517 POST REF. J2

DEBIT 4 3 5 00

CREDIT

BALANCE DEBIT CREDIT 4 3 5 00

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EXERCISE 4.4 GENERAL JOURNAL

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

DATE DESCRIPTION 2016 Nov. 5 Cash Accounts Receivable Fees Income Performed services for Job Search receiving part of fees in cash with remainder due in 60 days

PAGE POST. REF.

DEBIT

CREDIT

1 2 3 40 0 0 0 00 4 5 6 7 8 4 2 5 00 9 5 7 5 00 10 1 0 0 0 00 11 12 13 14 2 1 0 0 00 15 1 0 5 0 00 16 1 0 5 0 00 17 18 19 20 21

19 0 0 0 00 21 0 0 0 00

18 Equipment Supplies Cash Purchased graphing calculator and supplies, Check 1008 23 Automobile Expense Cash Accounts Payable Received Invoice 1602 from Automotive Technicians Repair, issued Check 1009 for half the amount, balance due in 30 days

EXERCISE 4.5 GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 July 30 Telephone Expense 3 Utilities Expense 4 To correct July 9 error charging 5 telephone bill to Utilities Expense 6

PAGE POST. REF.

DEBIT

CREDIT

1 0 0 0 00 1 0 0 0 00

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1 2 3 4 5 6


EXERCISE 4.6 GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2016 Oct. 1 Repair Expense Truck To correct September 16 error charging truck charges to the Truck account

PAGE POST. REF.

DEBIT

CREDIT

8 0 0 00 8 0 0 00

1 2 3 4 5 6

PROBLEM 4.1A GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Sept. 1 Rent Expense 3 Cash 4 Paid September rent, Check 1169 5 6 5 Cash 7 Fees Income 8 Performed services for cash 9 10 6 Accounts Receivable 11 Fees Income 12 Performed services on credit 13 14 10 Telephone Expense 15 Cash 16 Paid monthly telephone bill, Check 1170 17 18 11 Equipment Repair Expense 19 Cash 20 Paid for repairs, Check 1171 21 22 12 Cash 23 Accounts Receivable 24 Received cash on account

PAGE 1 POST. REF.

DEBIT 1 9 0 0 00

3 0 0 0 00

1 8 5 0 00

7 0 0 00

9 4 0 00

3 7 0 0 00

CREDIT 1 2 1 9 0 0 00 3 4 5 6 3 0 0 0 00 7 8 9 10 1 8 5 0 00 11 12 13 14 7 0 0 00 15 16 17 18 9 4 0 00 19 20 21 22 3 7 0 0 00 23 24

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PROBLEM 4.1A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Sept. 15 Salaries Expense 3 Cash 4 Paid semimonthly salaries, Checks 1172-1177 5 6 18 Supplies 7 Cash 8 Paid for supplies, Check 1178 9 10 19 Equipment 11 Accounts Payable 12 Purchased tennis rackets from The Tennis 13 Supply Shop, Invoice 3108, payable in 30 days 14 15 20 Equipment 16 Cash 17 Purchased nets, Check 1179 18 19 21 Cash 20 Accounts Receivable 21 Received cash on account 22 23 21 Cash 24 Equipment 25 Returned damaged net for cash refund 26 27 22 Cash 28 Fees Income 29 Performed services for cash 30 31 23 Accounts Receivable 32 Fees Income 33 Performed services on account 34 35 26 Supplies 36 Cash 37 Paid for supplies, Check 1180

PAGE POST. REF.

DEBIT 4 7 0 0 00

2 5 0 0 00

2 7 5 0 00

2 8 6 0 00

1 0 5 0 00

5 5 0 00

3 3 6 0 00

4 9 5 0 00

5 6 0 00

2

CREDIT 1 2 4 7 0 0 00 3 4 5 6 2 5 0 0 00 7 8 9 10 2 7 5 0 00 11 12 13 14 15 2 8 6 0 00 16 17 18 19 1 0 5 0 00 20 21 22 23 5 5 0 00 24 25 26 27 3 3 6 0 00 28 29 30 31 4 9 5 0 00 32 33 34 35 5 6 0 00 36 37

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PROBLEM 4.1A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Sept. 28 Utilities Expense 3 Cash 4 Paid monthly electric bill, Check 1181 5 6 30 Salaries Expense 7 Cash 8 Paid semimonthly salaries, Check 1182-1187 9 10 30 Selena Cantu, Drawing 11 Cash 12 Owner withdrew cash for personal use, 13 Check 1188

PAGE 3 POST. REF.

DEBIT 2 3 5 0 00

4 7 0 0 00

4 7 0 0 00

CREDIT 1 2 2 3 5 0 00 3 4 5 6 4 7 0 0 00 7 8 9 10 4 7 0 0 00 11 12 13

Analyze: Check 1189 would be included in the journal entry description.

PROBLEM 4.2A GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13

DATE DESCRIPTION 2016 Oct. 1 Cash Satillo Richey, Capital Beginning investment of owner

PAGE POST. REF. 101 301

2 Rent Expense Cash Paid October rent, Check 1001

514 101

5 Office Equipment Accounts Payable Purchased equipment from Office Furniture Mart, Inc., Invoice 6704, payable in 60 days

141 202

DEBIT

1

CREDIT

1 60 0 0 0 00 2 60 0 0 0 00 3 4 5 3 0 0 0 00 6 3 0 0 0 00 7 8 9 15 0 0 0 00 10 15 0 0 0 00 11 12 13

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PROBLEM 4.2A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Oct. 6 Art Equipment 3 Cash Purchased art equipment, Check 1002 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

PAGE 12 POST. REF.

DEBIT

151 101

3 2 0 0 0

7 Supplies Cash Purchased supplies, Check 1003

121 101

1 5 5 0 00

10 Office Cleaning Expense Cash Paid for office cleaning, Check 1004

511 101

6 0 0 00

12 Cash Accounts Receivable Fees Income Performed services for cash and on credit

101 111 401

4 1 0 0 00 1 9 0 0 00

15 Cash Supplies Returned damaged supplies for cash refund

101 121

4 0 0 00

18 Office Equipment Cash Accounts Payable Purchased equip. from Office Furniture Mart, Inc., Invoice 7108; Check 1005; balance due in 30 days

141 101 202

3 0 0 0 00

20 Accounts Payable Cash Paid Office Furniture Mart, Inc., on account, Invoice 6704; Check 1006

202 101

7 5 0 0 00

CREDIT

3 2 0 0 0

1 5 5 0 00

6 0 0 00

6 0 0 0 00

4 0 0 00

1 7 5 0 00 1 2 5 0 00

7 5 0 0 00

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1 2 3

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


PROBLEM 4.2A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Oct. 26 Accounts Receivable 3 Fees Income Performed services on credit 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

PAGE 13 POST. REF. 111 401

DEBIT 4 4 0 0 0

4 4 0 0 0

27 Telephone Expense Cash Paid monthly telephone bill, Check 1007

520 101

3 2 5 00

30 Cash

101 111

3 7 0 0 00

30 Utilities Expense Cash Paid monthly utility bill, Check 1008

523 101

4 0 0 00

30 Salaries Expense Cash Paid monthly salaries, Checks 1009-1011

517 101

8 0 0 0 00

Accounts Receivable Received cash on account

CREDIT 1 2 3

4 5 3 2 5 00 6 7 8 9 3 7 0 0 00 10 11 12 13 4 0 0 00 14 15 16 17 8 0 0 0 00 18 19 20

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PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Cash

DATE 2016 Oct. 1 2 6 7 10 12 15 18 20 27 30 30 30

ACCOUNT

POST DESCRIPTION REF. J1 J1 J1 J1 J1 J1 J1 J2 J2 J3 J3 J3 J3

DEBIT

CREDIT

60 0 0 0 00 3 0 0 0 00 3 2 0 0 00 1 5 5 0 00 6 0 0 00 4 1 0 0 00 4 0 0 00 1 7 5 0 00 7 5 0 0 00 3 2 5 00 3 7 0 0 00 4 0 0 00 8 0 0 0 00

Accounts Receivable

DATE 2016 Oct. 12 26 30

ACCOUNT

ACCOUNT NO. 101

POST DESCRIPTION REF. J1 J3 J3

60 0 0 0 00 57 0 0 0 00 53 8 0 0 00 52 2 5 0 00 51 6 5 0 00 55 7 5 0 00 56 1 5 0 00 54 4 0 0 00 46 9 0 0 00 46 5 7 5 00 50 2 7 5 00 49 8 7 5 00 41 8 7 5 00

ACCOUNT NO. 111

DEBIT

CREDIT

1 9 0 0 00 4 4 0 0 00 3 7 0 0 00

Supplies

DATE 2016 Oct. 7 15

BALANCE DEBIT CREDIT

BALANCE DEBIT CREDIT 1 9 0 0 00 6 3 0 0 00 2 6 0 0 00

ACCOUNT NO. 121

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

1 5 5 0 00 4 0 0 00

BALANCE DEBIT CREDIT 1 5 5 0 00 1 1 5 0 00

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PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Office Equipment

DATE 2016 Oct. 5 18

ACCOUNT

ACCOUNT NO. 141

POST DESCRIPTION REF. J1 J2

15 0 0 0 00 3 0 0 0 00

BALANCE DEBIT CREDIT 15 0 0 0 00 18 0 0 0 00

ACCOUNT NO. 151

DEBIT

CREDIT

3 2 0 0 00

BALANCE DEBIT CREDIT 3 2 0 0 00

Accounts Payable

DATE 2016 Oct. 5 18 20

ACCOUNT

CREDIT

Art Equipment

POST DATE DESCRIPTION REF. 2016 Oct. 6 J1

ACCOUNT

DEBIT

ACCOUNT NO. 202

POST DESCRIPTION REF. J1 J2 J2

DEBIT

CREDIT 15 0 0 0 00 1 2 5 0 00

7 5 0 0 00

Saltillo Richey, Capital

POST DATE DESCRIPTION REF. 2016 Oct. 1 J1

BALANCE DEBIT CREDIT 15 0 0 0 00 16 2 5 0 00 8 7 5 0 00

ACCOUNT NO. 301

DEBIT

CREDIT 60 0 0 0 00

BALANCE DEBIT CREDIT 60 0 0 0 00

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PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Wilson Adams, Drawing

DATE

POST DESCRIPTION REF.

ACCOUNT

CREDIT

POST DESCRIPTION REF.

DEBIT

J1 J3

POST DESCRIPTION REF.

CREDIT

BALANCE DEBIT CREDIT

6 0 0 0 00 4 4 0 0 00

6 0 0 0 00 10 4 0 0 00

ACCOUNT NO. 511

DEBIT

CREDIT

6 0 0 00

BALANCE DEBIT CREDIT 6 0 0 00

Rent Expense

DATE DESCRIPTION 2016 Oct. 2

BALANCE DEBIT CREDIT

ACCOUNT NO. 401

Office Cleaning Expense

DATE 2016 Oct. 10

ACCOUNT

DEBIT

Fees Income

DATE 2016 Oct. 12 26

ACCOUNT

ACCOUNT NO. 302

ACCOUNT NO. 514 POST REF.

DEBIT

J1

3 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 3 0 0 0 00

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PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Salaries Expense

DATE 2016 Oct. 30

ACCOUNT

ACCOUNT NO. 517

POST DESCRIPTION REF. J3

CREDIT

8 0 0 0 00

ACCOUNT NO. 520

DEBIT

CREDIT

3 2 5 00

BALANCE DEBIT CREDIT 3 2 5 00

Utilities Expense

DATE 2016 Oct. 30

BALANCE DEBIT CREDIT 8 0 0 0 00

Telephone Expense

POST DATE DESCRIPTION REF. 2016 Oct. 27 J3

ACCOUNT

DEBIT

ACCOUNT NO. 523

POST DESCRIPTION REF. J3

DEBIT

CREDIT

4 0 0 00

BALANCE DEBIT CREDIT 4 0 0 00

Analyze: General ledger account 202 has an $8,750 credit balance. PROBLEM 4.3A April 1: The debit should be to Accounts Receivable, not Accounts Payable. April 2: The debit and credit amounts are reversed. Telephone Expense should be debited and Cash should be credited. April 3: The two debit amounts and the credit amount in the entry are not equal because of a math error. The credit for Cash should be $8,000. Analyze: After correcting the three entries, the assets are increased by $11,800 ($12,400 - $1,000 + $400).

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PROBLEM 4.4A GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Nov. 1 Cash 3 Tools 4 Dennis Ortiz, Capital 5 Beginning investment of owner 6 7 2 Equipment 8 Office Supplies 9 Cash 10 Accounts Payable 11 Purchased equipment and office supplies from 12 Office Depot, Invoice 501; issued Check 100 13 for a down payment, balance payable in 30 days 14 15 10 Cash 16 Accounts Receivable 17 Fees Income 18 Services for cash and credit 19 20 20 Machinery 21 Cash 22 Accounts Payable 23 Purchased machinery from Craft Machinery Inc., 24 Invoice 709; issued Check 101 25 for a down payment, balance due in 30 days 26

PAGE 1 POST. REF.

DEBIT

101 131 301

55 0 0 0 00 2 0 0 0 00

151 121 101 202

2 0 5 0 00 5 5 0 00

101 111 401

1 0 0 0 00 1 9 0 0 00

141 101 202

4 0 0 0 00

CREDIT

57 0 0 0 00

7 0 0 00 1 9 0 0 00

2 9 0 0 00

1 5 0 0 00 2 5 0 0 00

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


PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Cash

DATE 2016 Nov. 1 2 10 20

ACCOUNT

POST DESCRIPTION REF. J1 J1 J1 J1

55 0 0 0 00 1 0 0 0 00

CREDIT

55 0 0 0 00 7 0 0 00 54 3 0 0 00 55 3 0 0 00 1 5 0 0 00 53 8 0 0 00

J1

DEBIT

CREDIT

1 9 0 0 00

BALANCE DEBIT CREDIT 1 9 0 0 00

Office Supplies

ACCOUNT NO. 121 POST REF. J1

DEBIT

CREDIT

5 5 0 00

BALANCE DEBIT CREDIT 5 5 0 00

Tools

DATE 2016 Nov. 1

BALANCE DEBIT CREDIT

ACCOUNT NO. 111

POST DESCRIPTION REF.

DATE DESCRIPTION 2016 Nov. 2

ACCOUNT

DEBIT

Accounts Receivable

DATE 2016 Nov. 10

ACCOUNT

ACCOUNT NO. 101

ACCOUNT NO. 131

POST DESCRIPTION REF. J1

DEBIT 2 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 0 00

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PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Machinery

DATE DESCRIPTION 2016 Nov. 20

ACCOUNT

DEBIT

J1

4 0 0 0 00

CREDIT

ACCOUNT NO. 151 POST REF.

DEBIT

J1

2 0 5 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 5 0 00

ACCOUNT NO. 202 POST REF.

DEBIT

J1 J1

CREDIT 1 9 0 0 00 2 5 0 0 00

Dennis Ortiz, Capital

DATE DESCRIPTION 2016 Nov. 1

BALANCE DEBIT CREDIT 4 0 0 0 00

Accounts Payable

DATE DESCRIPTION 2016 Nov. 2 20

ACCOUNT

POST REF.

Equipment

DATE DESCRIPTION 2016 Nov. 2

ACCOUNT

ACCOUNT NO. 141

BALANCE DEBIT CREDIT 1 9 0 0 00 4 4 0 0 00

ACCOUNT NO. 301

POST REF. J1

DEBIT

CREDIT 57 0 0 0 00

BALANCE DEBIT CREDIT 57 0 0 0 00

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PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Fees Income

DATE 2016 Nov. 10

ACCOUNT NO. 401

POST DESCRIPTION REF.

DEBIT

J1

CREDIT

BALANCE DEBIT CREDIT

2 9 0 0 00

2 9 0 0 00

Analyze: The business owes $4,400 as of November 30.

PROBLEM 4.1B GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Sept. 1 Cash 3 Charles Brown, Capital 4 Beginning investment of owner 5 6 5 Cash 7 Fees Income 8 Performed services for cash 9 10 6 Rent Expense 11 Cash 12 Paid for September, Check 1000 13 14 7 Accounts Receivable 15 Fees Income 16 Performed services on credit 17 18 9 Telephone Expense 19 Cash 20 Paid telephone bill, Check 1001

PAGE 1 POST REF.

DEBIT

CREDIT

50 0 0 0 00 50 0 0 0 00

6 0 0 0 00 6 0 0 0 00

2 5 0 0 00 2 5 0 0 00

6 3 0 0 00 6 3 0 0 00

6 4 0 00 6 4 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


PROBLEM 4.1B (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 Sept. 10 Equipment Repair Expense 3 Cash 4 Paid for equipment repairs, Check 1002 5 6 12 Cash 7 Accounts Receivable 8 Received cash on account 9 10 14 Salaries Expense 11 Cash 12 Paid semimonthly salaries to employees, 13 Checks 1003-1004 14 15 18 Cleaning Supplies Expense 16 Cash 17 Paid for cleaning supplies, Check 1005 18 19 19 Office Supplies Expense 20 Cash 21 Paid for office supplies, Check 1006 22 23 20 Equipment 24 Cash 25 Accounts Payable 26 Purchase from Razor Equipment, Inc., 27 Invoice 1012; issued Check 1007 for down 28 payment, balance due in 30 days 29 30 22 Cash 31 Fees Income 32 Performed services for cash 33 34 24 Utilities Expense 35 Cash 36 Paid utility bill, Check 1008

PAGE 12 POST. REF.

DEBIT

CREDIT

1 6 7 5 00 2 6 7 5 00 3 4 5 1 0 9 0 00 6 1 0 9 0 00 7 8 9 12 5 0 0 00 10 12 5 0 0 00 11 12 13 14 8 0 0 00 15 8 0 0 00 16 17 18 9 5 0 00 19 9 5 0 00 20 21 22 10 0 0 0 00 23 2 0 0 0 00 24 8 0 0 0 00 25 26 27 28 29 4 8 0 0 00 30 4 8 0 0 00 31 32 33 9 5 0 00 34 9 5 0 00 35 36

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PROBLEM 4.1B (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DATE DESCRIPTION 2016 Sept. 26 Accounts Receivable Fees Income Performed services on account

PAGE 13 POST. REF.

DEBIT

CREDIT

1 7 2 0 0 00 2 7 2 0 0 00 3 4 5 12 5 0 0 00 6 12 5 0 0 00 7 8 9 10 6 0 0 0 00 11 6 0 0 0 00 12 13 14 15

30 Salaries Expense Cash Paid semimonthly salaries, Checks 1009-1010 30 Charles Brown, Drawing Cash Owner withdrew cash for personal use, Check 1011

Analyze: Eight transactions affected expense accounts. PROBLEM 4.2B GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14

DATE DESCRIPTION 2016 June 1 Cash Carolyn Davis, Capital Beginning investment of owner

PAGE 1 POST. REF. 101 301

2 Rent Expense Cash Paid rent for June, Check 1001

514 101

5 Office Equipment Accounts Payable Purchased office equipment fromDeSoto, Inc., Invoice 5312, payable in 60 days

141 202

DEBIT

CREDIT

1 2 18 0 0 0 00 3 4 5 1 2 5 0 00 6 1 2 5 0 00 7 8 9 7 5 0 0 00 10 7 5 0 0 00 11 12 13 14

18 0 0 0 00

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PROBLEM 4.2B (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 June 6 Photographic Equipment 3 Cash 4 Purchased photo equipment, Check 1002 5 6 7 Supplies 7 Cash 8 Purchased supplies, Check 1003 9 10 10 Office Cleaning Expense 11 Cash 12 Paid for office cleaning, Check 1004 13 14 12 Cash 15 Accounts Receivable 16 Fees Income 17 Performed services for cash and credit 18 19 15 Cash 20 Supplies 21 Returned damaged supplies for cash 22 23 18 Office Equipment 24 Cash 25 Accounts Payable 26 Purchase from Denison Office Supply, 27 Invoice 304; issued Check 1005 for down 28 payment, balance payable in 30 days 29 30 20 Accounts Payable 31 Cash 32 Paid DeSoto, Inc., on account, Invoice 33 5312, Check 1006 34 35 26 Accounts Receivable 36 Fees Income 37 Performed services on credit

PAGE 12 POST. REF.

DEBIT

151 101

1 9 0 0 00

121 101

5 3 8 00

511 101

4 0 0 00

101 111 401

1 3 0 0 00 1 3 0 0 00

101 121

1 5 0 00

141 101 202

1 8 5 0 00

202 101

2 5 0 0 00

111 401

2 0 0 0 00

CREDIT 1 2 1 9 0 0 00 3 4 5 6 5 3 8 00 7 8 9 10 4 0 0 00 11 12 13 14 15 2 6 0 0 00 16 17 18 19 1 5 0 00 20 21 22 23 5 0 0 00 24 1 3 5 0 00 25 26 27 28 29 30 2 5 0 0 00 31 32 33 34 35 2 0 0 0 00 36 37

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PROBLEM 4.2B (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 June 27 Telephone Expense 3 Cash 4 Paid monthly phone bill, Check 1007 5 6 30 Cash 7 Accounts Receivable 8 Received cash on account 9 10 30 Utilities Expense 11 Cash 12 Paid monthly utility bill, Check 1008 13 14 30 Salaries Expense 15 Cash 16 Paid monthly salaries to employees, 17 Checks 1009-1011 18

PAGE 13 POST. REF.

DEBIT

520 101

5 8 0 00

101 111

2 1 0 0 00

523 101

5 7 5 00

517 101

5 6 0 0 00

CREDIT 1 2 5 8 0 00 3 4 5 6 2 1 0 0 00 7 8 9 10 5 7 5 00 11 12 13 14 5 6 0 0 00 15 16 17 18

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PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

DATE 2016 June 1 2 6 7 10 12 15 18 20 27 30 30 30

ACCOUNT

DATE 2016 June 12 26 30

ACCOUNT

DATE 2016 June 7 15

Cash

ACCOUNT NO. 101

POST DESCRIPTION REF. J1 J1 J1 J1 J1 J1 J1 J2 J2 J3 J3 J3 J3

DEBIT

CREDIT

18 0 0 0 00 1 2 5 0 00 1 9 0 0 00 5 3 8 00 4 0 0 00 1 3 0 0 00 1 5 0 00 5 0 0 00 2 5 0 0 00 5 8 0 00 2 1 0 0 00 5 7 5 00 5 6 0 0 00

Accounts Receivable

BALANCE DEBIT CREDIT 18 0 0 0 00 16 7 5 0 00 14 8 5 0 00 14 3 1 2 00 13 9 1 2 00 15 2 1 2 00 15 3 6 2 00 14 8 6 2 00 12 3 6 2 00 11 7 8 2 00 13 8 8 2 00 13 3 0 7 00 7 7 0 7 00

ACCOUNT NO. 111

POST DESCRIPTION REF. J1 J2 J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 1 0 0 00

1 3 0 0 00 3 3 0 0 00 1 2 0 0 00

1 3 0 0 00 2 0 0 0 00

Supplies

ACCOUNT NO. 121

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

5 3 8 00 1 5 0 00

BALANCE DEBIT CREDIT 5 3 8 00 3 8 8 00

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PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

Office Equipment

DATE DESCRIPTION 2016 June 5 18

ACCOUNT

DEBIT

J1 J2

7 5 0 0 00 1 8 5 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

J1

1 9 0 0 00

CREDIT

BALANCE DEBIT CREDIT 1 9 0 0 00

ACCOUNT NO. 202 POST REF. J1 J2 J2

DEBIT

CREDIT 7 5 0 0 00 1 3 5 0 00

2 5 0 0 00

Carolyn Davis, Capital

DATE DESCRIPTION 2016 June 1

BALANCE DEBIT CREDIT 7 5 0 0 00 9 3 5 0 00

Accounts Payable

DATE DESCRIPTION 2016 June 5 18 20

ACCOUNT

POST REF.

Photographic Equipment

DATE DESCRIPTION 2016 June 6

ACCOUNT

ACCOUNT NO. 141

POST REF. J1

BALANCE DEBIT CREDIT 7 5 0 0 00 8 8 5 0 00 6 3 5 0 00

ACCOUNT NO. 301

DEBIT

CREDIT 18 0 0 0 00

BALANCE DEBIT CREDIT 18 0 0 0 00

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PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

Wallace King, Drawing

DATE

POST DESCRIPTION REF.

ACCOUNT

CREDIT

POST DESCRIPTION REF.

DEBIT

J1 J2

POST DESCRIPTION REF.

CREDIT

BALANCE DEBIT CREDIT

2 6 0 0 00 2 0 0 0 00

2 6 0 0 00 4 6 0 0 00

ACCOUNT NO. 511

DEBIT

CREDIT

4 0 0 00

BALANCE DEBIT CREDIT 4 0 0 00

Rent Expense

DATE DESCRIPTION 2016 June 2

BALANCE DEBIT CREDIT

ACCOUNT NO. 401

Office Cleaning Expense

DATE 2016 June 10

ACCOUNT

DEBIT

Fees Income

DATE 2016 June 12 26

ACCOUNT

ACCOUNT NO. 302

ACCOUNT NO. 514 POST REF.

DEBIT

J1

1 2 5 0 00

CREDIT

BALANCE DEBIT CREDIT 1 2 5 0 00

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PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

DATE 2016 June 30

ACCOUNT

Salaries Expense

ACCOUNT NO. 517

POST DESCRIPTION REF. J3

DATE 2016 June 30

CREDIT

5 6 0 0 00

BALANCE DEBIT CREDIT 5 6 0 0 00

Telephone Expense

POST DATE DESCRIPTION REF. 2016 June 27 J3

ACCOUNT

DEBIT

ACCOUNT NO. 520

DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 8 0 00

5 8 0 00

Utilities Expense

ACCOUNT NO. 523

POST DESCRIPTION REF. J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 7 5 00

5 7 5 00

Analyze: The Cash account balance after the June 27 transaction was $11,782.

PROBLEM 4.3B January 1: The debit should be to Accounts Receivable, not Accounts Payable. January 2: The debit and credit amounts are reversed. Telephone Expense should be debited and Cash should be credited. January 3: The two debit amounts and the credit amount in the entry are not equal because of a mathematical error. The credit for Cash should be $580. Analyze: The assets decreased by $80. (Accounts Receivable + $100; Cash - $150 [$75 x 2]; Cash - $30)

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PROBLEM 4.4B GENERAL JOURNAL

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

DATE 2016 Dec. 3 Cash

DESCRIPTION

James Boynton, Capital Beginning investment of owner

PAGE 1 POST. REF. 101 301

4 Computers Cash Paid cash for computer

131 101

5 Furnitures and Fixtures Accounts Payable Purchased office furniture on credit

151 202

6 Office Equipment Cash Paid cash for equipment

141 101

10 Accounts Receivable Fees Income Rendered services on account

111 401

11 Office Supplies Cash Paid cash for supplies

121 101

15 Accounts Payable Cash Paid invoice for furniture purchased on December 5

202 101

DEBIT

CREDIT

1 20 0 0 0 00 2 20 0 0 0 00 3 4 5 2 4 0 0 00 6 2 4 0 0 00 7 8 9 6 5 0 0 00 10 6 5 0 0 00 11 12 13 2 1 5 0 00 14 2 1 5 0 00 15 16 17 2 6 0 0 00 18 2 6 0 0 00 19 20 21 9 5 0 00 22 9 5 0 00 23 24 25 6 5 0 0 00 26 6 5 0 0 00 27 28 29

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PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Cash

DATE DESCRIPTION 2016 Dec. 3 4 6 11 15

ACCOUNT

J1 J1 J1 J1 J1

DEBIT

CREDIT

20 0 0 0 00 2 4 0 0 00 2 1 5 0 00 9 5 0 00 6 5 0 0 00

POST REF.

DEBIT

J1

2 6 0 0 00

CREDIT

20 0 0 0 00 17 6 0 0 00 15 4 5 0 00 14 5 0 0 00 8 0 0 0 00

BALANCE DEBIT CREDIT 2 6 0 0 00

ACCOUNT NO. 121 POST REF. J1

DEBIT

CREDIT

9 5 0 00

BALANCE DEBIT CREDIT 9 5 0 00

Computers

DATE DESCRIPTION 2016 Dec. 4

BALANCE DEBIT CREDIT

ACCOUNT NO. 111

Office Supplies

DATE DESCRIPTION 2016 Dec. 11

ACCOUNT

POST REF.

Accounts Receivable

DATE DESCRIPTION 2016 Dec. 10

ACCOUNT

ACCOUNT NO. 101

ACCOUNT NO. 131 POST REF.

DEBIT

J1

2 4 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 4 0 0 00

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PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Office Equipment

DATE DESCRIPTION 2016 Dec. 6

ACCOUNT

DEBIT

J1

2 1 5 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

J1

6 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 6 5 0 0 00

ACCOUNT NO. 202 POST REF.

DEBIT

J1 J1

6 5 0 0 00

CREDIT 6 5 0 0 00

James Boynton, Capital

DATE DESCRIPTION 2016 Dec. 3

BALANCE DEBIT CREDIT 2 1 5 0 00

Accounts Payable

DATE DESCRIPTION 2016 Dec. 5 15

ACCOUNT

POST REF.

Furniture and Fixtures

DATE DESCRIPTION 2016 Dec. 5

ACCOUNT

ACCOUNT NO. 141

POST REF. J1

BALANCE DEBIT CREDIT 6 5 0 0 00 − 0 −

ACCOUNT NO. 301

DEBIT

CREDIT 20 0 0 0 00

BALANCE DEBIT CREDIT 20 0 0 0 00

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PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Fees Income

DATE 2016 Dec. 10

DESCRIPTION

ACCOUNT NO. 401 POST REF. J1

DEBIT

CREDIT 2 6 0 0 00

BALANCE DEBIT CREDIT 2 6 0 0 00

Analyze: Two postings were recorded, one debit and one credit.

CRITICAL THINKING PROBLEM 4.1 Income Statement Errors: 1. The third line of the heading is incorrect; this line must indicate the time period covered by the income statement. 2. Drawing is not an expense but a reduction of owner’s equity and is included in the calculation of ending owner’s equity, not on the income statement. 3. Arithmetic errors were made in adding column of expenses and in subtracting total expenses from revenue. Balance Sheet Errors: 1. The third line of the heading is incorrect; the balance sheet is identified by the last day of the accounting period. 2. Accounts Payable and Accounts Receivable are classified incorrectly; they should be interchanged. Accounts Payable is a liability and Accounts Receivable is an asset. 3. 4.

The assets are not listed in the correct order. The amount for Owner’s Equity on the balance sheet should be the ending owner’s equity, not the beginning owner’s equity. A statement of owner’s equity should be prepared to compute ending owner’s equity.

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CRITICAL THINKING PROBLEM 4.1 (continued) Sarah's Beauty Supply Income Statement Month Ended April 30, 2016 Revenue Fees Income Expenses Salaries Expense Rent Expense Repair Expense Utilities Expense Total Expenses Net Income

36 6 0 0 00 9 0 0 0 00 1 8 0 0 00 3 0 0 00 1 7 0 0 00 12 8 0 0 00 23 8 0 0 00

Sarah's Beauty Supply Statement of Owner's Equity Month Ended April 30, 2016 Sarah Davis, Capital, April 1, 2016 Net Income for April Less Withdrawals for April Increase in Capital Sarah Davis, Capital, April 30, 2016

49 2 0 0 00 23 8 0 0 00 4 0 0 0 00 19 8 0 0 00 69 0 0 0 00

Sarah's Beauty Supply Balance Sheet April 30, 2016 Assets Cash Accounts Receivable Land Building Total Assets

15 0 0 0 00 7 0 0 0 00 12 0 0 0 00 40 0 0 0 00 74 0 0 0 00

Liabilities Accounts Payable

5 0 0 0 00

Owner's Equity Sarah Davis, Capital Total Liabilities & Owner's Equity

69 0 0 0 00 74 0 0 0 00

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CRITICAL THINKING PROBLEM 4.2 GENERAL JOURNAL DATE DESCRIPTION 1 2016 2 June 1 Cash 3 Ashley Jackson, Capital 4 Beginning investment of owner 5 6 2 Rent Expense 7 Cash 8 Paid rent for June, Check 201 9 10 3 Office Furniture 11 Cash 12 Accounts Payable 13 Purchased furniture from Lowe's 14 Office Supply, Invoice 5103; issued 15 Check 202, balance due in 30 days 16 17 4 Supplies 18 Cash 19 Purchased supplies, Check 203 20 21 6 Cash 22 Fees Income 23 Performed services for cash 24 25 7 Advertising Expense 26 Cash 27 Paid for advertising, Check 204 28 29 8 Recording Equipment 30 Cash 31 Accounts Payable 32 Purchased equipment from Special 33 Moves, Inc., Invoice 2122; 34 issued Check 205, balance due in 30 days 35 36 10 Accounts Receivable 37 Fees Income 38 Performed services on account

PAGE 1 POST. REF. 101 301

514 101

141 101 202

121 101

101 401

511 101

151 101 202

111 401

DEBIT

CREDIT

1 2 30 0 0 0 00 3 4 5 1 8 0 0 00 6 1 8 0 0 00 7 8 9 12 0 0 0 00 10 2 0 0 0 00 11 10 0 0 0 00 12 13 14 15 16 1 5 0 0 00 17 1 5 0 0 00 18 19 20 6 0 0 0 00 21 6 0 0 0 00 22 23 24 2 0 0 0 00 25 2 0 0 0 00 26 27 28 15 0 0 0 00 29 5 0 0 0 00 30 10 0 0 0 00 31 32 33 34 35 4 5 0 0 00 36 4 5 0 0 00 37 38 30 0 0 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

DATE DESCRIPTION 2016 June 11 Accounts Payable Cash Paid Lowe's Office Supply on account for Invoice 5103, Check 206

PAGE 2 POST. REF.

DEBIT

202 101

3 0 0 0 00

101 401

9 0 0 0 00

15 Salaries Expense Cash Paid semimonthly salary, Check 207

517 101

5 0 0 0 00

18 Cash

101 111

4 0 0 0 00

20 Accounts Payable Cash Paid Special Moves, Inc., on account, Invoice 2122, Check 208

202 101

6 0 0 0 00

25 Telephone Expense Cash Paid telephone bill, Check 209

520 101

3 5 0 00

27 Utilities Expense Cash Paid utility bill, Check 210

523 101

8 0 0 00

28 Ashley Jackson, Drawing Cash Owner withdrew cash for personal use, Check 211

302 101

4 0 0 0 00

30 Salaries Expense Cash Paid semimonthly salary, Check 212

517 101

5 0 0 0 00

12 Cash Fees Income Performed services for cash

Accounts Receivable Received payment on account

CREDIT 1 2 3 0 0 0 00 3 4 5 6 7 9 0 0 0 00 8 9 10 11 5 0 0 0 00 12 13 14 15 4 0 0 0 00 16 17 18 19 6 0 0 0 00 20 21 22 23 24 3 5 0 00 25 26 27 28 8 0 0 00 29 30 31 32 4 0 0 0 00 33 34 35 36 37 5 0 0 0 00 38 39

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CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

DATE 2016 June 1 2 3 4 6 7 8 11 12 15 18 20 25 27 28 30

ACCOUNT

DATE 2016 June 10 18

ACCOUNT

DATE 2016 June 4

Cash

ACCOUNT NO. 101

POST DESCRIPTION REF. J1 J1 J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2 J2 J2 J2

DEBIT 30 0 0 0 00

6 0 0 0 00

9 0 0 0 00 4 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT

30 0 0 0 00 1 8 0 0 00 28 2 0 0 00 2 0 0 0 00 26 2 0 0 00 1 5 0 0 00 24 7 0 0 00 30 7 0 0 00 2 0 0 0 00 28 7 0 0 00 5 0 0 0 00 23 7 0 0 00 3 0 0 0 00 20 7 0 0 00 29 7 0 0 00 5 0 0 0 00 24 7 0 0 00 28 7 0 0 00 6 0 0 0 00 22 7 0 0 00 3 5 0 00 22 3 5 0 00 8 0 0 00 21 5 5 0 00 4 0 0 0 00 17 5 5 0 00 5 0 0 0 00 12 5 5 0 00

Accounts Receivable

ACCOUNT NO. 111

POST DESCRIPTION REF. J2 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

4 0 0 0 00

4 5 0 0 00 5 0 0 00

4 5 0 0 00

Supplies

ACCOUNT NO. 121

POST DESCRIPTION REF. J1

DEBIT 1 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 1 5 0 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Office Furniture

DATE DESCRIPTION 2016 June 3

ACCOUNT

DEBIT

J1

12 0 0 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

J1

15 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 15 0 0 0 00

ACCOUNT NO. 202 POST REF. J1 J1 J2 J2

DEBIT

CREDIT 10 0 0 0 00 10 0 0 0 00

3 0 0 0 00 6 0 0 0 00

Ashley Jackson, Capital

DATE DESCRIPTION 2016 June 1

BALANCE DEBIT CREDIT 12 0 0 0 00

Accounts Payable

DATE DESCRIPTION 2016 June 3 8 11 20

ACCOUNT

POST REF.

Recording Equipment

DATE DESCRIPTION 2016 June 8

ACCOUNT

ACCOUNT NO. 141

POST REF. J1

BALANCE DEBIT CREDIT 10 0 0 0 00 20 0 0 0 00 17 0 0 0 00 11 0 0 0 00

ACCOUNT NO. 301

DEBIT

CREDIT 30 0 0 0 00

BALANCE DEBIT CREDIT 30 0 0 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT 4

Ashley Jackson, Drawing

DATE DESCRIPTION 2016 June 28

ACCOUNT

DEBIT

J2

4 0 0 0 00

CREDIT

ACCOUNT NO. 401 POST REF.

DEBIT

J1 J2 J2

CREDIT

BALANCE DEBIT CREDIT

6 0 0 0 00 4 5 0 0 00 9 0 0 0 00

6 0 0 0 00 10 5 0 0 00 19 5 0 0 00

ACCOUNT NO. 511

POST REF.

DEBIT

J1

2 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 0 00

Rent Expense

DATE DESCRIPTION 2016 June 2

BALANCE DEBIT CREDIT 4 0 0 0 00

Advertising Expense

DATE DESCRIPTION 2016 June 7

ACCOUNT

POST REF.

Fees Income

DATE DESCRIPTION 2016 June 6 10 12

ACCOUNT

ACCOUNT NO. 302

ACCOUNT NO. 514 POST REF.

DEBIT

J1

1 8 0 0 00

CREDIT

BALANCE DEBIT CREDIT 1 8 0 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Salaries Expense

DATE DESCRIPTION 2016 June 15 30

ACCOUNT

POST REF.

DEBIT

J2 J2

5 0 0 0 00 5 0 0 0 00

CREDIT

ACCOUNT NO. 520 POST REF. J2

DEBIT

CREDIT

3 5 0 00

BALANCE DEBIT CREDIT 3 5 0 00

Utilities Expense

DATE DESCRIPTION 2016 June 27

BALANCE DEBIT CREDIT 5 0 0 0 00 10 0 0 0 00

Telephone Expense

DATE DESCRIPTION 2016 June 25

ACCOUNT

ACCOUNT NO. 517

ACCOUNT NO. 523 POST REF. J2

DEBIT 8 0 0 00

CREDIT

BALANCE DEBIT CREDIT 8 0 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) Leadership Talent Agency Trial Balance June 30, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Office Furniture Recording Equipment Accounts Payable Ashley Jackson, Capital Ashley Jackson, Drawing Fees Income Advertising Expense Rent Expense Salaries Expense Telephone Expense Utilities Expense Totals

12 DEBIT 5 5 0 00 5 0 0 00 1 5 0 0 00 12 0 0 0 00 15 0 0 0 00

CREDIT

11 0 0 0 00 30 0 0 0 00 4 0 0 0 00 19 5 0 0 00 2 0 0 0 00 1 8 0 0 00 10 0 0 0 00 3 5 0 00 8 0 0 00 60 5 0 0 00

60 5 0 0 00

Leadership Talent Agency Income Statement Month Ended June 30, 2016 Revenue Fees Income Expenses Advertising Expense Rent Expense Salaries Expense Telephone Expense Utilities Expense Total Expenses Net Income

19 5 0 0 00 2 0 0 0 00 1 8 0 0 00 10 0 0 0 00 3 5 0 00 8 0 0 00 14 9 5 0 00 4 5 5 0 00

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CRITICAL THINKING PROBLEM 4.2 (continued) Leadership Talent Agency Statement of Owner's Equity Month Ended June 30, 2016 Ashley Jackson, Capital, June 1, 2016 Net Income for June Less Withdrawals for June Increase in Owner's Equity Ashley Jackson, Capital, June 30, 2016

30 0 0 0 00 4 5 5 0 00 4 0 0 0 00 5 5 0 00 30 5 5 0 00

Leadership Talent Agency Balance Sheet June 30, 2016 Assets Cash Accounts Receivable Supplies Office Furniture Recording Equipment Total Assets

12 5 5 0 00 5 0 0 00 1 5 0 0 00 12 0 0 0 00 15 0 0 0 00 41 5 5 0 00

Liabilities Accounts Payable

Owner's Equity Ashley Jackson, Capital Total Liabilities & Owner's Equity

11 0 0 0 00

30 5 5 0 00 41 5 5 0 00

Analyze: There were 16 postings in the Cash account.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Inefficient flow of information; errors and insufficient information. 2. For prompt and accurate journalizing of all transactions. 3. To assure accuracy and safeguards against fraud. 4. Journal: detailed chronological record. Ledger: permanent, classified record of all financial events. Ethical Dilemma: You must check to see if the cash account is going down because of her actions. Is Mesia keeping the cash from the reversed sales because she has made so many errors? Is this something she does each month? It is unethical to accept a dinner for fixing her error. Financial Statement Analysis: 1. Debit the Property and Equipment account, credit Accounts Payable. 2. Invoice from the supplier. 3. Dates for equipment purchases, posting reference, purchase amount, and account balance. Analyze Online: Answers will vary depending on the year. Teamwork: Answers will vary. Journal Entry to General Ledger to Trial Balance to Financial Statement. Internet Connection: Sites that might be displayed are: www.careerbank.com , www.careersinaccounting.com , www.account.com . Suggested experience would require 5 years or more, with an AA degree. Skills would include good communication skills, detailed and multi-task oriented.

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SOLUTIONS TO PRACTICE TEST Part A Matching 1. a 2. f 3. b 4. j 5. i 6. h 7. d 8. e 9. c 10. g Part B Completion 1. ledger 2. posting references 3. brief or concise 4. credit 5. debit 6. debit 7. year 8. chronological or date 9. assets or balance sheet accounts 10. posted

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CHAPTER 5 ADJUSTMENTS AND THE WORKSHEET Chapter Opener: Thinking Critically If businesses are allowed to record revenues in one year and then postpone the recognition of their expenses until the next year, then their reported net income would be too high in the first year and too low in the second year when all of the expenses were recorded. Fast Facts • Willamette Valley Vineyards, Inc. (the “Company”) was formed in May 1988 to produce and sell premium, super premium and ultra premium varietal wines (i.e., wine which sells at retail prices of $7 to $14, $14 to $20 and over $20 per 750 ml bottle, respectively). • Willamette Valley Vineyards was originally established as a sole proprietorship by Oregon winegrower Jim Bernau in 1983. The Company is headquartered in Turner, Oregon, where the Company’s Turner Vineyard and Winery are located on 75 acres of Company-owned land adjacent to Interstate 5, approximately two miles south of Salem, Oregon. • The Company’s wines are made from grapes grown on the 592 acres of vineyard owned, leased or contracted by the Company, and from grapes purchased from other nearby vineyards. The grapes are crushed, fermented and made into wine at the Company’s Turner winery (the “Winery”) and the wines are sold principally under the Company’s Willamette Valley Vineyards label. Willamette Valley Vineyards is the owner of Tualatin Estate Vineyards and Winery located on approximately 120 acres near Forest Grove, Oregon, and leases an additional 114 acres of vineyard land at the Forest Grove location. •

Willamette Valley (NASDAQ: WVVI) produced revenues of $12.53 million in 2012 versus $12.24 million in the prior year, an increase of 2.4%.

Managerial Implications: Thinking Critically Assets are depreciated because they have a limited life and will be used up over time. Depreciation is the allocation of the cost of the asset over its useful life. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. 2. 3. 4. 5. 6. 7.

Update supplies account at the end of a period to reflect amounts used. Expense items that are acquired and paid for in advance of their use. Supplies, prepaid rent, prepaid insurance, and prepaid advertising. Debit Insurance Expense; credit Prepaid Insurance. Debit Depreciation Expense—Machine, $400; Credit Accum. Depr. – Machine, $400. a. none b. none c. none d. decrease a. decrease b. none c. none d. decrease To create a permanent record of any changes in account balances that are shown on the worksheet.

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Discussion Questions (cont.) 8

Asset cost, accumulated depreciation, book value.

9 Cost of asset less accumulated depreciation. 10. Contra asset accounts have a credit balance. Asset accounts have a debit balance. 11. To keep a record of total depreciation taken; to reduce the book value of asset. 12. b, d, f, g, and i are depreciated. Only long-term tangible assets are subject to depreciation. 13. Charges off an equal amount of cost of asset during each accounting period in asset’s useful life. 14. Equipment, buildings, and automobiles. EXERCISE 5.1 1.

Rent Expense, $1,000 Dr. Prepaid Rent, $1,000 Cr. ($7,000 ÷ 7 months = $1,000 per month)

2.

Supplies Expense, $4,650 Dr. Supplies, $4,650 Cr. ($7,950 - $3,300 = $4,650)

3.

Depreciation Expense—Equipment, $600 Dr. Accumulated Depreciation—Equipment, $600 Cr. ($64,800 ÷ 108 months = $600)

EXERCISE 5.2 1.

Insurance Expense, $350 Dr. Prepaid Insurance, $350 Cr. ($12,600 ÷ 36 months = $350)

2.

Advertising Expense, $1,350 Dr. Prepaid Advertising, $1,350 Cr. ($32,400 ÷ 24 months = $1,350)

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EXERCISE 5.3 Meeks Company Worksheet (Partial) Month Ended January 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depreciation—Equipment 7 Accounts Payable 8 Lorraine Meeks, Capital 9 Fees Income 10 Rent Expense 11 Salaries Expense 12 Supplies Expense 13 Insurance Expense 14 Depreciation Expense—Equipment 15 Totals

TRIAL BALANCE DEBIT CREDIT 63 0 0 0 00 22 5 0 0 00 9 0 0 0 00 8 2 0 0 00 91 5 0 0 00

ADJUSTMENTS DEBIT CREDIT

ADJUSTED TRIAL BALANCE DEBIT CREDIT 63 0 0 0 00 22 5 0 0 00 (a) 5 7 0 0 00 3 3 0 0 00 (b) 2 0 5 0 00 6 1 5 0 00 91 5 0 0 00 (c) 1 8 2 5 00 1 8 2 5 00 16 7 0 0 00 16 7 0 0 00 81 9 5 0 00 81 9 5 0 00 117 0 0 0 00 117 0 0 0 00 10 6 0 0 00 10 6 0 0 00 10 8 5 0 00 10 8 5 0 00 (a) 5 7 0 0 00 5 7 0 0 00 (b) 2 0 5 0 00 2 0 5 0 00 (c ) 1 8 2 5 00 1 8 2 5 00 215 6 5 0 00 215 6 5 0 00

9 5 7 5 00

9 5 7 5 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14

217 4 7 5 00 217 4 7 5 00 15

16

16

17 18 19 20 21 22

17 18 19 20 21 22

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EXERCISE 5.4 Net Income Before Adjustments Less Adjustments: Rent Expense Depreciation Expense Supplies Expense Total Adjustments for Expenses Not Made

$90,000 $7,000 8,200 3,600

Corrected Net Income

18,800 $71,200

If the adjusting entries are not made, total expenses will be understated by $18,800. Net income will be overstated by $18,800. EXERCISE 5.5 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment

POST. REF.

DEBIT

523 121

11 0 0 0 00

521 131

8 2 0 0 00

517 142

5 8 0 0 00

3

CREDIT 1 2 3 11 0 0 0 00 4 5 6 8 2 0 0 00 7 8 9 5 8 0 0 00 10

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EXERCISE 5.5 (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2016 Dec. 1 31 Adjusting

ACCOUNT NO. POST. REF. J1 J3

DEBIT

CREDIT

18 0 0 0 00 11 0 0 0 00

ACCOUNT Prepaid Insurance

DATE DESCRIPTION 2016 Dec. 1 31 Adjusting

J1 J3

DEBIT 49 2 0 0 00

CREDIT

POST. REF.

DEBIT

J3

CREDIT

DEBIT

J3

5 8 0 0 00

5 8 0 0 00

ACCOUNT NO.

CREDIT

142

BALANCE DEBIT CREDIT

5 8 0 0 00

POST. REF.

131

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting

18 0 0 0 00 7 0 0 0 00

49 2 0 0 00 8 2 0 0 00 41 0 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

121

517

BALANCE DEBIT CREDIT 5 8 0 0 00

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EXERCISE 5.5 (continued) GENERAL LEDGER ACCOUNT Insurance Expense

ACCOUNT NO.

POST. DESCRIPTION REF.

DATE 2016 Dec. 31 Adjusting

J3

DEBIT

CREDIT

8 2 0 0 00

DATE 2016 Dec. 31 Adjusting

BALANCE DEBIT CREDIT 8 2 0 0 00

ACCOUNT Supplies Expense

ACCOUNT NO.

POST. DESCRIPTION REF. J3

DEBIT 11 0 0 0 00

521

CREDIT

523

BALANCE DEBIT CREDIT 11 0 0 0 00

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PROBLEM 5.1A Nixon Company Worksheet (Partial) Month Ended January 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depn—Equipment 7 Accounts Payable 8 Robert Nixon, Capital 9 Robert Nixon, Drawing 10 Fees Income 11 Supplies Expense 12 Insurance Expense 13 Salaries Expense 14 Depreciation Expense—Equipment 15 Utilities Expense 16 Totals 17 Net Income 18 19

TRIAL BALANCE DEBIT CREDIT 105 0 0 0 00 21 8 0 0 00 39 4 0 0 00 66 0 0 0 00 109 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 35 2 0 0 00 (b) 5 5 0 0 00 (c ) 1 6 0 0 00

25 8 0 0 00 253 0 0 0 00 15 4 0 0 00 114 2 0 0 00 (a) 35 2 0 0 00 (b) 5 5 0 0 00 32 2 0 0 00 (c ) 1 6 0 0 00 4 2 0 0 00 393 0 0 0 00 393 0 0 0 00

42 3 0 0 00

42 3 0 0 00

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PROBLEM 5.1A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 105 0 0 0 00 21 8 0 0 00 4 2 0 0 00 60 5 0 0 00 109 0 0 0 00 1 6 0 0 00 25 8 0 0 00 253 0 0 0 00 15 4 0 0 00 114 2 0 0 00 35 2 0 0 00 5 5 0 0 00 32 2 0 0 00 1 6 0 0 00 4 2 0 0 00 394 6 0 0 00 394 6 0 0 00

INCOME STATEMENT DEBIT CREDIT

114 2 0 0 00 35 2 0 0 00 5 5 0 0 00 32 2 0 0 00 1 6 0 0 00 4 2 0 0 00 78 7 0 0 00 114 2 0 0 00 35 5 0 0 00 114 2 0 0 00 114 2 0 0 00

BALANCE SHEET DEBIT CREDIT 105 0 0 0 00 21 8 0 0 00 4 2 0 0 00 60 5 0 0 00 109 0 0 0 00 1 6 0 0 00 25 8 0 0 00 253 0 0 0 00 15 4 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 315 9 0 0 00 280 4 0 0 00 16 35 5 0 0 00 17 315 9 0 0 00 315 9 0 0 00 18 19

Analyze: The adjustment to Prepaid Insurance decreased the account balance.

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PROBLEM 5.2A The College Bookstore Worksheet (Partial) Month Ended November 30, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation-Equip. 7 Accounts Payable 8 Randy Moss, Capital 9 Randy Moss, Drawing 10 Fees Income 11 Depreciation Expense—Equipment 12 Rent Expense 13 Salaries Expense 14 Supplies Expense 15 Utilities Expense 16 Totals 17

TRIAL BALANCE DEBIT CREDIT 46 1 5 0 00 7 6 2 4 00 15 0 0 0 00 49 0 0 0 00 55 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 5 8 0 0 00 (b) 7 0 0 0 00 (c) 1

9 0 0 00

18 0 0 0 00 83 6 7 4 00 8 0 0 0 00 97 1 0 0 00 (c) 1 9 0 0 00 (b) 7 0 0 0 00 17 0 0 0 00 (a) 5 1 0 0 0 00 198 7 7 4 00 198 7 7 4 00

8 0 0 00

14 7 0 0 00

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14 7 0 0 00


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PROBLEM 5.2A (continued)

ADJUSTED TRIAL BALANCE DEBIT 46 1 5 0 00 7 6 2 4 00 9 2 0 0 00 42 0 0 0 00 55 0 0 0 00

CREDIT

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

1 9 0 0 00 18 0 0 0 00 83 6 7 4 00 8 0 0 0 00 97 1 0 0 00 1 9 0 0 00 7 0 0 0 00 17 0 0 0 00 5 8 0 0 00 1 0 0 0 00 200 6 7 4 00 200 6 7 4 00

Analyze:

The balance of the Prepaid Rent account prior to the adjusting entry for expired rent is $49,000.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17


PROBLEM 5.3A Vasquez Corporation Income Statement Month Ended December 31, 2016 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Depreciation Expense—Equipment Total Expenses Net Income

115 5 0 0 00 17 8 0 0 00 2 8 0 0 00 7 0 0 0 00 3 4 0 0 00 1 7 0 0 00 32 7 0 0 00 82 8 0 0 00

Vasquez Corporation Statement of Owner's Equity Month Ended December 31, 2016 Rosa Vasquez, Capital, December 1, 2016 Net income for December Less Withdrawals for December Increase in Capital Rosa Vasquez, Capital, December 31, 2016

109 0 0 0 00 82 8 0 0 00 8 2 0 0 00 74 6 0 0 00 183 6 0 0 00

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PROBLEM 5.3A (continued) Vasquez Corporation Balance Sheet December 31, 2016 Assets Cash Accounts Receivable Supplies Prepaid Advertising Equipment Less Accumulated Depreciation—Equipment Total Assets

78 2 0 0 00 13 0 0 0 00 5 1 0 0 00 17 0 0 0 00 85 0 0 0 00 1 7 0 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Rosa Vasquez, Capital Total Liabilities and Owner's Equity

83 3 0 0 00 196 6 0 0 00

13 0 0 0 00 183 6 0 0 00 196 6 0 0 00

Analyze: Net Income $79,400 ($82,800 - $3,400). Analyze: Incomewould wouldbebe $48,900 ($51,300 - $2,400).

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PROBLEM 5.4A Judge Creative Designs Worksheet Month Ended January 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Advertising 5 Prepaid Rent 6 Equipment 7 Accumulated Depreciation—Equip. 8 Accounts Payable 9 Paula Judge, Capital 10 Paula Judge, Drawing 11 Fees Income 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Rent Expense 15 Salaries Expense 16 Supplies Expense 17 Utilities Expense 18 Totals 19 Net Income 20 21

TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 9 7 5 0 00 12 4 0 0 00 25 2 0 0 00 33 6 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 8 1 5 0 00 (b) 3 1 0 0 00 (c )2 1 0 0 00 (d)

2 8 0 00

16 5 5 0 00 61 0 0 0 00 8 0 0 0 00 74 1 0 0 00 (b) 3 1 0 0 00 (d) 2 8 0 00 (c )2 1 0 0 00 10 7 0 0 00 (a) 8 1 5 0 00 1 9 0 0 00 151 6 5 0 00 151 6 5 0 00

13 6 3 0 00

13 6 3 0 00

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PROBLEM 5.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 33 6 0 0 00 2 8 0 00 16 5 5 0 00 61 0 0 0 00 8 0 0 0 00 74 1 0 0 00 3 1 0 0 00 2 8 0 00 2 1 0 0 00 10 7 0 0 00 8 1 5 0 00 1 9 0 0 00 151 9 3 0 00 151 9 3 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 33 6 0 0 00 2 8 0 00 16 5 5 0 00 61 0 0 0 00 8 0 0 0 00

74 1 0 0 00 3 1 0 0 00 2 8 0 00 2 1 0 0 00 10 7 0 0 00 8 1 5 0 00 1 9 0 0 00 26 2 3 0 00 47 8 7 0 00 74 1 0 0 00

74 1 0 0 00 74 1 0 0 00

125 7 0 0 00

77 8 3 0 00 47 8 7 0 00 125 7 0 0 00 125 7 0 0 00

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


PROBLEM 5.4A (continued) Judge Creative Designs Income Statement Month Ended January 31, 2016 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Rent Expense Depreciation Expense—Equipment Total Expenses Net Income

74 1 0 0 00 10 7 0 0 00 1 9 0 0 00 8 1 5 0 00 3 1 0 0 00 2 1 0 0 00 2 8 0 00 26 2 3 0 00 47 8 7 0 00

Judge Creative Designs Statement of Owner's Equity Month Ended January 31, 2016 Paula Judge, Capital, January 1, 2016 Net income for January Less Withdrawals for January Increase in Capital Paula Judge, Capital, January 31, 2016

61 0 0 0 00 47 8 7 0 00 8 0 0 0 00 39 8 7 0 00 100 8 7 0 00

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PROBLEM 5.4A (continued) Judge Creative Designs Balance Sheet January 31, 2016 Assets Cash Accounts Receivable Supplies Prepaid Advertising Prepaid Rent Equipment Less Accumulated Depreciation—Equipment Total Assets

36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 33 6 0 0 00 2 8 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Paula Judge, Capital Total Liabilities and Owner's Equity

16 5 5 0 00 100 8 7 0 00 117 4 2 0 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14

2016 Jan.

DESCRIPTION Adjusting Entries

33 3 2 0 00 117 4 2 0 00

POST. P REF. O

DEBIT

31 Supplies Expense Supplies

517 121

8 1 5 0 00

31 Advertising Expense Prepaid Advertising

519 130

3 1 0 0 00

31 Rent Expense Prepaid Rent

520 131

2 1 0 0 00

31 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

523 142

2 8 0 00

3

CREDIT

8 1 5 0 00

3 1 0 0 00

2 1 0 0 00

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2 8 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14


PROBLEM 5.4A (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Jan. 1 31 Adjusting

ACCOUNT

J1 J3

DEBIT

BALANCE DEBIT CREDIT

8 1 5 0 00

9 7 5 0 00 1 6 0 0 00

9 7 5 0 00

ACCOUNT NO. POST. REF. J1 J3

DEBIT 12 4 0 0 00

CREDIT

J1 J3

DEBIT 25 2 0 0 00

12 4 0 0 00 3 1 0 0 00 9 3 0 0 00

CREDIT

DATE DESCRIPTION 2016 Jan. 31 Adjusting

J3

DEBIT

131

BALANCE DEBIT CREDIT

25 2 0 0 00 2 1 0 0 00 23 1 0 0 00

Accumulated Depreciation—Equipment POST. REF.

130

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

121

CREDIT

Prepaid Rent

DATE DESCRIPTION 2016 Jan. 1 31 Adjusting

ACCOUNT

POST. REF.

Prepaid Advertising

DATE DESCRIPTION 2016 Jan. 1 31 Adjusting

ACCOUNT

ACCOUNT NO.

Supplies

ACCOUNT NO.

CREDIT 2 8 0 00

142

BALANCE DEBIT CREDIT 2 8 0 00

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PROBLEM 5.4A (continued) GENERAL LEDGER ACCOUNT Supplies Expense

DATE DESCRIPTION 2016 Jan. 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

J3

8 1 5 0 00

CREDIT

ACCOUNT NO. POST. REF.

DEBIT

J3

3 1 0 0 00

CREDIT

DEBIT

J3

2 1 0 0 00

CREDIT

Analyze:

POST. REF. J3

DEBIT 2 8 0 00

520

BALANCE DEBIT CREDIT 2 1 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Jan. 31 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

519

3 1 0 0 00

ACCOUNT Rent Expense

DATE DESCRIPTION 2016 Jan. 31 Adjusting

BALANCE DEBIT CREDIT 8 1 5 0 00

ACCOUNT Advertising Expense

DATE DESCRIPTION 2016 Jan. 31 Adjusting

517

ACCOUNT NO.

CREDIT

523

BALANCE DEBIT CREDIT 2 8 0 00

If adjusting entries had not been made, net income would be overstated.

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PROBLEM 5.1B Sanchez Company Worksheet Month Ended February 29, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Maria Sanchez, Capital 9 Maria Sanchez, Drawing 10 Fees Income 11 Salaries Expense 12 Utilities Expense 13 Supplies Expense 14 Rent Expense 15 Depreciation Expense-Equipment 16 Totals 17 Net Income 18 19 20 21

TRIAL BALANCE DEBIT CREDIT 73 0 0 0 00 6 4 0 0 00 4 2 0 0 00 24 0 0 0 00 46 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 2 0 0 0 00 (b) 2 0 0 0 00 (c) 1 0 0 0 00

12 0 0 0 00 98 5 0 0 00 3 0 0 0 00 54 0 0 0 00 6 3 0 0 00 1 6 0 0 00 (a) 2 0 0 0 00 (b) 2 0 0 0 00 (c) 1 0 0 0 00 164 5 0 0 00 164 5 0 0 00 5 0 0 0 00

5 0 0 0 00

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PROBLEM 5.1B (continued)

ADJUSTED TRIAL DEBIT CREDIT 73 0 0 0 00 6 4 0 0 00 2 2 0 0 00 22 0 0 0 00 46 0 0 0 00 1 0 0 0 00 12 0 0 0 00 98 5 0 0 00 3 0 0 0 00 54 0 0 0 00 6 3 0 0 00 1 6 0 0 00 2 0 0 0 00 2 0 0 0 00 1 0 0 0 00 165 5 0 0 00 165 5 0 0 00

INCOME STATEMENT DEBIT CREDIT

54 0 0 0 00 6 3 0 0 00 1 6 0 0 00 2 0 0 0 00 2 0 0 0 00 1 0 0 0 00 12 9 0 0 00 41 1 0 0 00 54 0 0 0 00

54 0 0 0 00 54 0 0 0 00

BALANCE SHEET DEBIT CREDIT 73 0 0 0 00 6 4 0 0 00 2 2 0 0 00 22 0 0 0 00 46 0 0 0 00 1 0 0 0 00 12 0 0 0 00 98 5 0 0 00 3 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 152 6 0 0 00 111 5 0 0 00 16 41 1 0 0 00 17 152 6 0 0 00 152 6 0 0 00 18 19 20 21

Analyze: No depreciation has been recorded for the fiscal period, or any previous fiscal period.

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PROBLEM 5.2B Lisa Morgan, Attorney-at-Law Worksheet (Partial) Month Ended November 30, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Lisa Morgan, Capital 9 Lisa Morgan, Drawing 10 Fees Income 11 Salaries Expense 12 Utilities Expense 13 Supplies Expense 14 Rent Expense 15 Depreciation Expense—Equipment 16 Totals 17 18 19

TRIAL BALANCE DEBIT CREDIT 140 2 0 0 00 34 0 0 0 00 41 6 0 0 00 176 8 0 0 00 264 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 14 4 0 0 00 (b) 13 6 0 0 00 (c ) 2 2 0 0 00

68 0 0 0 00 320 0 0 0 00 24 0 0 0 00 342 8 0 0 00 43 2 0 0 00 7 0 0 0 00 (a) 14 4 0 0 00 (b) 13 6 0 0 00 (c ) 2 2 0 0 00 730 8 0 0 00 730 8 0 0 00 30 2 0 0 00

30 2 0 0 00

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PROBLEM 5.2B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 140 2 0 0 00 34 0 0 0 00 27 2 0 0 00 163 2 0 0 00 264 0 0 0 00 2 2 0 0 00 68 0 0 0 00 320 0 0 0 00 24 0 0 0 00 342 8 0 0 00 43 2 0 0 00 7 0 0 0 00 14 4 0 0 00 13 6 0 0 00 2 2 0 0 00 733 0 0 0 00 733 0 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

Analyze: Accumulated Depreciation—Equipment

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19


PROBLEM 5.3B CJ's Accounting Services Income Statement Month Ended December 31, 2016 Revenue Fees Income Expenses Salaries Expense Supplies Expense Utilities Expense Rent Expense Advertising Expense Depreciation Expense—Fixtures Total Expenses Net Income

31 3 3 0 00 18 6 0 0 00 6 0 0 00 1 0 8 0 00 3 5 0 0 00 8 0 0 00 3 0 0 00 24 8 8 0 00 6 4 5 0 00

CJ’s Accounting Services Statement of Owner's Equity Month Ended December 31, 2016 Charlene Jordan, Capital, December 1, 2016 Net income for December 2016 Less Withdrawals for Year Increase in Capital Charlene Jordan, Capital, December 31, 2016

30 0 0 0 00 6 4 5 0 00 3 0 0 0 00 3 4 5 0 00 33 4 5 0 00

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PROBLEM 5.3B (continued) CJ's Accounting Services Balance Sheet December 31, 2016 Assets Cash Accounts Receivable Supplies Prepaid Advertising Fixtures Less Accumulated Depreciation Total Assets Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Charlene Jordan, Capital Total Liabilities and Owner's Equity

16 9 5 0 00 2 2 0 0 00 9 0 0 00 3 2 0 0 00 18 0 0 0 00 3 0 0 00

17 7 0 0 00 40 9 5 0 00

7 5 0 0 00 33 4 5 0 00 40 9 5 0 00

Analyze: Adjusting entries decreased the assets of the company by $1,700.

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PROBLEM 5.4B Nix Estate Planning and Investments Worksheet Month Ended June 30, 2016 TRIAL BALANCE DEBIT CREDIT 39 4 0 0 00 12 2 0 0 00 15 2 0 0 00 28 8 0 0 00 72 0 0 0 00 96 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies (a) 9 2 0 0 00 4 Prepaid Advertising (b) 7 2 0 0 00 5 Prepaid Rent (c )6 0 0 0 00 6 Equipment 7 Accumulated Depreciation—Equip. (d) 1 6 0 0 00 8 Accounts Payable 21 6 0 0 00 9 Sam Nix, Capital 120 2 0 0 00 10 Sam Nix, Drawing 8 0 0 0 00 11 Fees Income 147 6 0 0 00 12 Advertising Expense (b) 7 2 0 0 00 13 Depreciation Expense—Equipment (d) 1 6 0 0 00 14 Rent Expense (c ) 6 0 0 0 00 15 Salaries Expense 15 2 0 0 00 16 Supplies Expense (a) 9 2 0 0 00 17 Utilities Expense 2 6 0 0 00 18 Totals 289 4 0 0 00 289 4 0 0 00 24 0 0 0 00 24 0 0 0 00 19 Net Income 20 21 22

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PROBLEM 5.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 39 4 0 0 00 12 2 0 0 00 6 0 0 0 00 21 6 0 0 00 66 0 0 0 00 96 0 0 0 00 1 6 0 0 00 21 6 0 0 00 120 2 0 0 00 8 0 0 0 00 147 6 0 0 00 7 2 0 0 00 1 6 0 0 00 6 0 0 0 00 15 2 0 0 00 9 2 0 0 00 2 6 0 0 00 291 0 0 0 00 291 0 0 0 00

INCOME STATEMENT DEBIT CREDIT

147 6 0 0 00 7 2 0 0 00 1 6 0 0 00 6 0 0 0 00 15 2 0 0 00 9 2 0 0 00 2 6 0 0 00 41 8 0 0 00 105 8 0 0 00 147 6 0 0 00

147 6 0 0 00 147 6 0 0 00

BALANCE SHEET DEBIT CREDIT 39 4 0 0 00 1 12 2 0 0 00 2 6 0 0 0 00 3 21 6 0 0 00 4 66 0 0 0 00 5 96 0 0 0 00 6 1 6 0 0 00 7 21 6 0 0 00 8 120 2 0 0 00 9 8 0 0 0 00 10 11 12 13 14 15 16 17 249 2 0 0 00 143 4 0 0 00 18 105 8 0 0 00 19 249 2 0 0 00 249 2 0 0 00 20 21 22

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PROBLEM 5.4B (continued) Nix Estate Planning and Investments Income Statement Month Ended June 30, 2016 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Rent Expense Depreciation Expense—Equipment Total Expenses Net Income

147 6 0 0 00 15 2 9 7 6 1

2 0 6 0 2 0 2 0 0 0 6 0

0 00 0 00 0 00 0 00 0 00 0 00 41 8 0 0 00 105 8 0 0 00

Nix Estate Planning and Investments Statement of Owner's Equity Month Ended June 30, 2016 Sam Nix, Capital, June 1, 2016 Net income for June Less Withdrawals for June Increase in Capital Sam Nix, Capital, June 30, 2016

120 2 0 0 00 105 8

8 0 0 00 0 0 0 00 97 8 0 0 00 218 0 0 0 00

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PROBLEM 5.4B (continued) Nix Estate Planning and Investments Balance Sheet June 30, 2016 Assets Cash Accounts Receivable Supplies Prepaid Advertising Prepaid Rent Equipment Less Accumulated Depreciation—Equipment Total Assets

39 4 0 0 00 12 2 0 0 00 6 0 0 0 00 21 6 0 0 00 66 0 0 0 00 96 0 0 0 00 1 6 0 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Sam Nix, Capital Total Liabilities and Owner's Equity

21 6 0 0 00 218 0 0 0 00 239 6 0 0 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14

2016 June

DESCRIPTION Adjusting Entries

94 4 0 0 00 239 6 0 0 00

POST. P REF. O DEBIT

30 Supplies Expense Supplies

517 121

9 2 0 0 00

30 Advertising Expense Prepaid Advertising

519 130

7 2 0 0 00

30 Rent Expense Prepaid Rent

520 131

6 0 0 0 00

30 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

523 142

1 6 0 0 00

3

CREDIT 1 2 3 9 2 0 0 00 4 5 6 7 2 0 0 00 7 8 9 6 0 0 0 00 10 11 12 1 6 0 0 00 13 14

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PROBLEM 5.4B (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 June 1 30 Adjusting

ACCOUNT

J1 J3

DEBIT

CREDIT

15 2 0 0 00 9 2 0 0 00

POST. REF. J1 J3

DEBIT 28 8 0 0 00

CREDIT

J1 J3

DEBIT 72 0 0 0 00

POST. REF. J3

DEBIT

130

BALANCE DEBIT CREDIT

28 8 0 0 00 7 2 0 0 00 21 6 0 0 00

CREDIT

131

BALANCE DEBIT CREDIT

72 0 0 0 00 6 0 0 0 00 66 0 0 0 00

Accumulated Depreciation—Equipment

DATE DESCRIPTION 2016 June 30 Adjusting

15 2 0 0 00 6 0 0 0 00

ACCOUNT NO. POST. REF.

121

BALANCE DEBIT CREDIT

ACCOUNT NO.

Prepaid Rent

DATE DESCRIPTION 2016 June 1 30 Adjusting

ACCOUNT

POST. REF.

Prepaid Advertising

DATE DESCRIPTION 2016 June 1 30 Adjusting

ACCOUNT

ACCOUNT NO.

Supplies

ACCOUNT NO.

142

CREDIT

BALANCE DEBIT CREDIT

1 6 0 0 00

1 6 0 0 00

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PROBLEM 5.4B (continued) GENERAL LEDGER ACCOUNT Supplies Expense

DATE DESCRIPTION 2016 June 30 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

J3

9 2 0 0 00

CREDIT

ACCOUNT NO. POST. REF.

DEBIT

J3

7 2 0 0 00

CREDIT

DEBIT

J3

6 0 0 0 00

CREDIT

POST. REF.

DEBIT

J3

1 6 0 0 00

520

BALANCE DEBIT CREDIT 6 0 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 June 30 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

519

7 2 0 0 00

ACCOUNT Rent Expense

DATE DESCRIPTION 2016 June 30 Adjusting

BALANCE DEBIT CREDIT 9 2 0 0 00

ACCOUNT Advertising Expense

DATE DESCRIPTION 2016 June 30 Adjusting

517

ACCOUNT NO.

CREDIT

523

BALANCE DEBIT CREDIT 1 6 0 0 00

Analyze: Generally accepted accounting principles require that the original cost of the asset appear in the asset account until the asset has been used up or disposed. A contra asset account is used to record depreciation costs.

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CRITICAL THINKING PROBLEM 5.1 TO: James Parkland, Owner FROM: Student’s Name DATE: Current Date SUBJEC Effect on Financial Statements of Omitting Adjusting Entries Adjusting entries are recorded to update the accounts at the end of the accounting period for previously unrecorded items that belong to that period. If these entries are omitted, the net income will not be an accurate measure of the operation of the company for the year and certain accounts on the balance sheet will not report correct end-of-year balances. In particular, Parkland Industries' net income for the year will be overstated by $26,150; net income should be $56,600 instead of $82,750. This amount represents a 32% decrease in net income over the amount that would be reported if the adjusting entries were not made. ($26,150 ÷ $82,750 = 0.32). This decrease in net income results from not making adjusting entries for the following unrecorded expenses: 1. Expense of Rent for the year ($21,000 x 6/12 = $10,500 for 6 months) 2. Expense of supplies used during the year (Total supplies of $9,000 - Ending Inventory of $1,750 = $7,250 supplies used) 3. Depreciation expense for the year ($210,000 ÷ 25 years = $8,400 per year) Total increase in expenses

$10,500 7,250 8,400 $26,150

In addition to overstating the net income, the balances of Prepaid Rent and Supplies on the balance sheet would be overstated and the book value of Building would also be overstated. Preparation of the adjusting entries would permit the financial statements to present a more accurate measure of the company’s operations for the year and its financial condition at the end of the year. Therefore, it is important and the time is well spent to prepare adjusting entries so that the financial statements are up-to-date and present an accurate picture of the business.

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CRITICAL THINKING PROBLEM 5.2 Rogers International Company Worksheet Month Ended January 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Maxine Rogers, Capital 9 Maxine Rogers, Drawing 10 Fees Income 11 Advertising Expense 12 Depreciation Expense—Equipment 13 Insurance Expense 14 Rent Expense 15 Salaries Expense 16 Supplies Expense 17 Telephone Expense 18 Utilities Expense 19 Totals 20 Net Income 21 22

TRIAL BALANCE DEBIT CREDIT 18 4 7 5 00 3 4 0 0 00 2 1 5 0 00 15 0 0 0 00 24 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 1 0 5 0 00 (b) 2 5 0 0 00 (c)

2 0 0 00

6 0 0 0 00 40 0 0 0 00 2 0 0 0 00 30 9 2 5 00 1 5 0 0 00 (c) 2 0 0 00 (b) 2 5 0 0 00 2 5 0 0 00 6 7 0 0 00 (a) 1 0 5 0 00 3 5 0 00 8 5 0 00 76 9 2 5 00 76 9 2 5 00

3 7 5 0 00

3 7 5 0 00

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CRITICAL THINKING PROBLEM 5.2 (continued)

ADJUSTED TRIAL DEBIT CREDIT 18 4 7 5 00 3 4 0 0 00 1 1 0 0 00 12 5 0 0 00 24 0 0 0 00 2 0 0 00 6 0 0 0 00 40 0 0 0 00 2 0 0 0 00 30 9 2 5 00 1 5 0 0 00 2 0 0 00 2 5 0 0 00 2 5 0 0 00 6 7 0 0 00 1 0 5 0 00 3 5 0 00 8 5 0 00 77 1 2 5 00 77 1 2 5 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 18 4 7 5 00 3 4 0 0 00 1 1 0 0 00 12 5 0 0 00 24 0 0 0 00 2 0 0 00 6 0 0 0 00 40 0 0 0 00 2 0 0 0 00

30 9 2 5 00 1 5 0 0 00 2 0 0 00 2 5 0 0 00 2 5 0 0 00 6 7 0 0 00 1 0 5 0 00 3 5 0 00 8 5 0 00 15 6 5 0 00 15 2 7 5 00 30 9 2 5 00

30 9 2 5 00

61 4 7 5 00

30 9 2 5 00

61 4 7 5 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 46 2 0 0 00 19 15 2 7 5 00 20 61 4 7 5 00 21 22

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CRITICAL THINKING PROBLEM 5.2 (continued) Rogers International Company Income Statement Month Ended January 31, 2016 Revenue Fees Income Expenses Advertising Expense Depreciation Expense—Equipment Insurance Expense Rent Expense Salaries Expense Supplies Expense Telephone Expense Utilities Expense Total Expenses Net Income

30 9 2 5 00 1 5 0 0 00 2 0 0 00 2 5 0 0 00 2 5 0 0 00 6 7 0 0 00 1 0 5 0 00 3 5 0 00 8 5 0 00 15 6 5 0 00 15 2 7 5 00

Rogers International Company Statement of Owner’s Equity Month Ended January 31, 2016 Maxine Rogers, Capital, January 1, 2016 Net income for January Less Withdrawals for January Increase in Capital Maxine Rogers, Capital, January 31, 2016

40 0 0 0 00 15 2 7 5 00 2 0 0 0 00 13 2 7 5 00 53 2 7 5 00

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CRITICAL THINKING PROBLEM 5.2 (continued) Rogers International Company Balance Sheet January 31, 2016 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Less Accumulated Depreciation—Equipment Total Assets

18 4 7 5 00 3 4 0 0 00 1 1 0 0 00 12 5 0 0 00 24 0 0 0 00 2 0 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Maxine Rogers, Capital Total Liabilities and Owner's Equity

6 0 0 0 00 53 2 7 5 00 59 2 7 5 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11

2016 Jan.

DESCRIPTION Adjusting Entries

23 8 0 0 00 59 2 7 5 00

POST. P REF. O DEBIT

31 Supplies Expense Supplies

520 121

1 0 5 0 00

31 Insurance Expense Prepaid Insurance

517 131

2 5 0 0 00

30 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

514 142

2 0 0 00

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3

CREDIT 1 2 3 1 0 5 0 00 4 5 6 2 5 0 0 00 7 8 9 2 0 0 00 10 11


CRITICAL THINKING PROBLEM 5.2 (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2016 Jan. 1 Balance 31 Adjusting

ACCOUNT NO. POST. REF. ✔ J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 0 5 0 00

2 1 5 0 00 1 1 0 0 00

2 1 5 0 00

ACCOUNT Prepaid Insurance

DATE DESCRIPTION 2016 Jan. 1 Balance 31 Adjusting

ACCOUNT NO. POST. REF. ✔ J3

DEBIT 15 0 0 0 00

CREDIT

POST. REF.

DEBIT

J3

DATE DESCRIPTION 2016 Jan. 31 Adjusting

J3

DEBIT 2 0 0 00

BALANCE DEBIT CREDIT

ACCOUNT NO.

142

CREDIT

BALANCE DEBIT CREDIT

2 0 0 00

2 0 0 00

ACCOUNT Depreciation Expense—Equipment POST. REF.

131

15 0 0 0 00 2 5 0 0 00 12 5 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2016 Jan. 31 Adjusting

121

ACCOUNT NO.

CREDIT

514

BALANCE DEBIT CREDIT 2 0 0 00

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CRITICAL THINKING PROBLEM 5.2 (continued) GENERAL LEDGER ACCOUNT Insurance Expense

DATE DESCRIPTION 2016 Jan. 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

J3

2 5 0 0 00

CREDIT

Analyze:

BALANCE DEBIT CREDIT 2 5 0 0 00

ACCOUNT Supplies Expense

DATE DESCRIPTION 2016 Jan. 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

J3

1 0 5 0 00

517

CREDIT

520

BALANCE DEBIT CREDIT 1 0 5 0 00

If the useful life of the equipment had been 12 years instead of 10 years, depreciation would have been $166.67 rather than $200. Net Income would have been $33.33 greater.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Accounting records generally reflect an asset’s historical or original cost, less accumulated depreciation (not market value). 2. Depreciation Expense will offset income. Accumulated Depreciation will decrease the book value of the asset. 3. Are necessary to present an accurate financial position of the firm. 4. Provides end-of-period adjusting entries and contains income statement and balance sheet accounts.

Ethical Dilemma: If the company wanted to donate to a nonprofit organization they would write a check and get a tax deduction. It is unethical to record higher costs than are actually incurred. Financial Statement Analysis: 1. 4.1% ($1,319 ÷ $31,826) 2. 60% ($19,085 ÷ $31,826) 3. 9.7 years ($12,741 ÷ $1,319) Analyze Online: Answers will vary depending on the year. Teamwork: Mr. Foster has expenses that will appear on the income statement. He needs to match these expenses with revenue. He can record the revenue as a receivable for the amount that he has completed (40% 25% = 15%). In this case, he can record $30,000 or 15% of the price of the job.

Internet Connection: Professional liability, surety bonds, umbrella policies, errors and omissions, product liability, fire, auto, dental, workers’ compensation, sexual harassment.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. FALSE 2. FALSE 3. TRUE 4. TRUE 5. TRUE 6. TRUE 7. TRUE 8. TRUE 9. FALSE 10. TRUE Part B Matching 1. d 2. b 3. c 4. f 5. e 6. a

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CHAPTER 6 CLOSING ENTRIES AND THE POSTCLOSING TRIAL BALANCE Chapter Opener: Thinking Critically Students should recognize that financial statements can be used to evaluate net profit or loss, return on investments, expense trends, or growth in company net assets. The income statement is used to measure net income or loss, while the balance sheet can be used to measure growth in assets or liabilities. Executives and managers would use financial statements to make decisions about expanding business, investing in new ventures, or hiring new employees. Fast Facts • Carnival has 80,000 employees worldwide. • Of the 3 million passengers Carnival serves annually, approximately 1,000,000 are seniors and 500,000 are children. • Carnival became a publicly traded company in 1987. • Carnival Corporation is comprised of distinct brands operating in North and South America, the United Kingdom, Germany, Italy, France, Spain, and Australia, which account for nearly 90 percent of cruise passengers worldwide. • Carnival Corporation operates 100 ships with 9 new vessels scheduled for delivery between March 2013 and March 2016. Managerial Implications: Thinking Critically Answers will vary but could include monthly or quarterly. Students should want financial statements frequently so that trends can be observed and timely decisions made before the business is negatively impacted. Discussion Questions Note to instructor: These questions are designed to check the students’ understanding of the new terms, concepts, and procedures presented in the chapter. 1. Adjustments columns of the worksheet. 2. Transfer results of operations to the owner’s capital account; Reduce balances of revenue, expense, and drawing accounts to zero. 3. Worksheet. 4. Balances of revenue and expense accounts are transferred to Income Summary. Next the balance of the Income Summary account is transferred to the owner’s equity account. 5. Source document info to general journal, to general ledger, to worksheet, to financial statements. 6. Journalize and post adjusting entries; Journalize and postclosing entries; Prepare a postclosing trial balance.

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7. (1) analyze (2) journalize (3) post (4) prepare worksheet (5) prepare financial statements (6) journalize and post adjusting entries (7) journalize and post-closing entries (8) prepare post-closing trial balance (9) interpret financial information 8. Steps to classify, record, and summarize financial data. 9. Asset, liability, and owner’s capital. 10. Avoids errors, proves total debits and credits are equal after the closing process.

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EXERCISE 6.1 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense 8 Salaries Expense 9 Supplies Expense 10 Telephone Expense 11 Utilities Expense 12 13 31 Income Summary 14 Maria Hernandez, Capital 15 16 31 Maria Hernandez, Capital 17 Maria Hernandez, Drawing 18

POST. REF.

DEBIT

CREDIT

53 7 5 0 00 53 7 5 0 00 30 0 0 0 00 2 7 5 0 00 17 0 0 0 00 3 0 0 0 00 2 6 0 0 00 4 6 5 0 00 23 7 5 0 00 23 7 5 0 00 26 0 0 0 00

EXERCISE 6.2 1. Analyze transactions. 2. Journalize the transactions. 3. Post the journal entries. 4. Prepare a worksheet. 5. Prepare financial statements. 6. Record adjusting entries. 7. Record closing entries. 8. Prepare a post-closing trial balance. 9. Interpret the financial information.

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4

26 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18


EXERCISE 6.3 1. Cash 2. Accounts Receivable 3. Supplies 4. Equipment

5. Accumulated Depreciation 6. Accounts Payable 7. John Martin, Capital

EXERCISE 6.4 1. B 2. I 3. B 4. B 5. I

6. 7. 8. 9. 10.

B E B I B

11. 12. 13. 14. 15.

I, E B, E B I B

EXERCISE 6.5 1. Total revenue for the period is $67,000. 2. Total expenses for the period are $35,900. 3. Net income for the period is $31,100. 4. Owner’s withdrawals for the period are $11,000.

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EXERCISE 6.6 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Mar. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense- Equipment 8 Insurance Expense 9 Rent Expense 10 Salaries Expense 11 Supplies Expense 12 Telephone Expense 13 Utilities Expense 14 15 31 Income Summary 16 Lee Retha Hale, Capital 17 18 31 Lee Retha Hale, Capital 19 Lee Retha Hale, Drawing 20

POST. REF.

DEBIT

401 399

374 4 6 0 00

399 510 511 514 517 518 519 523

253 3 6 0 00

399 301

121 1 0 0 00

301 302

13 0 0 0 00

CREDIT

374 4 6 0 00

21 1 6 0 00 11 4 0 0 00 33 0 0 0 00 166 0 0 0 00 5 6 0 0 00 6 8 0 0 00 9 4 0 0 00

121 1 0 0 00

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4

13 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT Lee Retha Hale, Capital

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing 31 Closing

POST. REF.  J4 J4

ACCOUNT NO.

DEBIT

CREDIT

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

POST. REF.

130 0 0 0 00 251 1 0 0 00 238 1 0 0 00

13 0 0 0 00

ACCOUNT NO.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF. J4 J4 J4

302

13 0 0 0 00 13 0 0 0 00 −0−

ACCOUNT Income Summary

DATE DESCRIPTION 2016 Mar. 31 Closing 31 Closing 31 Closing

BALANCE DEBIT CREDIT

121 1 0 0 00

ACCOUNT Lee Retha Hale, Drawing

301

DEBIT

CREDIT

399

BALANCE DEBIT CREDIT

374 4 6 0 00 253 3 6 0 00 121 1 0 0 00

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374 4 6 0 00 121 1 0 0 00 −0−


EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

ACCOUNT

POST. REF.  J4

DEBIT

CREDIT

POST. REF.  J4

ACCOUNT NO.

CREDIT

21 1 6 0 00

21 1 6 0 00 −0−

ACCOUNT NO. POST. REF.

DEBIT

 J4

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

CREDIT

11 4 0 0 00

11 4 0 0 00 −0−

ACCOUNT NO.

DEBIT

511

BALANCE DEBIT CREDIT

ACCOUNT Rent Expense POST. REF.

510

BALANCE DEBIT CREDIT

Insurance Expense

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

374 4 6 0 00

DEBIT

401

374 4 6 0 00 −0−

Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO.

Fees Income

514

CREDIT

BALANCE DEBIT CREDIT

33 0 0 0 00

33 0 0 0 00 −0−

 J4

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EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

ACCOUNT

DEBIT

 J4

CREDIT

166 0 0 0 00

POST. REF.

DEBIT

 J4

CREDIT

5 6 0'00 00

DEBIT

 J4

CREDIT

6 8 0 0 00

POST. REF.  J4

DEBIT

CREDIT

9 4 0 0 00

518

BALANCE DEBIT CREDIT 5 6 0 0 00 − 0 −

519

BALANCE DEBIT CREDIT 6 8 0 0 00 − 0 −

ACCOUNT NO.

Utilities Expense

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

166 0 0 0 00 − 0 −

ACCOUNT NO. POST. REF.

517

BALANCE DEBIT CREDIT

ACCOUNT NO.

Telephone Expense

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

ACCOUNT

POST. REF.

Supplies Expense

DATE DESCRIPTION 2016 Mar. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO.

Salaries Expense

523

BALANCE DEBIT CREDIT 9 4 0 0 00 − 0 −

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EXERCISE 6.7 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Dec. 31 Michelle Davison, Capital 4 Income Summary 5 6 31 Michelle Davison, Capital 7 Michelle Davison, Drawing 8

POST. REF.

DEBIT

37 0 0 0 00

4 0 0 0 00

CREDIT 1 2 3 37 0 0 0 00 4 5 6 4 0 0 0 00 7 8

The new balance of Michelle Davison, Capital is $17,000 ($58,000 – $37,000 – $4,000).

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4


EXERCISE 6.8

Analyze transactions

Journalize transactions

Post transactions

Prepare a worksheet

Prepare financial statements

Record adjusting entries

Record closing entries

Prepare post-closing trial balance

Interpret financial information

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PROBLEM 6.1A PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 3 Jan. 31 Supplies Expense 4 Supplies 5 6 31 Rent Expense 7 Prepaid Rent 8 9 31 Depreciation Expense—Office Equipment 10 Accumulated Depreciation—Office Equip. 11

POST. REF.

DEBIT

2 3 4 0 00

13 0 0 0 00

4 5 8 0 00

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3

CREDIT 1 2 3 2 3 4 0 00 4 5 6 13 0 0 0 00 7 8 9 4 5 8 0 00 10 11


PROBLEM 6.1A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Jan. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense—Office Equipment 8 Rent Expense 9 Salaries Expense 10 Supplies Expense 11 Telephone Expense 12 Travel Expense 13 Utilities Expense 14 15 31 Income Summary 16 Sam Hill, Capital 17 18 31 Sam Hill, Capital 19 Sam Hill, Drawing 20

POST. REF.

DEBIT

4

CREDIT

1 2 100 0 0 0 00 3 100 0 0 0 00 4 5 82 4 1 0 00 6 4 5 8 0 00 7 13 0 0 0 00 8 49 5 0 0 00 9 2 3 4 0 00 10 1 3 5 0 00 11 10 3 9 0 00 12 1 2 5 0 00 13 14 17 5 9 0 00 15 17 5 9 0 00 16 17 11 0 0 0 00 18 11 0 0 0 00 19 20

Analyze: Debit the Capital account; credit the Drawing account.

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PROBLEM 6.2A PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Advertising Expense 7 Prepaid Advertising 8 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment 11

POST. REF.

DEBIT

517 121

3 4 0 0 00

526 131

4 0 0 0 00

523 142

3 4 0 0 00

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Supplies Expense 8 Advertising Expense 9 Depreciation Expense—Equipment 10 Salaries Expense 11 Utilities Expense 12 13 31 Income Summary 14 Delva King, Capital 15 16 31 Delva King, Capital 17 Delva King, Drawing 18

CREDIT 1 2 3 3 4 0 0 00 4 5 6 4 0 0 0 00 7 8 9 3 4 0 0 00 10 11

PAGE

GENERAL JOURNAL POST. REF.

401 309 309 517 526 523 511 514 309 301 301 302

DEBIT

3

4

CREDIT

1 2 103 5 0 0 00 3 103 5 0 0 00 4 5 28 5 0 0 00 6 3 4 0 0 00 7 4 0 0 0 00 8 3 4 0 0 00 9 15 4 0 0 00 10 2 3 0 0 00 11 12 75 0 0 0 00 13 75 0 0 0 00 14 15 9 4 0 0 00 16 9 4 0 0 00 17 18

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PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

BALANCE DEBIT CREDIT

3 4 0 0 00

8 0 0 0 00 4 6 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

4 0 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting

POST. REF.

DEBIT

J3

CREDIT

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing 31 Closing

32 0 0 0 00 28 0 0 0 00

3 4 0 0 00

ACCOUNT NO.

 J4 J4

CREDIT

142

BALANCE DEBIT CREDIT

3 4 0 0 00

DEBIT

131

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Delva King, Capital POST. REF.

121

301

BALANCE DEBIT CREDIT

75 0 0 0 00 9 4 0 0 00

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142 0 0 0 00 217 0 0 0 00 207 6 0 0 00


PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Delva King, Drawing

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

9 4 0 0 00

9 4 0 0 00 −0−

ACCOUNT NO.

Income Summary

DATE DESCRIPTION 2016 Dec. 31 Closing 31 Closing 31 Closing

POST. REF.

DEBIT

J4 J4 J4

28 5 0 0 00 75 0 0 0 00

CREDIT

103 5 0 0 00 75 0 0 0 00 −0−

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

309

BALANCE DEBIT CREDIT

103 5 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

302

401

BALANCE DEBIT CREDIT

103 5 0 0 00

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103 5 0 0 00 −0−


PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Salaries Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

15 4 0 0 00

ACCOUNT Utilities Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

DEBIT

2 3 0 0 00

2 3 0 0 00 −0−

ACCOUNT NO.

POST. REF. J3 J4

DEBIT

POST. REF.

CREDIT

3 4 0 0 00

3 4 0 0 00 −0−

ACCOUNT NO.

523

CREDIT

BALANCE DEBIT CREDIT

3 4 0 0 00

3 4 0 0 00 −0−

3 4 0 0 00 J3 J4

517

BALANCE DEBIT CREDIT

3 4 0 0 00

DEBIT

514

CREDIT

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

15 4 0 0 00 −0−

BALANCE DEBIT CREDIT

ACCOUNT Supplies Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO.

POST. REF.  J4

511

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PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Advertising Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

POST. REF. J3 J4

DEBIT

CREDIT

4 0 0 0 00 4 0 0 0 00

BALANCE DEBIT CREDIT 4 0 0 0 00 −0−

The King Group Post-closing Trial Balance December 31, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Delva King, Capital Totals

DEBIT 93 4 0 0 00 13 0 0 0 00 4 6 0 0 00 28 0 0 0 00 85 0 0 0 00

526

CREDIT

3 4 0 0 00 13 0 0 0 00 207 6 0 0 00 224 0 0 0 00 224 0 0 0 00

Analyze: Fifteen accounts are listed in the Adjusted Trial Balance section. Eight accounts are listed on the post-closing trial balance.

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PROBLEM 6.3A PAGE

GENERAL JOURNAL

DATE 1 2 2016 3 Dec. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

DESCRIPTION Closing Entries

POST. REF.

DEBIT

31 Fees Income Income Summary

401 399

163 6 0 0 00

31 Income Summary Advertising Expense Depreciation Expense—Equipment Rent Expense Salaries Expense Utilities Expense

399 511 514 517 519 523

57 9 2 0 00

31 Income Summary Andrea Gomez, Capital

399 301

105 6 8 0 00

31 Andrea Gomez, Capital Andrea Gomez, Drawing

301 302

8 2 0 0 00

CREDIT

163 6 0 0 00

5 8 0 0 00 1 0 0 0 00 4 6 0 0 00 38 8 0 0 00 7 7 2 0 00

105 6 8 0 00

8 2 0 0 00

GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Andrea Gomez, Capital POST. DESCRIPTION REF.

DATE 2016 Dec. 31 Balance 31 Closing 31 Closing

 J4 J4

DEBIT

CREDIT

301

BALANCE DEBIT CREDIT

105 6 8 0 00 8 2 0 0 00

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4

65 6 2 0 00 171 3 0 0 00 163 1 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18


PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT

POST. REF.

DEBIT

 J4

BALANCE DEBIT CREDIT

8 2 0 0 00

8 2 0 0 00 −0−

ACCOUNT NO. POST. REF.

DEBIT

J4 J4 J4

57 9 2 0 00 105 6 8 0 00

CREDIT

163 6 0 0 00 105 6 8 0 00 −0−

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

399

BALANCE DEBIT CREDIT

163 6 0 0 00

Fees Income

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

302

CREDIT

Income Summary

DATE DESCRIPTION 2016 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT

ACCOUNT NO.

Andrea Gomez, Drawing

401

BALANCE DEBIT CREDIT

163 6 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-19

163 6 0 0 00 −0−


PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Advertising Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

5 8 0 0 00

5 8 0 0 00 −0−

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

POST. REF.  J4

DEBIT

ACCOUNT NO.

CREDIT

1 0 0 0 00

1 0 0 0 00 −0−

ACCOUNT NO.

POST. REF.  J4

DEBIT

CREDIT

4 6 0 0 00

4 6 0 0 00 −0−

ACCOUNT NO.

POST. REF.  J4

DEBIT

517

BALANCE DEBIT CREDIT

ACCOUNT Salaries Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

514

BALANCE DEBIT CREDIT

ACCOUNT Rent Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

511

CREDIT

38 8 0 0 00

519

BALANCE DEBIT CREDIT 38 8 0 0 00 −0−

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-20


PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT Utilities Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

523

CREDIT

BALANCE DEBIT CREDIT

7 7 2 0 00

7 7 2 0 00 −0−

Analyze: The balance in the Salaries Expense account is $0.

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-21


PROBLEM 6.4A Home Auto Detailing Service Worksheet Month Ended December 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Advertising 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Clifton Davis, Capital 9 Clifton Davis, Drawing 10 Fees Income 11 Supplies Expense 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Salaries Expense 15 Utilities Expense 16 Totals 17 Net Income 18 19

TRIAL BALANCE DEBIT CREDIT 32 0 5 0 00 5 4 5 0 00 6 0 0 0 00 4 0 0 0 00 21 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 2 1 0 0 00 (b) 1 9 0 0 00 (c)

5 8 0 00

6 0 0 0 00 45 5 0 0 00 3 0 0 0 00 26 6 0 0 00 (a) 2 1 0 0 00 (b) 1 9 0 0 00 (c) 5 8 0 00 5 8 0 0 00 8 0 0 00 78 1 0 0 00

78 1 0 0 00

4 5 8 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-22

4 5 8 0 00


PROBLEM 6.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 32 0 5 0 00 5 4 5 0 00 3 9 0 0 00 2 1 0 0 00 21 0 0 0 00 5 8 0 00 6 0 0 0 00 45 5 0 0 00 3 0 0 0 00 26 6 0 0 00 2 1 0 0 00 1 9 0 0 00 5 8 0 00 5 8 0 0 00 8 0 0 00 78 6 8 0 00 78 6 8 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 32 0 5 0 00 5 4 5 0 00 3 9 0 0 00 2 1 0 0 00 21 0 0 0 00 5 8 0 00 6 0 0 0 00 45 5 0 0 00 3 0 0 0 00

26 6 0 0 00 2 1 0 0 00 1 9 0 0 00 5 8 0 00 5 8 0 0 00 8 0 0 00 11 1 8 0 00 15 4 2 0 00 26 6 0 0 00

26 6 0 0 00

67 5 0 0 00

26 6 0 0 00

67 5 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-23

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 52 0 8 0 00 16 15 4 2 0 00 17 67 5 0 0 00 18 19


PROBLEM 6.4A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 (a) 3 Dec. 31 Supplies Expense 4 Supplies 5 6 (b) 7 31 Advertising Expense 8 Prepaid Advertising 9 10 (c) 11 31 Depreciation Expense—Equipment 12 Accumulated Depreciation—Equipment 13

POST. REF.

DEBIT

517 121

2 1 0 0 00

526 131

1 9 0 0 00

523 142

5 8 0 00

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Salaries Expense 8 Utilities Expense 9 Supplies Expense 10 Depreciation Expense—Equipment 11 Advertising Expense 12 13 31 Income Summary 14 Clifton Davis, Capital 15 16 31 Clifton Davis, Capital 17 Clifton Davis, Drawing 18

CREDIT 1 2 3 2 1 0 0 00 4 5 6 7 1 9 0 0 00 8 9 10 11 5 8 0 00 12 13

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

401 399

26 6 0 0 00

399 511 514 517 523 526

11 1 8 0 00

399 301

15 4 2 0 00

301 302

3 0 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-24

3

4

CREDIT 1 2 3 26 6 0 0 0000 4 5 6 5 8 0 0 00 7 8 0 0 00 8 2 1 0 0 00 9 5 8 0 00 10 1 9 0 0 00 11 12 13 15 4 2 0 00 14 15 16 3 0 0 0 00 17 18


PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

2 1 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

DEBIT

 J3

CREDIT

1 9 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting

6 0 0 0 00 3 9 0 0 00

POST. REF.

DEBIT

J3

CREDIT

4 0 0 0 00 2 1 0 0 00

5 8 0 00

 J4 J4

DEBIT

CREDIT

142

BALANCE DEBIT CREDIT 5 8 0 00

ACCOUNT NO.

POST. REF.

131

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Clifton Davis, Capital

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

121

301

BALANCE DEBIT CREDIT

15 4 2 0 00 3 0 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-25

45 5 0 0 00 60 9 2 0 00 57 9 2 0 00


PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT Clifton Davis, Drawing

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

POST. REF.

ACCOUNT NO.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

3 0 0 0 00

3 0 0 0 00 −0−

ACCOUNT Income Summary

DATE DESCRIPTION 2016 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

J4 J4 J4

11 1 8 0 00 15 4 2 0 00

CREDIT

 J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT

26 6 0 0 00

ACCOUNT NO. POST. REF.  J4

DEBIT

401

26 6 0 0 00 −0−

ACCOUNT Salaries Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

26 6 0 0 00 15 4 2 0 00 −0−

ACCOUNT NO. POST. REF.

399

BALANCE DEBIT CREDIT

26 6 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

302

511

CREDIT

BALANCE DEBIT CREDIT

5 8 0 0 00

5 8 0 0 00 −0−

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-26


PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT

DEBIT

 J4

CREDIT

8 0 0 00

POST. REF. J3 J4

DEBIT

POST. REF. J3 J4

2 1 0 0 00

2 1 0 0 00 −0−

ACCOUNT NO.

CREDIT

5 8 0 00 5 8 0 00

J3 J4

DEBIT

523

BALANCE DEBIT CREDIT 5 8 0 00 −0−

ACCOUNT NO.

POST. REF.

517

CREDIT

Advertising Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

8 0 0 00 −0−

BALANCE DEBIT CREDIT

2 1 0 0 00

DEBIT

514

BALANCE DEBIT CREDIT

ACCOUNT NO.

Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

ACCOUNT

POST. REF.

Supplies Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

ACCOUNT

ACCOUNT NO.

Utilities Expense

526

CREDIT

BALANCE DEBIT CREDIT

1 9 0 0 00

1 9 0 0 00 −0−

1 9 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-27


PROBLEM 6.4A (continued) Home Auto Detailing Service Post-closing Trial Balance December 31, 2016 ACCOUNT NAME

DEBIT 32 0 5 0 00 5 4 5 0 00 3 9 0 0 00 2 1 0 0 00 21 0 0 0 00

Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Clifton Davis, Capital Totals

64 5 0 0 00

CREDIT

5 8 0 00 6 0 0 0 00 57 9 2 0 00 64 5 0 0 00

Analyze: Total debits of $56,200 were posted to the general ledger to complete the closing entries PROBLEM 6.1B PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11

2016 Jan.

DESCRIPTION Adjusting Entries

(a) 31 Supplies Expense Supplies (b) 31 Insurance Expense Prepaid Insurance (c) 31 Depreciation Expense—Machinery Accumulated Depreciation—Machinery

POST. REF.

DEBIT

523 121

4 2 9 0 00

514 134

2 2 2 0 00

511 142

1 6 8 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-28

3

CREDIT 1 2 3 4 2 9 0 00 4 5 6 2 2 2 0 00 7 8 9 1 6 8 0 00 10 11


PROBLEM 6.1B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Jan. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense—Machinery 8 Insurance Expense 9 Rent Expense 10 Salaries Expense 11 Supplies Expense 12 Telephone Expense 13 Utilities Expense 14 15 31 Income Summary 16 Fred Sanford, Capital 17 18 31 Fred Sanford, Capital 19 Fred Sanford, Drawing 20

POST. REF.

DEBIT

401 309

49 2 0 0 00

309 511 514 517 520 523 526 529

37 9 6 5 00

309 301

11 2 3 5 00

301 302

3 6 0 0 00

CREDIT

49 2 0 0 00

1 6 8 0 00 2 2 2 0 00 4 5 0 0 00 24 0 0 0 00 4 2 9 0 00 3 1 5 00 9 6 0 00

11 2 3 5 00

3 6 0 0 00

Analyze: The adjusting entry for expired insurance created a debit to Insurance Expense, increasing the Insurance Expense account balance to $2,220.

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-29

4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


PROBLEM 6.2B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 (a) 3 Dec. 31 Supplies Expense 4 Supplies 5 (b) 6 31 Advertising Expense 7 Prepaid Advertising 8 (c) 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment 11

POST. REF.

DEBIT

517 121

3 0 0 0 00

526 131

1 2 0 0 00

523 142

1 5 0 0 00

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Salaries Expense 8 Utilities Expense 9 Supplies Expense 10 Depreciation Expense—Equipment 11 Advertising Expense 12 13 31 Income Summary 14 Scott Jeremy, Capital 15 16 31 Scott Jeremy, Capital 17 Scott Jeremy, Drawing 18

CREDIT 1 2 3 3 0 0 0 00 4 5 6 1 2 0 0 00 7 8 9 1 5 0 0 00 10 11

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

401 309

46 8 0 0 00

309 511 514 517 523 526

21 9 0 0 00

309 301

24 9 0 0 00

301 302

8 4 0 0 00

4

CREDIT

46 8 0 0 00

14 4 0 0 00 1 8 0 0 00 3 0 0 0 00 1 5 0 0 00 1 2 0 0 00

24 9 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-30

3

8 4 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18


PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

BALANCE DEBIT CREDIT

3 0 0 0 00

6 0 0 0 00 3 0 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

DATE DESCRIPTION 2016 Dec. 31 Adjusting

DEBIT

J3

CREDIT

1 2 0 0 00

9 0 0 0 00 7 8 0 0 00

ACCOUNT NO.

CREDIT

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing 31 Closing

1 5 0 0 00

ACCOUNT NO.

 J4 J4

DEBIT

CREDIT

142

BALANCE DEBIT CREDIT

1 5 0 0 00

ACCOUNT Scott Jeremy, Capital POST. REF.

131

BALANCE DEBIT CREDIT

ACCOUNT Accumulated Depreciation—Equipment POST. REF.

121

301

BALANCE DEBIT CREDIT

24 9 0 0 00 8 4 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-31

82 2 0 0 00 107 1 0 0 00 98 7 0 0 00


PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Scott Jeremy, Drawing

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

8 4 0 0 00

8 4 0 0 00 −0−

ACCOUNT Income Summary

DATE DESCRIPTION 2016 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

J4 J4 J4

21 9 0 0 00 24 9 0 0 00

CREDIT

46 8 0 0 00 24 9 0 0 00 −0−

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

309

BALANCE DEBIT CREDIT

46 8 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

302

401

BALANCE DEBIT CREDIT

46 8 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-32

46 8 0 0 00 −0−


PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Salaries Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

14 4 0 0 00

ACCOUNT Utilities Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

DEBIT

 J4

1 8 0 0 00

1 8 0 0 00 −0−

ACCOUNT NO. POST. REF. J3 J4

DEBIT

POST. REF. J3 J4

517

CREDIT

BALANCE DEBIT CREDIT

3 0 0 0 00

3 0 0 0 00 −0−

3 0 0 0 00

DEBIT

514

CREDIT

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

14 4 0 0 00 −0−

BALANCE DEBIT CREDIT

ACCOUNT Supplies Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

511

ACCOUNT NO.

523

CREDIT

BALANCE DEBIT CREDIT

1 5 0 0 00

1 5 0 0 00 −0−

1 5 0 0 00

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PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Advertising Expense

DATE DESCRIPTION 2016 Dec. 31 Adjusting 31 Closing

POST. REF. J3 J4

DEBIT

CREDIT

1 2 0 0 00 1 2 0 0 00

526

BALANCE DEBIT CREDIT 1 2 0 0 00 −0−

Cedar Valley Nursery and Landscape Post-closing Trial Balance December 31, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Scott Jeremy, Capital Totals

DEBIT 32 4 0 0 00 6 0 0 0 00 3 0 0 0 00 7 8 0 0 00 60 0 0 0 00

CREDIT

1 5 0 0 00 9 0 0 0 00 98 7 0 0 00 109 2 0 0 00 109 2 0 0 00

Analyze: Total credits of $102,000 were posted to the general ledger to complete the closing entries

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-34


PROBLEM 6.3B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Fees Income 3 Income Summary 5 6 31 Income Summary 7 Advertising Expense 8 Depreciation Expense—Equipment 9 RentRent Expense Expense 10 Salaries Salaries Expense Expense 11 Utilities Utilities Expense Expense 12 13 31 Income Summary 14 Taylor Jackson, Capital 15 16 31 Taylor Jackson, Capital 17 Taylor Jackson, Drawing 18

POST. REF.

DEBIT

401 399

162 0 0 0 00

399 511 514 517 519 523

62 1 0 0 00

399 301

99 9 0 0 00

301 302

10 8 0 0 00

4

CREDIT

162 0 0 0 00

9 9 0 0 00 2 7 0 0 00 6 3 0 0 00 32 4 0 0 00 10 8 0 0 00

99 9 0 0 00

10 8 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-35

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18


PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Taylor Jackson, Capital

DATE

DESCRIPTION

ACCOUNT NO.

POST. REF. DEBIT

BALANCE CREDIT DEBIT

2016 Dec.

1 Balance 31 Closing 31 Closing

 J4 J4

#

99 9 0 0 00 10 8 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-36

CREDIT 172 3 5 0 00 272 2 5 0 00 261 4 5 0 00


PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Taylor Jackson, Drawing

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

POST. REF.

ACCOUNT NO.

DEBIT

 J4

CREDIT

10 8 0 0 00

ACCOUNT Income Summary

DATE DESCRIPTION 2016 Dec. 31 Closing 31 Closing 31 Closing

DEBIT

J4 J4 J4

62 1 0 0 00 99 9 0 0 00

CREDIT

10 8 0 0 00 −0−

162 0 0 0 00 99 9 0 0 00 −0−

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

399

BALANCE DEBIT CREDIT

162 0 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

302

401

BALANCE DEBIT CREDIT

162 0 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-37

162 0 0 0 00 −0−


PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Advertising Expense

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

9 9 0 0 00

9 9 0 0 00 −0−

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

POST. REF.

DEBIT

 J4

ACCOUNT NO.

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

CREDIT

2 7 0 0 00

2 7 0 0 00 −0−

ACCOUNT NO.

DEBIT

 J4

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

CREDIT

6 3 0 0 00

6 3 0 0 00 −0−

ACCOUNT NO.

 J4

DEBIT

517

BALANCE DEBIT CREDIT

ACCOUNT Salaries Expense POST. REF.

514

BALANCE DEBIT CREDIT

ACCOUNT Rent Expense POST. REF.

511

CREDIT

32 4 0 0 00

519

BALANCE DEBIT CREDIT 32 4 0 0 00 −0−

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-38


PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Dec. 31 Balance 31 Closing

Analyze:

ACCOUNT NO.

Utilities Expense POST. REF.  J4

DEBIT

CREDIT

10 8 0 0 00

523

BALANCE DEBIT CREDIT 10 8 0 0 00 −0−

Fees Income, Income Summary, Taylor Jackson—Capital, Taylor Jackson—Drawing, Advertising, Depreciation, Rent, Salaries, and Utilities Expense.

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-39


PROBLEM 6.4B Christopher Cobb, CPA Worksheet Month Ended June 30, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Computers 5 Accumulated Depreciation—Computers 6 Accounts Payable 7 Christopher Cobb, Capital 8 Christopher Cobb, Drawing 9 Fees Income 10 Salaries Expense 11 Supplies Expense 12 Depreciation Expense—Computers 13 Travel Expense 14 Utilities Expense 15 Totals

TRIAL BALANCE DEBIT CREDIT 63 9 0 0 00 22 6 8 0 00 31 5 0 0 00 57 6 0 0 00 5 7 6 0 00 25 2 0 0 00 124 4 7 0 00 24 0 0 0 00 135 9 0 0 00 75 4 5 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 5 4 0 0 00 (b)

4 8 0 00

(a) 5 4 0 0 00 (b) 4 8 0 00 10 8 0 0 00 5 4 0 0 00 291 3 3 0 00 291 3 3 0 00

5 8 8 0 00

16 Net Income 17 18

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-40

5 8 8 0 00


PROBLEM 6.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 63 9 0 0 00 22 6 8 0 00 26 1 0 0 00 57 6 0 0 00 6 2 4 0 00 25 2 0 0 00 124 4 7 0 00 24 0 0 0 00 135 9 0 0 00 75 4 5 0 00 5 4 0 0 00 4 8 0 00 10 8 0 0 00 5 4 0 0 00

75 4 5 0 00 5 4 0 0 00 4 8 0 00 10 8 0 0 00 5 4 0 0 00

291 8 1 0 00

97 5 3 0 00

291 8 1 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 63 9 0 0 00 22 6 8 0 00 26 1 0 0 00 57 6 0 0 00 6 2 4 0 00 25 2 0 0 00 124 4 7 0 00 24 0 0 0 00

135 9 0 0 00

135 9 0 0 00

194 2 8 0 00 155 9 1 0 00

15

38 3 7 0 00

16

194 2 8 0 00 194 2 8 0 00

17

38 3 7 0 00 135 9 0 0 00

135 9 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14

18

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-41


PROBLEM 6.4B (continued) PAGE

GENERAL JOURNAL

DATE 1 2 2016 3 Jun. 4 5 6 7 8 9 10 11 12 13

DESCRIPTION Adjusting Entries

POST. REF.

DEBIT

30 Supplies Expense Supplies

517 121

5 4 0 0 00

30 Depreciation Expense—Computers Accumulated Depreciation—Computers

523 142

4 8 0 00

1 2 2016 3 Jun. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

DESCRIPTION Closing Entries

CREDIT

4 8 0 00

PAGE POST. REF.

1 2 3 4 5 6 7 8 9 10 11 12 13

5 4 0 0 00

GENERAL JOURNAL

DATE

3

DEBIT

30 Fees Income Income Summary

401 309

135 9 0 0 00

30 Income Summary Salaries Expense Supplies Expense Depreciation Expense—Computers Travel Expense Utilities Expense

309 511 517 523 519 514

97 5 3 0 00

30 Income Summary Christopher Cobb, Wilson, Capital

309 301

38 3 7 0 00

30 Christopher Cobb, Capital Christopher Cobb, Drawing

301 302

24 0 0 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-42

4

CREDIT 1 2 3 135 9 0 0 0000 4 5 6 75 4 5 0 00 7 5 4 0 0 00 8 4 8 0 00 9 10 8 0 0 00 10 5 4 0 0 00 11 12 13 38 3 7 0 00 14 15 16 24 0 0 0 00 17 18


PROBLEM 6.4B (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Adjusting

ACCOUNT

POST. REF.

DEBIT

 J3

CREDIT

BALANCE DEBIT CREDIT

ACCOUNT NO.

POST. REF.

121

31 5 0 0 00 5 4 0 0 00 26 1 0 0 00

Computers

DATE DESCRIPTION 2016 Jun. 30 Balance

ACCOUNT

ACCOUNT NO.

Supplies

DEBIT

CREDIT

131

BALANCE DEBIT CREDIT 57 6 0 0 00

Accumulated Depreciation—Computers

ACCOUNT NO.

POST. DESCRIPTION REF.

BALANCE DEBIT CREDIT

DATE 2016 Jun. 30 Balance 30 Adjusting

 J3

DEBIT

CREDIT

4 8 0 00

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142

5 7 6 0 00 6 2 4 0 00


PROBLEM 6.4B (continued) ACCOUNT

ACCOUNT NO.

Christopher Cobb, Capital

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Closing 30 Closing

POST. REF.  J4 J4

DEBIT

CREDIT

301

BALANCE DEBIT CREDIT 124 4 7 0 00 162 8 4 0 00 138 8 4 0 00

38 3 7 0 00 24 0 0 0 00

GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Closing

ACCOUNT

ACCOUNT NO.

Christopher Cobb, Drawing POST. REF.

DEBIT

 J4

CREDIT

24 0 0 0 00

DATE DESCRIPTION 2016 Jun. 30 Closing 30 Closing 30 Closing

BALANCE DEBIT CREDIT 24 0 0 0 00 −0−

ACCOUNT NO.

Income Summary POST. REF. J4 J4 J4

DEBIT

CREDIT

302

309

BALANCE DEBIT CREDIT

135 9 0 0 00 97 5 3 0 00 38 3 7 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-44

135 9 0 0 00 38 3 7 0 00 −0−


PROBLEM 6.4B (continued) ACCOUNT Fees Income

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT 135 9 0 0 00 −0−

135 9 0 0 00

ACCOUNT Salaries Expense

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

401

CREDIT

75 4 5 0 00

511

BALANCE DEBIT CREDIT 75 4 5 0 00 −0−

GENERAL LEDGER ACCOUNT Utilities Expense

DATE DESCRIPTION 2016 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.  J4

DEBIT

514

CREDIT

BALANCE DEBIT CREDIT

5 4 0 0 00

5 4 0 0 00 −0−

© 2015 McGraw-Hill Education. This is proprietary material solely for instructor use. Not authorized for sale or distribution in any manner. 6-45


PROBLEM 6.4B (continued) ACCOUNT Supplies Expense

DATE 2010 2016 Jun.

DESCRIPTION 30 Adjusting 30 Closing

ACCOUNT NO. POST. REF. J3 J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 4 0 0 00

5 4 0 0 00 −0−

5 4 0 0 00

ACCOUNT Travel Expense

DATE 2010 2016 Jun.

DESCRIPTION 30 Balance 30 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

10 8 0 0 00

ACCOUNT Depreciation Expense—Computers

DATE DESCRIPTION 2010 2016 Jun. 30 Adjusting 30 Closing

POST. REF. J3 J4

DEBIT

517

BALANCE DEBIT CREDIT 10 8 0 0 00 −0−

ACCOUNT NO.

CREDIT

4 8 0 00 4 8 0 00

519

523

BALANCE DEBIT CREDIT 4 8 0 00 −0−

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PROBLEM 6.4B (continued) Christopher Cobb, CPA Post-closing Trial Balance June 30, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Computers Accumulated Depreciation—Computers Accounts Payable Scott Wilson, Capital Totals

Analyze:

DEBIT 63 9 0 0 00 22 6 8 0 00 26 1 0 0 00 57 6 0 0 00

CREDIT

6 2 4 0 00 25 2 0 0 00 138 8 4 0 00 170 2 8 0 00 170 2 8 0 00

Net Income for Christopher Cobb , CPA for the month of June 2016 was $38,370.

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CRITICAL THINKING PROBLEM 6.1 21st Century Fashions Worksheet Month Ended December 31, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Machinery 6 Accumulated Depreciation—Machinery 7 Accounts Payable 8 Carolyn Davis, Capital 9 Carolyn Davis, Drawing 10 Fees Income 11 Supplies Expense 12 Insurance Expense 13 Salaries Expense 14 Depreciation Expense—Machinery 15 Utilities Expense 16 Totals

TRIAL BALANCE DEBIT CREDIT 81 6 0 0 00 18 0 0 0 00 14 4 0 0 00 21 6 0 0 00 168 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 7 (b) 4

2 0 0 00 8 0 0 00

(c ) 2 4 0 0 00 27 0 0 0 00 149 1 6 0 00 12 0 0 0 00 165 0 0 0 00 (a) 7 2 0 0 00 (b) 4 8 0 0 00 22 2 0 0 00 (c ) 2 4 0 0 00 3 3 6 0 00 341 1 6 0 00 341 1 6 0 00

14 4 0 0 00 00 14 4 0 0 00

17 Net Income 18 19

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CRITICAL THINKING PROBLEM 6.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 81 6 0 0 00 18 0 0 0 00 7 2 0 0 00 16 8 0 0 00 168 0 0 0 00 2 4 0 0 00 27 0 0 0 00 149 1 6 0 00 12 0 0 0 00 165 0 0 0 00 7 2 0 0 00 4 8 0 0 00 22 2 0 0 00 2 4 0 0 00 3 3 6 0 00 343 5 6 0 00

343 5 6 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 81 6 0 0 00 18 0 0 0 00 7 2 0 0 00 16 8 0 0 00 168 0 0 0 00 2 4 0 0 00 27 0 0 0 00 149 1 6 0 00 12 0 0 0 00

165 0 0 0 00 7 2 0 0 00 4 8 0 0 00 22 2 0 0 00 2 4 0 0 00 3 3 6 0 00 39 9 6 0 00

165 0 0 0 00

303 6 0 0 00 178 5 6 0 00 16

125 0 4 0 00 165 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

125 0 4 0 00 17 165 0 0 0 00

303 6 0 0 00 303 6 0 0 00 18 19

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CRITICAL THINKING PROBLEM 6.1 (continued) 21st Century Fashions Income Statement Month Ended December 31, 2016 Revenue Fees Income Expenses Supplies Expense Insurance Expense Salaries Expense Depreciation Expense—Machinery Utilities Expense Total Expenses Net Income

165 0 0 0 00 7 2 0 0 00 4 8 0 0 00 22 2 0 0 00 2 4 0 0 00 3 3 6 0 00 39 9 6 0 00 125 0 4 0 00

21st Century Fashions Statement of Owner's Equity Month Ended December 31, 2016 Carolyn Davis, Capital, December 1, 2016 Net income for December Less Withdrawals for December Increase in Capital Carolyn Davis, Capital, December 31, 2016

149 1 6 0 00 125 0 4 0 00 12 0 0 0 00

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113 0 4 0 00 262 2 0 0 00


CRITICAL THINKING PROBLEM 6.1 (continued) 21st Century Fashions Balance Sheet December 31, 2016 Assets Cash Accounts Receivable Supplies Prepaid Insurance Machinery Accumulated Depreciation—Machinery Total Assets Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Carolyn Davis, Capital Total Liabilities and Owner's Equity

81 6 18 0 7 2 16 8 168 0 2 4

0 0 00 0 0 00 0 0 00 0 0 00

0 0 00 0 0 00 165 6 0 0 00 289 2 0 0 00

27 0 0 0 00 262 2 0 0 00 289 2 0 0 00

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CRITICAL THINKING PROBLEM 6.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

POST. REF.

1 2 2016 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Depreciation Expense—Machinery 10 Accumulated Depreciation—Machinery 11

DEBIT

7 2 0 0 00

4 8 0 0 00

2 4 0 0 00

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Supplies Expense 8 Insurance Expense 9 Salaries Expense 10 Depreciation Expense—Machinery 11 Utilities Expense 12 13 31 Income Summary 14 Carolyn Davis, Capital 15 16 31 Carolyn Davis, Capital 17 Carolyn Davis, Drawing 18

CREDIT 1 2 3 7 2 0 0 00 4 5 6 4 8 0 0 00 7 8 9 2 4 0 0 00 10 11

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

3

4

CREDIT

1 2 165 0 0 0 00 3 165 0 0 0 0000 4 5 39 9 6 0 00 6 7 2 0 0 00 7 4 8 0 0 00 8 22 2 0 0 00 9 2 4 0 0 00 10 3 3 6 0 00 11 12 125 0 4 0 00 13 125 0 4 0 00 14 15 12 0 0 0 00 16 12 0 0 0 00 17 18

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CRITICAL THINKING PROBLEM 6.1 (continued) 21st Century Fashions Post-closing Trial Balance December 31, 2016 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Insurance Machinery Accumulated Depreciation—Machinery Accounts Payable Carolyn Davis, Capital

DEBIT 81 6 0 0 00 18 0 0 0 00 7 2 0 0 00 16 8 0 0 00 168 0 0 0 00

Totals

291 6 0 0 00 291 6 0 0 00

Analyze:

CREDIT

2 4 0 0 00 27 0 0 0 00 262 2 0 0 00

The net income would be $134,640.

CRITICAL THINKING PROBLEM 6.2 1. Davis made the following errors preparing the closing entries: a. Accumulated Depreciation and Accounts Payable are permanent accounts that continue from accounting period to accounting period and, consequently, are not closed. b.

The Drawing account is not an expense account to be closed to Income Summary but is a reduction of equity and is closed directly to the Capital account.

Demetria Davis closed accounts based on what kind of balance they had (debit/credit) rather than looking at the type of account (permanent/temporary) they were. Only temporary, or nominal, accounts are closed.

2.

1 2 3 4 5 6

PAGE

GENERAL JOURNAL

DATE DESCRIPTION 2016 Dec. 31 Thomas Richey, Capital Accumulated Depreciation Accounts Payable To correct errors made in closing entries

POST. REF.

DEBIT 41 5 0 0 00

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CREDIT 1 2 8 5 0 0 00 3 33 0 0 0 00 4 5 6


CRITICAL THINKING PROBLEM 6.2 (continued) 3. The proof of this entry is: Fees Income Expenses: Salaries Expense Supplies Expense Depreciation Expense Net Income Withdrawals Increase in Capital Capital, Beginning Capital, Ending

98,000 78,000 5,000 2,400

Capital account balance in general ledger Less debit from correcting entry Corrected ending Capital balance

85,400 12,600 (7,000) 5,600 50,000 55,600 97,100 (41,500) 55,600

Note: It is not necessary to make an entry to correct the closing of the Drawing account to the Income Summary account. Closing the Drawing account to the Income Summary account, which in turn was closed to the Capital account, results in reducing the Capital account by the amount of the withdrawals. So, while incorrect, Davis’s entry with regard to Drawing achieves the correct end result.

The balance of the Capital account after closing entries have been posted must agree with the ending Capital balance as shown. Posting the entry closing the Income Summary account increases the Capital account by the amount of the net income (or decreases it by the amount of a net loss), while posting the entry closing the Drawing account decreases the Capital account. These postings reflect the same changes to Capital that are shown on the statement of owner’s equity and on the balance sheet, and therefore, the ending Capital amount must be the same for both. Note that the errors Davis made in preparing the closing entries would not be revealed by the post-closing trial balance. Since each entry Davis made had equal debits and credits, the post-closing trial balance would be in balance. The errors would not become evident until the next year when postings were made to the Accumulated Depreciation and Accounts Payable accounts or when the ledger account balances were compared to the balance sheet amounts.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. No. A thorough analysis of the components of the income statement would reveal how costs directly impact net income. The balance sheet helps determine the amount of the firm’s assets and its liquidity, liabilities, and equity. 2. Current assets compared with current liabilities. 3. Timely preparation of financial statements support future planning, prompt payment of debts, developing effective credit policies. 4. The income statement might help determine the adequacy of profit, how to improve revenue and hold down expenses, how to reduce expenses without decreasing revenue, and how to even out the business operating cycle. Balance sheet data might influence decisions concerning growth of equity, the return on investment, adequacy of the firm’s assets, whether collections on accounts receivable should be accelerated, and whether more capital is needed. Ethical Dilemma: You should wait to verify the invoice is an actual invoice. At the end of the year, Miscellaneous Expense will be closed and the $2,000 expense will be in the previous year and not given the verification it so badly needs. Financial Statement Analysis: 1. Dr. Inc. Summ., $8,299,000; Cr. Labor and Fringe, $3,020,000; Cr. Materials, Supplies, and Other $2,156,000; Cr. Depreciation, $1,059,000; Cr. Fuel, $1,672,000; Cr. Equipment & Other Rents, $392,000 2. Dr. Revenue $11,756,000; Cr. Inc. Summ., $11,756,000 Analyze Online: Answers will vary depending on the year. Teamwork: 1) Analyze transactions, 2) journalize the data about transactions, 3) post the data about transactions, 4) prepare a worksheet, 5) prepare financial statements, 6) record adjusting entries, 7) record closing entries, 8) prepare a post-closing trial balance, and 9) interpret the financial information. Internet Connection: 1. Requirements Experience: At least 2 years full-time experience or the part-time or freelance equivalent. 2. Examination: Candidates must pass a 4-part national examination, including 2 parts given at any Prometric Test Center (there are over 300 nationwide). 3. Code of Ethics: Applicants must sign a Code of Ethics.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. FALSE 2. TRUE 3. FALSE 4. TRUE 5. FALSE 6. FALSE 7. TRUE 8. FALSE 9. FALSE 10. TRUE Part B Matching 1. d 2. c 3. e 4. b 5. a

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MINI-PRACTICE SET 1 SERVICE BUSINESS ACCOUNTING CYCLE PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2017 2 Jan. 2 Supplies 3 Cash 4 Bought supplies for cash, Check 1015 5 6 2 Prepaid Insurance 7 Cash 8 Purchased one year of insurance, Check 1016 9 10 7 Cash 11 Accounts Receivable 12 Fees Income 13 Performed services for cash and on account 14 15 12 Cash 16 Accounts Receivable 17 Received cash on account 18 19 12 Advertising Expense 20 Cash 21 Paid for advertising on radio, Check 1017 22 23 13 Cash 24 Accounts Receivable 25 Received cash on account 26 27 14 Cash 28 Supplies 29 Returned damaged supplies for cash refund 30 31 15 Cash 32 Accounts Receivable 33 Fees Income 34 Performed services for cash and on account 35

POST. REF.

DEBIT

121 101

6 0 0 0 00

134 101

7 2 0 0 00

101 111 401

20 0 0 0 00 4 0 0 0 00

101 111

4 0 0 0 00

526 101

3 2 0 0 00

101 111

3 5 0 0 00

101 121

6 5 0 00

101 111 401

20 7 0 0 00 2 3 0 0 00

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3

CREDIT 1 2 6 0 0 0 00 3 4 5 6 7 2 0 0 00 7 8 9 10 11 24 0 0 0 00 12 13 14 15 4 0 0 0 00 16 17 18 19 3 2 0 0 00 20 21 22 23 3 5 0 0 00 24 25 26 27 6 5 0 00 28 29 30 31 32 23 0 0 0 00 33 34 35


MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2017 2 Jan. 20 Supplies 3 Accounts Payable 4 Bought supplies on account 5 6 20 Cash 7 Accounts Receivable 8 Fees Income 9 Performed services for cash and on account 10 11 20 Cash 12 Accounts Receivable 13 Performed services for cash and on account 14 15 21 Maintenance Expense 16 Cash 17 Paid for maintenance on equipment 18 Check 1018 19 20 22 Advertising Expense 21 Cash 22 Paid cash for newspaper ads, Check 1019 23 24 23 Telephone Expense 25 Cash 26 Paid monthly telephone bill, Check 1020 27 28 26 Cash 29 Accounts Receivable 30 Received cash on account 31 32 27 Accounts Payable 33 Cash 34 Made payment to creditor, Check 1021 35 36 37

POST. REF. 121 202

101 111 401

101 111

529 101

526 101

532 101

101 111

202 101

DEBIT

4

CREDIT

1 4 6 0 0 00 2 4 6 0 0 00 3 4 5 12 5 0 0 00 6 3 3 5 0 00 7 15 8 5 0 00 8 9 10 4 5 0 0 00 11 4 5 0 0 00 12 13 14 6 0 7 5 00 15 6 0 7 5 00 16 17 18 19 3 2 0 0 00 20 3 2 0 0 00 21 22 23 9 2 5 00 24 9 2 5 00 25 26 27 1 6 0 0 00 28 1 6 0 0 00 29 30 31 3 0 0 0 00 32 3 0 0 0 00 33 34 35 36 37

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MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2017 28 Utilities Expense 2 Jan. Cash 3 Paid monthly utility bill, Check 1022 4 5 29 Cash 6 Accounts Receivable 7 Fees Income 8 Performed services for cash and on account 9 10 31 Salaries Expense 11 Cash 12 Paid monthly salaries, Checks 1023–1027 13 14 31 Carolyn Wells, Drawing 15 Cash 16 Owner withdrew cash for personal use, 17 Check 1028 18 19 31 Maintenance Expense 20 Cash 21 Paid for monthly maintenance services, 22 Check 1029 23 24 31 Equipment 25 Cash 26 Accounts Payable 27 Bought equipment for cash and on account, 28 Check 1030 29 30 31 Cash 31 Accounts Receivable 32 Fees Income 33 Performed services for cash and on account 34 35 36 37

POST. REF. 514 101

DEBIT 2 3 5 0 00

101 111 401

19 0 0 0 00 2 7 5 0 00

511 101

25 7 5 0 00

302 101

15 0 0 0 00

529 101

4 1 5 0 00

141 101 202

15 0 0 0 00

101 111 401

5 6 0 0 00 1 5 8 0 00

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5

CREDIT 1 2 3 5 0 00 2 3 4 5 6 21 7 5 0 00 7 8 9 10 25 7 5 0 00 11 12 13 14 15 0 0 0 00 15 16 17 18 19 4 1 5 0 00 20 21 22 23 24 10 0 0 0 00 25 5 0 0 0 00 26 27 28 29 30 31 7 1 8 0 00 32 33 34 35 36 37


MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2017 3 Jan. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Rent Expense 10 Prepaid Rent 11 12 31 Depreciation Expense—Equipment 13 Accumulated Depreciation—Equipment 14 15 Closing Entries 16 17 31 Fees Income 18 Income Summary 19 20 31 Income Summary 21 Salaries Expense 22 Utilities Expense 23 Supplies Expense 24 Rent Expense 25 Depreciation Expense—Equipment 26 Advertising Expense 27 Maintenance Expense 28 Telephone Expense 29 Insurance Expense 30 31 31 Income Summary 32 Carolyn Wells, Capital 33 34 31 Carolyn Wells, Capital 35 Carolyn Wells, Drawing 36

POST. REF.

DEBIT

517 121

6 7 5 0 00

535 134

6 0 0 00

520 137

4 0 0 0 00

523 142

1 8 3 00

401 309

91 7 8 0 00

309 511 514 517 520 523 526 529 532 535

57 1 8 3 00

309 301

34 5 9 7 00

301 302

15 0 0 0 00

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6

CREDIT 1 2 3 6 7 5 0 00 4 5 6 6 0 0 00 7 8 9 4 0 0 0 00 10 11 12 1 8 3 00 13 14 15 16 17 91 7 8 0 00 18 19 20 25 7 5 0 00 21 2 3 5 0 00 22 6 7 5 0 00 23 4 0 0 0 00 24 1 8 3 00 25 6 4 0 0 00 26 10 2 2 5 00 27 9 2 5 00 28 6 0 0 00 29 30 31 34 5 9 7 00 32 33 34 15 0 0 0 00 35 36


MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Cash

DATE DESCRIPTION 2017 Jan. 1 Balance 2 2 7 12 12 13 14 15 20 20 21 22 23 26 27 28 29 31 31 31 31 31

POST. REF. ✔ J3 J3 J3 J3 J3 J3 J3 J4 J4 J4 J4 J4 J4 J4 J5 J5 J5 J5 J5 J5 J5 J5

DEBIT

CREDIT

6 0 0 0 00 7 2 0 0 00 20 0 0 0 00 4 0 0 0 00 3 2 0 0 00 3 5 0 0 00 6 5 0 00 20 7 0 0 00 12 5 0 0 00 4 5 0 0 00 6 0 7 5 00 3 2 0 0 00 9 2 5 00 1 6 0 0 00 3 0 0 0 00 2 3 5 0 00 19 0 0 0 00 25 7 5 0 00 15 0 0 0 00 4 1 5 0 00 10 0 0 0 00 5 6 0 0 00

101

BALANCE DEBIT CREDIT 111 3 5 0 00 105 3 5 0 00 98 1 5 0 00 118 1 5 0 00 122 1 5 0 00 118 9 5 0 00 122 4 5 0 00 123 1 0 0 00 143 8 0 0 00 156 3 0 0 00 160 8 0 0 00 154 7 2 5 00 151 5 2 5 00 150 6 0 0 00 152 2 0 0 00 149 2 0 0 00 146 8 5 0 00 165 8 5 0 00 140 1 0 0 00 125 1 0 0 00 120 9 5 0 00 110 9 5 0 00 116 5 5 0 00

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MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2017 Jan. 1 Balance 7 12 13 15 20 20 26 29 31

ACCOUNT

ACCOUNT NO.

Accounts Receivable POST. REF. ✔ J3 J3 J3 J4 J4 J4 J4 J5 J5

DEBIT

CREDIT

4 0 0 0 00 4 0 0 0 00 3 5 0 0 00 2 3 0 0 00 3 3 5 0 00 4 5 0 0 00 1 6 0 0 00 2 7 5 0 00 1 5 8 0 00

111

BALANCE DEBIT CREDIT 5 0 9 0 5 0 1 5 3 8 7 1 2 6 1 0 3 8 5 3

0 0 0 0 0 5 5 5 0 8

0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00

Supplies

ACCOUNT NO.

POST. DESCRIPTION REF.

BALANCE DEBIT CREDIT

DATE 2017 Jan. 1 Balance 2 14 20 31 Adjusting

✔ J3 J3 J4 J6

DEBIT

6 0 0 0 00 4 6 0 0 00

CREDIT

1 0 7 0 6 5 0 00 6 3 10 9 6 7 5 0 00 4 2

0 0 5 5 0

0 00 0 00 0 00 0 00 0 00

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121


MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Accounts Payable

POST. DATE DESCRIPTION REF. 2017 Jan. 1 Balance ✔ 20 J4 27 J5 31 J5

ACCOUNT

CREDIT

DATE 2017 Jan. 1 Balance 31 Closing 31 Closing

✔ J6 J6

Carolyn Wells, Drawing

BALANCE DEBIT CREDIT 3 5 0 0 00 8 1 0 0 00 5 1 0 0 00 10 1 0 0 00

4 6 0 0 00 3 0 0 0 00 5 0 0 0 00

ACCOUNT NO.

Carolyn Wells, Capital POST. DESCRIPTION REF.

ACCOUNT

DEBIT

DEBIT

CREDIT

202

301

BALANCE DEBIT CREDIT 128 6 6 7 00 163 2 6 4 00 148 2 6 4 00

34 5 9 7 00 15 0 0 0 00

ACCOUNT NO.

302

BALANCE POST. DEBIT CREDIT DATE DESCRIPTION REF. DEBIT CREDIT 2017 Jan. 31 J5 15 0 0 0 00 15 0 0 0 00 31 Closing J6 15 0 0 0 00 − 0 −

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MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2017 Jan. 2 31 Adjusting

ACCOUNT

ACCOUNT NO.

Prepaid Insurance POST. REF. J3 J6

DATE 2017 Jan. 1 Balance 31 Adjusting

7 2 0 0 00 6 0 0 00

DEBIT

✔ J6

CREDIT

4 0 0 0 00

✔ J5

DEBIT

CREDIT

POST. DESCRIPTION REF. ✔ J6

DEBIT

137

BALANCE DEBIT CREDIT 4 0 0 0 00 − 0−

141

BALANCE DEBIT CREDIT 11 0 0 0 00 26 0 0 0 00

15 0 0 0 00

Accumulated Depreciation—Equipment

DATE 2017 Jan. 1 Balance 31 Adjusting

7 2 0 0 00 6 6 0 0 00

ACCOUNT NO.

Equipment

DATE 2017 Jan. 1 Balance 31

BALANCE DEBIT CREDIT

ACCOUNT NO.

POST. DESCRIPTION REF.

ACCOUNT

CREDIT

Prepaid Rent POST. DESCRIPTION REF.

ACCOUNT

DEBIT

134

ACCOUNT NO.

CREDIT

142

BALANCE DEBIT CREDIT

1 8 3 00

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1 8 3 00 3 6 6 00


MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Income Summary

POST. DATE DESCRIPTION REF. DEBIT CREDIT 2017 Jan. 31 Closing J6 91 7 8 0 00 31 Closing J6 57 1 8 3 00 31 Closing J6 34 5 9 7 00

ACCOUNT

POST. DESCRIPTION REF.

DATE 2017 Jan. 7 15 20 29 31 31 Closing

ACCOUNT

J3 J4 J4 J5 J5 J6

DEBIT

CREDIT

91 7 8 0 00 34 5 9 7 00 − 0 −

24 0 0 0 00 47 0 0 0 00 62 8 5 0 00 84 6 0 0 00 91 7 8 0 00 − 0 −

91 7 8 0 00

ACCOUNT NO.

POST. DESCRIPTION REF. J5 J6

DEBIT 25 7 5 0 00

CREDIT

401

BALANCE DEBIT CREDIT

24 0 0 0 00 23 0 0 0 00 15 8 5 0 00 21 7 5 0 00 7 1 8 0 00

Salaries Expense

DATE 2017 Jan. 31 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO.

Fees Income

309

511

BALANCE DEBIT CREDIT

25 7 5 0 00 25 7 5 0 00 − 0 −

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MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2017 Jan. 28 31 Closing

ACCOUNT

J5 J6

DEBIT

CREDIT

2 3 5 0 00 2 3 5 0 00

POST. REF. J6 J6

DEBIT

CREDIT

6 7 5 0 00 6 7 5 0 00

J6 J6

DEBIT

CREDIT

4 0 0 0 00 4 0 0 0 00

Depreciation Expense—Equipment

DATE DESCRIPTION 2017 Jan. 31 Adjusting 31 Closing

2 3 5 0 00 − 0 −

POST. REF. J6 J6

DEBIT

517

BALANCE DEBIT CREDIT 6 7 5 0 00 − 0 −

ACCOUNT NO. POST. REF.

514

BALANCE DEBIT CREDIT

ACCOUNT NO.

Rent Expense

DATE DESCRIPTION 2017 Jan. 31 Adjusting 31 Closing

ACCOUNT

POST. REF.

Supplies Expense

DATE DESCRIPTION 2017 Jan. 31 Adjusting 31 Closing

ACCOUNT

ACCOUNT NO.

Utilities Expense

520

BALANCE DEBIT CREDIT 4 0 0 0 00 − 0 −

ACCOUNT NO.

523

CREDIT

BALANCE DEBIT CREDIT

1 8 3 00

1 8 3 00 − 0 −

1 8 3 00

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MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2017 Jan. 12 22 31 Closing

ACCOUNT

J3 J4 J6

DEBIT

CREDIT

3 2 0 0 00 3 2 0 0 00 6 4 0 0 00

POST. REF. J4 J5 J6

DEBIT 6 0 7 5 00 4 1 5 0 00

CREDIT

J4 J6

DEBIT

BALANCE DEBIT CREDIT

CREDIT

9 2 5 00

9 2 5 00 − 0 −

9 2 5 00

J6 J6

DEBIT

532

BALANCE DEBIT CREDIT

ACCOUNT NO.

POST. REF.

529

6 0 7 5 00 10 2 2 5 00 10 2 2 5 00 − 0 −

Insurance Expense

DATE DESCRIPTION 2017 Jan. 31 Adjusting 31 Closing

3 2 0 0 00 6 4 0 0 00 − 0 −

ACCOUNT NO.

POST. REF.

526

BALANCE DEBIT CREDIT

ACCOUNT NO.

Telephone Expense

DATE DESCRIPTION 2017 Jan. 23 31 Closing

ACCOUNT

POST. REF.

Maintenance Expense

DATE DESCRIPTION 2017 Jan. 21 31 31 Closing

ACCOUNT

ACCOUNT NO.

Advertising Expense

535

CREDIT

BALANCE DEBIT CREDIT

6 0 0 00

6 0 0 00 − 0 −

6 0 0 00

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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Worksheet Month Ended January 31, 2017

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Prepaid Rent 6 Equipment 7 Accumulated Depreciation—Equipment 8 Accounts Payable 9 Carolyn Wells, Capital 10 Carolyn Wells, Drawing 11 Income Summary 12 Fees Income 13 Salaries Expense 14 Utilities Expense 15 Supplies Expense 18 Insurance Expense 16 Rent Expense 17 Depreciation Expense—Equipment 19 Advertising Expense 20 Telephone Expense 21 Maintenance Expense 22 Totals

TRIAL BALANCE DEBIT CREDIT 116 5 5 0 00 5 3 8 0 00 10 9 5 0 00 7 2 0 0 00 4 0 0 0 00 26 0 0 0 00 1 8 3 00

ADJUSTMENTS DEBIT CREDIT

(a) 6 7 5 0 00 (b) 6 0 0 00 (c) 4 0 0 0 00 (d)

1 8 3 00

10 1 0 0 00 128 6 6 7 00 15 0 0 0 00 91 7 8 0 00 25 7 5 0 00 2 3 5 0 00 (a) 6 (b) (c) 4 (d)

7 5 0 00 6 0 0 00 0 0 0 00 1 8 3 00

6 4 0 0 00 9 2 5 00 10 2 2 5 00 230 7 3 0 00

230 7 3 0 00

11 5 3 3 00

23 Net Income 24 25

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11 5 3 3 00


MINI-PRACTICE SET 1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 116 5 5 0 00 5 3 8 0 00 4 2 0 0 00 − 0 − 6 6 0 0 00 26 0 0 0 00 3 6 6 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 116 5 5 0 00 5 3 8 0 00 4 2 0 0 00 − 0 − 6 6 0 0 00 26 0 0 0 00 3 6 6 00

10 1 0 0 00 128 6 6 7 00 15 0 0 0 00

25 7 5 0 00 2 3 5 0 00 6 7 5 0 00 4 0 0 0 00 1 8 3 00 6 0 0 00 6 4 0 0 00 9 2 5 00 10 2 2 5 00 230 9 1 3 00

10 1 0 0 00 128 6 6 7 00

8 9 10 11 12 13 14 15 16 17 18 19 20 21

139 1 3 3 00

22

34 5 9 7 00

23

173 7 3 0 00

24

15 0 0 0 00 91 7 8 0 00

91 7 8 0 00 25 7 5 0 00 2 3 5 0 00 6 7 5 0 00 4 0 0 0 00 1 8 3 00 6 0 0 00 6 4 0 0 00 9 2 5 00 10 2 2 5 00

230 9 1 3 00

57 1 8 3 00

91 7 8 0 00

173 7 3 0 00

34 5 9 7 00 91 7 8 0 00

91 7 8 0 00

173 7 3 0 00

1 2 3 4 5 6 7

25

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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Income Statement Month Ended January 31, 2017 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Rent Expense Insurance Expense Depreciation Expense—Equipment Advertising Expense Telephone Expense Maintenance Expense Total Expenses Net Income

91 7 8 0 00 25 7 5 0 00 2 3 5 0 00 6 7 5 0 00 4 0 0 0 00 6 0 0 00 1 8 3 00 6 4 0 0 00 9 2 5 00 10 2 2 5 00 57 1 8 3 00 34 5 9 7 00

Wells’ Consulting Services Statement of Owner's Equity Month Ended January 31, 2017 Carolyn Wells, Capital, January 1, 2017 Net Income for January Less Withdrawals for January Increase in Capital for January Carolyn Wells, Capital, January 31, 2017

128 6 6 7 00 34 5 9 7 00 15 0 0 0 00

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19 5 9 7 00 148 2 6 4 00


MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Balance Sheet January 31, 2017 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Less Accumulated Depreciation—Equipment Total Assets

116 5 5 0 00 5 3 8 0 00 4 2 0 0 00 6 6 0 0 00 26 0 0 0 00 3 6 6 00

25 6 3 4 00 158 3 6 4 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Carolyn Wells, Capital Total Liabilities and Owner's Equity

10 1 0 0 00 148 2 6 4 00 158 3 6 4 00

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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Post-closing Trial Balance January 31, 2017 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Carolyn Wells, Capital Totals

Analyze:

DEBIT 116 5 5 0 00 5 3 8 0 00 4 2 0 0 00 6 6 0 0 00 26 0 0 0 00

CREDIT

3 6 6 00 10 1 0 0 00 148 2 6 4 00 158 7 3 0 00 158 7 3 0 00

a. Total assets increased by $26,197 ($158,364 – $132,167). Total liabilities increased by $6,600 ($10,100 – $3,500). Owner’s capital increased by $19,597 ($148,264 – 128,667). b. The balance of Cash increased by $5,200 ($116,550 – $111,350). The balance of Accounts Receivable increased by $380 ($5,380 – $5,000). c. Yes. The firm’s financial position improved through the increases in capital of $19,597 ($148,264 – $128,667).

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CHAPTER 7 ACCOUNTING FOR SALES, ACCOUNTS RECEIVABLE, AND CASH RECEIPTS Chapter Opener: Thinking Critically It is common practice for stores to offer trade and/or cash discounts to its customers. For example, if a store purchases larger quantities of goods then Kellogg may offer it a trade discount based on the size of its order. It may also offer a store an early payment discount if the store pays its balance owed within a certain period of time. In this way, Kellogg can increase its volume of sales as well as collect more quickly, the amounts owed from its customers.

Fast Facts • Kellogg offers more than 1,600 products, which are produced in 18 countries and marketed in over 180 countries. • Kellogg's employs over 31,000 people. • As of 2012, the North America frozen food business alone generates $1 billion in revenues. • Kellogg's business in Latin America, Asia, South Africa, Mediterranean and Russia reached $2 billion in 2012, which is a 140% increase since 2001. Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Retail: sell goods directly to consumers. Wholesale: sell goods to retailers. Net sales are sales, less sales returns and allowances and less sales discounts. Prove balances, summarize receivables. Separate record of returns and allowances. Contra revenue account. Contra revenue account. Time of sale; Sales Tax Payable. Divide total of Sales account by 105 percent, multiply by sales tax rate. a. Debit Accounts Receivable, credit Sales, b. Debit Accounts Receivable from Credit Card Companies, credit Sales.of credit card sales submitted to the credit card company for payment. Summaries The credit card company. No responsibility for collecting cash from customer exists. Credit Card Expense. Purchase amount to be paid at a later date. A reduction from the list price, offered by wholesalers; attracts customers.

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EXERCISE 7.1 Cr Sales Dr Sales Returns and Allowances Dr Sales Discounts

Dr Credit Card Expense Cr Sales Tax Payable

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EXERCISE 7.2 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2016 2 June 5 Accounts Receivable 3 Sales 4 Sold merchandise on account to Mahonga Company, 5 Sales Slip 1200, terms n/30 6 7 15 Cash 8 Sales 9 Recorded cash sales 10 11 30 Cash 12 Accounts Receivable 13 Received cash from Mahonga Company on account 14

DEBIT

8 7 5 00

1 8 4 0 00

8 7 5 00

1

CREDIT 1 2 8 7 5 00 3 4 5 6 7 1 8 4 0 00 8 9 10 11 8 7 5 00 12 13 14

EXERCISE 7.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 May 1 Accounts Receivable ($2,000 + $160) 3 Sales 4 Sales Tax Payable ($2,000 x 8%) 5 Sold merchandise on credit to Bill Walker, 6 Sales Slip 1015, terms n/30 7 8 15 Cash ($4,800 + $384) 9 Sales 10 Sales Tax Payable ($4,800 x 8%) 11 Recorded cash sales 12 13 31 Cash 14 Accounts Receivable 15 Received payment on account from Bill Walker 16

Post Ref.

DEBIT

2 1 6 0 00

5 1 8 4 00

2 1 6 0 00

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1

CREDIT 1 2 2 0 0 0 00 3 1 6 0 00 4 5 6 7 8 4 8 0 0 00 9 3 8 4 00 10 11 12 13 2 1 6 0 00 14 15 16


EXERCISE 7.4 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 April 2 Cash ($1,500 + $120) 3 Sales 4 Sales Tax Payable ($1,500 x 8%) 5 Recorded cash sales 6 7 3 Sales Returns and Allowances 8 Sales Tax Payable ($150 x 8%) 9 Cash ($150 + $12) 10 Recorded sales return 11 12 4 Accounts Receivable ($1,050 + $84) 13 Sales 14 Sales Tax Payable ($1,050 × 8%) 15 Sold merchandise on credit to Tisha Lee, 16 Sales Slip 908, terms n/30 17 18 6 Sales Returns and Allowances 19 Sales Tax Payable ($75 x 8%) 20 Accounts Receivable ($75+ $6) 21 Accept a return of defective merchandise, Credit 22 Memorandum 302; original sale made on 23 Sales Slip 908 to Tisha Lee on April 4 24 25 30 Cash ($1,134 - $81) 26 Accounts Receivable 27 Received cash from Tisha Lee, after deducting 28 Credit Memorandum 302 29

Post Ref.

DEBIT

1 6 2 0 00

1 5 0 00 1 2 00

1 1 3 4 00

7 5 00 6 00

1 0 5 3 00

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1

CREDIT 1 2 1 5 0 0 00 3 1 2 0 00 4 5 6 7 8 1 6 2 00 9 10 11 12 1 0 5 0 00 13 8 4 00 14 15 16 17 18 19 8 1 00 20 21 22 23 24 25 1 0 5 3 00 26 27 28 29


EXERCISE 7.5 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 2 Credit Card Expense ($3,800 + $304) × 2% 3 Cash ($3,800 + $304 - $82.08) 4 Sales 5 Sales Tax Payable ($3,800 × 8%) 6 Record sales to customers using bank credit cards 7 8 15 Accounts Receivable ($2,100 + $168) 9 Sales 10 Sales Tax Payable ($2,100 × 8%) 11 Record sales to customers using American Express 12 13 20 Credit Card Expense ($2,268 × 3%) 14 Cash ($2,268 - $68.04) 15 Accounts Receivable 16 Record payment received from American Express 17

Post Ref.

DEBIT

8 2 08 4 0 2 1 92

2 2 6 8 00

6 8 04 2 1 9 9 96

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1

CREDIT 1 2 3 3 8 0 0 00 4 3 0 4 00 5 6 7 8 2 1 0 0 00 9 1 6 8 00 10 11 12 13 14 2 2 6 8 00 15 16 17


EXERCISE 7.6 1. 2. 3.

$512 ($640 × 20% = $128; $640 - $128 = $512) $444 ($740 × 40% = $296; $740 - $296 = $444) $224 ($320 × 30% = $96; $320 - $96 = $224)

EXERCISE 7.7 1.

2.

3.

List price Less first discount ($4,500 × 30%)

$4,500.00 1,350.00

Difference Less second discount ($3,150×20%)

$3,150.00 630.00

Invoice price

$2,520.00

List price Less first discount ($5,200 × 30%)

$5,200.00 1,560.00

Difference Less second discount ($3,640× 20%)

$3,640.00 728.00

Invoice price

$2,912.00

List price Less first discount $3,550 × 20%)

$3,550.00 710.00

Difference Less second discount ($2,840 × 10%)

$2,840.00 284.00

Invoice price

$2,556.00

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EXERCISE 7.8 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2016 2 April 1 Accounts Receivable 3 Sales 4 Sold merchandise on account to Fronke's 5 Franks, Invoice 1001, terms 1/10, n30. 6 7 10 Sales Discounts ($3,000 x 1%) 8 Cash ($3,000 - $30 discount) 9 Accounts Receivable 10 Received payment from Fronke's Franks for 11 Invoice 1001, dated April 1. 12 13

DEBIT

14

CREDIT

3 0 0 0 00 3 0

3 0 00 2 9 7 0 00 3 0

1 2 0 0 00 3 4 5 6 7 8 0 0 00 9 10 11 12 13

EXERCISE 7.9 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 8 Cash 3 Accounts Receivable/John Gibrone 4 5 6 7 8 9 10 11 12 13

Post Ref.

DEBIT

40

CREDIT

6

1 2 4 0 00 3

2

4 5 6 7 8 1 6 00 9

6 4 0 00 111

Received partial payment on account from John Gibrone 20 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Jim Garcia

2 0 0 00 1 6 00 111

Accept return of defective merchandise, Credit Memorandum 121; original sale made on Sales Slip 11102 of December 27, 2015

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10 11 12 13


EXERCISE 7.9 (continued) GENERAL LEDGER ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

Post Ref.

2016 Jan. 1 Balance 8 20

DEBIT

CREDIT

✔ J40 J40

6 4 0 00 2 1 6 00

BALANCE DEBIT CREDIT 9 8 4 0 00 9 2 0 0 00 8 9 8 4 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Jim Garcia ADDRESS DATE

DESCRIPTION

2016 Jan. 1 Balance 20

Post Ref.

DEBIT

✔ J40

CREDIT

2 1 6 00

BALANCE

2 2 6 0 00 2 0 4 4 00

NAME John Gibrone ADDRESS DATE

DESCRIPTION

2016 Jan. 1 Balance 8

Post Ref.

DEBIT

✔ J40

CREDIT

6 4 0 00

BALANCE

6 4 0 0 00 5 7 6 0 00

NAME June Lin ADDRESS DATE 2016 Jan. 1 Balance

DESCRIPTION

Post Ref.

DEBIT

CREDIT

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BALANCE

1 1 8 0 00


EXERCISE 7.10 1. Calderone Company Schedule of Accounts Receivable January 31, 2016 Jim Garcia John Gibrone June Lin Total

2 0 4 4 00 5 7 6 0 00 1 1 8 0 00 8 9 8 4 00

2. Yes, they should be equal. The balance of the Accounts Receivable control account is also $8,984.00.

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PROBLEM 7.1A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 1 Accounts Receivable/Dave Allen ($600 + $36) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Sales Sales Tax Payable ($600 × 6%) Sold merchandise on credit to Dave Allen, Sales Slip 101 4 Accounts Receivable/Castor Phan ($900 + $54) Sales Sales Tax Payable ($900 × 6%) Sold merchandise on credit to Castor Phan, Sales Slip 102 12 Accounts Receivable/Chris Hughes ($1,100 + $66) Sales Sales Tax Payable ($1,100 × 6%) Sold merchandise on credit to Chris Hughes, Sales Slip 103

Post Ref.

DEBIT

111

6 3 6 00

1 2

9 5 4 00

6 0 0 00 3 3 6 00 4 5 6 7 8

1 1 6 6 00

9 0 0 00 9 5 4 00 10 11 12 13 14

401 221

111

401 221

111

401 221

15 Cash ($7,600 + $456) Sales Sales Tax Payable ($7,600 × 6%) Record cash sales, March 1-15

101 401 221

25 Accounts Receivable/Brian Cooley ($850 + $51)

111

Sales Sales Tax Payable ($850 × 6%) Sold merchandise on credit to Brian Cooley, Sales Slip 104 28 Cash Accounts Receivable/Castor Phan

1

8 0 5 6 00

9 0 1 00

401 221

101 111

2 2 0 00

Received partial payment on account from Castor Phan

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CREDIT

1 1 0 0 00 15 6 6 00 16 17 18 19 20 7 6 0 0 00 21 4 5 6 00 22 23 24 25 8 5 0 00 26 5 1 00 27 28 29 30 31 2 2 0 00 32 33 34 35 36


PROBLEM 7.1A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 31 Cash ($4,500 + $270) 3 Sales 4 Sales Tax Payable ($4,500 × 6%) 5 Record cash sales, March 16 - 31 6 7 31 Cash 8 Accounts Receivable/Dave Allen 9 10

Post Ref.

DEBIT

101 401 221

4 7 7 0 00

101

6 3 6 00

111

Received full payment on account from Dave Allen

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2

CREDIT 1 2 4 5 0 0 00 3 2 7 0 00 4 5 6 7 6 3 6 00 8 9 10


PROBLEM 7.1A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 March 15 28 31 31

Post Ref.

DEBIT

J1 J1 J2 J2

8 0 5 6 00 2 2 0 00 4 7 7 0 00 6 3 6 00

CREDIT

8 0 5 6 00 8 2 7 6 00 13 0 4 6 00 13 6 8 2 00

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2016 March 1 4 12 25 28 31

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

6 3 6 00 9 5 4 00 1 1 6 6 00 9 0 1 00

CREDIT

2 2 0 00 6 3 6 00

2016 March 1 4 12 15 25 31

DESCRIPTION

BALANCE DEBIT CREDIT 6 3 6 00 1 5 9 0 00 2 7 5 6 00 3 6 5 7 00 3 4 7 3 00 2 8 0 1 00

ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J1 J1 J1 J1 J1 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 6 00 5 4 00 6 6 00 4 5 6 00 5 1 00 2 7 0 00

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3 6 00 9 0 00 1 5 6 00 6 1 2 00 6 6 3 00 9 3 3 00


PROBLEM 7.1A (continued) ACCOUNT NO. 401

ACCOUNT Sales DATE 2016 March 1 4 12 15 25 31

DESCRIPTION

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

CREDIT

BALANCE DEBIT CREDIT

6 0 0 00 9 0 0 00 1 1 0 0 00 7 6 0 0 00 8 5 0 00 4 5 0 0 00

Analyze: The total cash receipts during March were $13,682.

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6 0 0 00 1 5 0 0 00 2 6 0 0 00 10 2 0 0 00 11 0 5 0 00 15 5 5 0 00


PROBLEM 7.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 1 Accounts Receivable/Candy Cho ($2,400 + $168) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Sales Sales Tax Payable ($2,400 × 7%) Sold TV on credit to Candy Cho, Sales Slip 101 3 Accounts Receivable/Jim Peterson ($900 + $63) Sales Sales Tax Payable ($900 × 7%) Sold stereo equip. on credit to Jim Peterson, Sales Slip 102 7 Accounts Receivable/Bridgette Huffman ($200 + $14) Sales Sales Tax Payable ($200 × 7%) Sold microwave oven on credit to Bridgette Huffman Sales Slip 103 12 Sales Returns and Allowances Sales Tax Payable ($200 × 7%) Accounts Receivable/Jim Peterson

Post Ref.

DEBIT

111

2 5 6 8 00

1 2

9 6 3 00

2 4 0 0 00 3 1 6 8 00 4 5 6 7 8

401 221

111

401 221

111

2 1 4 00

401 221

421 221 111

2 0 0 00 1 4 00

Accepted return of defective merchandise, Credit Memorandum 101; original sale made on Sales Slip 102 of September 3 15 Cash ($10,800 + $756) Sales Sales Tax Payable ($10,800 × 7%) Record cash sales, Sept. 1-15

101 401 221

16 Accounts Receivable/Kathy Sundstrand ($500 + $35)

111

Sales Sales Tax Payable ($500 × 7%) Sold gas dryer on credit to Kathy Sundstrand, Sales Slip 104

1

11 5 5 6 00

5 3 5 00

401 221

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CREDIT

9 0 0 00 9 6 3 00 10 11 12 13 14 2 0 0 00 15 1 4 00 16 17 18 19 20 21 2 1 4 00 22 23 24 25 26 27 10 8 0 0 00 28 7 5 6 00 29 30 31 32 5 0 0 00 33 3 5 00 34 35 36 37


PROBLEM 7.2A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 17 Accounts Receivable/Mark Navalta ($2,400 + $168) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Sales Sales Tax Payable ($2,400 × 7%) Sold home entertainment system on credit to Mark Navalta, Sales Slip 105 18 Cash Accounts Receivable/Candy Cho

Post Ref.

DEBIT

111

2 5 6 8 00

401 221

101 111

7 0 0 00

Received partial payment on account from Candy Cho 20 Cash ($963 - $214) Accounts Receivable/Jim Peterson

101 111

7 4 9 00

Received payment on account from Jim Peterson for sale of Sept. 3, less return of Sept. 12. 25 Sales Returns and Allowances Sales Tax Payable ($200 × 7%) Accounts Receivable/Mark Navalta

421 221 111

2 0 0 00 1 4 00

Issued Credit Memorandum 102 due to scratches on home entertainment system 27 Cash Accounts Receivable/Bridgette Huffman

Sales Sales Tax Payable ($600 × 7%) Sold dishwasher on credit to Mark Navalta, Sales Slip 106 30 Cash Sales Sales Tax Payable ($11,100 × 7%) Record cash sales, Sept. 16 – 30

111

1 2 2 4 0 0 00 3 1 6 8 00 4 5 6 7 8 7 0 0 00 9 10 11 12 13 7 4 9 00 14 15 16 17 18 19 2 1 4 00 20

26 27 28

2 1 4 00

Received payment from Bridgette Huffman 29 Accounts Receivable/Mark Navalta

CREDIT

21 22 23 24 2 1 4 00 25

101 111

2

6 4 2 00

221

101 401 221

11 8 7 7 00

Analyze: $5,300 /$28,500 = 18.6%; 18.6% of the sales in September were for entertainment items.

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6 0 0 00 29 4 2 00 30 31 32 33 34 11 1 0 0 00 35 7 7 7 00 36 37 38


PROBLEM 7.3A GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 Sept. 15 18 20 27 30

Post Ref.

DEBIT

J1 J2 J2 J2 J2

11 5 5 6 00 7 0 0 00 7 4 9 00 2 1 4 00 11 8 7 7 00

CREDIT

11 5 5 12 2 5 13 0 0 13 2 1 25 0 9

2016 Sept. 1 3 7 12 16 17 18 20 25 27 29

DESCRIPTION

6 00 6 00 5 00 9 00 6 00

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2

2 5 6 8 00 9 6 3 00 2 1 4 00

CREDIT

2 1 4 00 5 3 5 00 2 5 6 8 00 7 0 0 00 7 4 9 00 2 1 4 00 2 1 4 00 6 4 2 00

BALANCE DEBIT CREDIT 2 5 6 3 5 3 3 7 4 3 5 3 4 0 6 6 6 3 5 9 3 5 1 8 4 9 7 4 7 5 5 3 9

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8 00 1 00 5 00 1 00 6 00 4 00 4 00 5 00 1 00 7 00 9 00


PROBLEM 7.3A (continued) ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

DESCRIPTION

2016 Sept. 1 3 7 12 15 16 17 25 29 30

Post Ref. J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 6 8 00 6 3 00 1 4 00 1 4 00 7 5 6 00 3 5 00 1 6 8 00

1 1 1 1 1

1 4 00 4 2 00 7 7 7 00

1 6 8 00 2 3 1 00 2 4 5 00 2 3 1 00 9 8 7 00 0 2 2 00 1 9 0 00 1 7 6 00 2 1 8 00 9 9 5 00

GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2016 Sept. 1 3 7 15 16 17 29 30

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2

CREDIT

2 4 0 0 00 9 0 0 00 2 0 0 00 10 8 0 0 00 5 0 0 00 2 4 0 0 00 6 0 0 00 11 1 0 0 00

2016 Sept. 12 25

DESCRIPTION

2 3 3 14 14 17 17 28

4 0 0 00 3 0 0 00 5 0 0 00 3 0 0 00 8 0 0 00 2 0 0 00 8 0 0 00 9 0 0 00

ACCOUNT NO. 421

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J2

2 0 0 00 2 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 00 4 0 0 00

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PROBLEM 7.3A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Candy Cho ADDRESS DATE

DESCRIPTION

2016 Sept. 1 Sales Slip 101 18

Post Ref.

DEBIT

J1 J2

2 5 6 8 00

Post Ref.

DEBIT

J1 J2

2 1 4 00

Post Ref.

DEBIT

J2 J2 J2

2 5 6 8 00

Post Ref.

DEBIT

J1 J1 J2

9 6 3 00

CREDIT

7 0 0 00

BALANCE

2 5 6 8 00 1 8 6 8 00

NAME Bridgette Huffman ADDRESS DATE

DESCRIPTION

2016 Sept. 7 Sales Slip 103 27

CREDIT

2 1 4 00

BALANCE

2 1 4 00 - 0 -

NAME Mark Navalta ADDRESS DATE

DESCRIPTION

2016 Sept. 17 Sales Slip 105 25 Credit Memorandum 102 29 Sales Slip 106

CREDIT

2 1 4 00 6 4 2 00

BALANCE

2 5 6 8 00 2 3 5 4 00 2 9 9 6 00

NAME Jim Peterson ADDRESS DATE

DESCRIPTION

2016 Sept. 3 Sales Slip 102 12 Credit Memorandum 101 20

CREDIT

2 1 4 00 7 4 9 00

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BALANCE

9 6 3 00 7 4 9 00 - 0 -


PROBLEM 7.3A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Kathy Sundstrand ADDRESS DATE 2016 Sept. 16 Sales Slip 104

DESCRIPTION

Post Ref.

DEBIT

J1

5 3 5 00

CREDIT

BALANCE

5 3 5 00

Exceptional Electronics Schedule of Accounts Receivable September 30, 2016 Candy Cho Bridgette Huffman Mark Navalta Jim Peterson Kathy Sundstrand Total

Analyze: The amount of sales tax owed at September 30, 2016 is $1,995.

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1 8 6 8 00 0 00 2 9 9 6 00 0 00 5 3 5 00 5 3 9 9 00


PROBLEM 7.4A PAGE

GENERAL JOURNAL DATE 1 2016 2 April 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Alto Music Center Sales Sold merchandise on credit to Alto Music Center, Invoice 3912, 1/10, n/30 3 Sales Discounts Cash Accounts Receivable/Music Supply Store

Post Ref.

DEBIT

111

4 5 0 0 00

401

452 101 111

2 0 00 1 9 8 0 00

Received payment on account from Music Supply Store, Invoice 2718 5 Cash Sales Sold merchandise for cash to a new customer

101 401

1 7 2 5 00

7 Sales Returns and Allowances Cash Issued cash refund for merchandise sold on April 5

451 101

8 0 00

8 Accounts Receivable/Music Warehouse

111

Sales Sold merchandise on credit to Music Warehouse, Invoice 3913, 2/10, n/30 10 Sales Discounts ($4,500 * 1%) Cash ($4,500 - $45) Accounts Receivable/Alto Music Center

6 5 0 0 00

401

452 101 111

4 5 00 4 4 5 5 00

Received payment on account from Alto Music Center, Invoice 3912 15 Sales Returns and Allowances Accounts Receivable/Music Warehouse

451 111

2 3 0 0 00

Accepted return of damaged merchandise, issued Credit Memorandum 105 to Music Warehouse Original sale made on Invoice 3913, April 8

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11

CREDIT 1 2 4 5 0 0 00 3 4 5 6 7 8 2 0 0 0 00 9 10 11 12 13 1 7 2 5 00 14 15 16 17 8 0 00 18 19 20 21 6 5 0 0 00 22 23 24 25 26 27 4 5 0 0 00 28 29 30 31 32 2 3 0 0 00 33 34 35 36 37


PROBLEM 7.4A (continued) DATE

GENERAL JOURNAL DESCRIPTION

1 2016 2 April 17 Sales Discounts (($6,500 - $2,300) * 2%) 3 Cash ($4,200 - $84) 4 Accounts Receivable/Music Warehouse 5 Received payment on account from 6 Music Warehouse, Invoice 3913 7 8 19 Cash 9 Accounts Receivable/Oldies Sounds 10 Received payment on account from Oldies Sounds 11 Invoice 3850 12 13 20 Accounts Receivable/Hawk Music Center 14 Sales 15 Sold merchandise on credit to Hawk Music Center, 16 Invoice 3914, 2/10, n/30 17 18 25 Accounts Receivable/Modern Sounds 19 Sales 20 Sold merchandise on credit to Modern Sounds, 21 Invoice 3915, 2/10, n/30 22 23 26 Accounts Receivable/Country Tunes 24 Sales 25 Sold merchandise on credit to Country Tunes, 26 Invoice 3916, 2/10, n/30 27 28 27 Sales Returns and Allowances 29 Accounts Receivable/Modern Sounds 30 Accepted return of damaged merchandise, issued 31 Credit Memorandum 106 to Modern Sounds. 32 Original sale made on Invoice 3915, April 25 33 34 29 Sales Discounts ($11,200 * 2%) 35 Cash ($11,200 - $224) 36 Accounts Receivable/Hawk Music Center 37 38 39

Post Ref.

1 2 3 4 2 0 0 00 4 5 6 7 8 2 3 0 0 00 9 10 11 12 13 11 2 0 0 00 14 15 16 17 18 10 8 0 0 00 19 20 21 22 23 8 6 0 0 00 24 25 26 27 28 5 0 0 00 29 30 31 32 33 34 35 11 2 0 0 00 36

37 38 39

452 101 111

111

8 4 00 4 1 1 6 00

101 111

DEBIT

2 3 0 0 00

11 2 0 0 00

401

111

10 8 0 0 00

401

111

8 6 0 0 00

401

451 111

5 0 0 00

452 101 111

2 2 4 00 10 9 7 6 00

Received payment on account, Invoice 3914 30 Accounts Receivable/Oldies Sounds

111

PAGE 12 CREDIT

3 2 0 0 00

40 Sales 401 41 Sold merchandise on credit to Oldies Sounds, 42 Invoice 3917, 2/10, n/30 43 Analyze: The amount of the cash discount taken by Hawk Music Center on April 29 was $224.

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3 2 0 0 00 40 41 42 43


PROBLEM 7.5A GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 April 1 Balance 3 5 7 10 17 19 29

Post Ref.

J11 J11 J11 J11 J12 J12 J12

DEBIT

CREDIT

1 9 8 0 00 1 7 2 5 00 8 0 00 4 4 5 5 00 4 1 1 6 00 2 3 0 0 00 10 9 7 6 00

DESCRIPTION

2016 April 1 Balance 1 3 8 10 15 17 19 20 25 26 27 29 30

27 4 0 0 00 29 3 8 0 00 31 1 0 5 00 31 0 2 5 00 35 4 8 0 00 39 5 9 6 00 41 8 9 6 00 52 8 7 2 00 ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

BALANCE DEBIT CREDIT

Post Ref.

J11 J11 J11 J11 J11 J12 J12 J12 J12 J12 J12 J12 J12

DEBIT

CREDIT DEBIT

4 5 0 0 00 2 0 0 0 00 6 5 0 0 00 4 5 0 0 00 2 3 0 0 00 4 2 0 0 00 2 3 0 0 00 11 2 0 0 00 10 8 0 0 00 8 6 0 0 00 5 0 0 00 11 2 0 0 00 3 2 0 0 00

BALANCE CREDIT

4 3 0 0 00 8 8 0 0 00 6 8 0 0 00 13 3 0 0 00 8 8 0 0 00 6 5 0 0 00 2 3 0 0 00 - 0 11 2 0 0 00 22 0 0 0 00 30 6 0 0 00 30 1 0 0 00 18 9 0 0 00 22 1 0 0 00

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EXERCISE 7.5A (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2016 April 1 5 8 20 25 26 30

Post Ref.

DEBIT

J11 J11 J11 J12 J12 J12 J12

CREDIT

4 5 0 0 00 1 7 2 5 00 6 5 0 0 00 11 2 0 0 00 10 8 0 0 00 8 6 0 0 00 3 2 0 0 00

DESCRIPTION

2016 April 7 15 27

Post Ref.

DEBIT

J11 J11 J12

8 0 00 2 3 0 0 00 5 0 0 00

CREDIT

DESCRIPTION

2016 April 3 Balance 10 17 29

BALANCE DEBIT CREDIT 8 0 00 2 3 8 0 00 2 8 8 0 00

ACCOUNT NO. 452

ACCOUNT Sales Discounts DATE

4 5 0 0 00 6 2 2 5 00 12 7 2 5 00 23 9 2 5 00 34 7 2 5 00 43 3 2 5 00 46 5 2 5 00 ACCOUNT NO. 451

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J11 J11 J12 J12

2 0 00 4 5 00 8 4 00 2 2 4 00

CREDIT

BALANCE DEBIT CREDIT 2 0 00 6 5 00 1 4 9 00 3 7 3 00

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PROBLEM 7.5A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Alto Music Center ADDRESS DATE

DESCRIPTION

2016 April 1 Invoice 3912 10

Post Ref.

DEBIT

J11 J11

4 5 0 0 00

Post Ref.

DEBIT

J12

8 6 0 0 00

Post Ref.

DEBIT

J12 J12

11 2 0 0 00

Post Ref.

DEBIT

J12 J12

10 8 0 0 00

CREDIT

BALANCE

4 5 0 0 00

4 5 0 0 00 - 0 -

CREDIT

BALANCE

NAME Country Tunes ADDRESS DATE

DESCRIPTION

2016 April 26 Invoice 3916

8 6 0 0 00

NAME Hawk Music Center ADDRESS DATE

DESCRIPTION

2016 April 20 Invoice 3914 29

CREDIT

BALANCE

11 2 0 0 00

11 2 0 0 00 - 0 -

CREDIT

BALANCE

NAME Modern Sounds ADDRESS DATE

DESCRIPTION

2016 April 25 Invoice 3915 27 Credit Memorandum 106

5 0 0 00

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10 8 0 0 00 10 3 0 0 00


PROBLEM 7.5A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Music Supply Store ADDRESS DATE

DESCRIPTION

2016 April 1 Balance 3

Post Ref.

DEBIT

✔ J11

CREDIT

BALANCE

2 0 0 0 00

2 0 0 0 00 - 0 -

CREDIT

BALANCE

2 3 0 0 00 4 2 0 0 00

6 5 0 0 00 4 2 0 0 00 - 0 -

CREDIT

BALANCE

2 3 0 0 00

2 3 0 0 00 - 0 3 2 0 0 00

NAME Music Warehouse ADDRESS DATE

DESCRIPTION

2016 April 8 Invoice 3913 15 Credit Memorandum 105 17

Post Ref.

DEBIT

J11 J11 J12

6 5 0 0 00

Post Ref.

DEBIT

NAME Oldies Sounds ADDRESS DATE 2016 April 1 Balance 19 30 Invoice 3917

DESCRIPTION

✔ J12 J12

3 2 0 0 00

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PROBLEM 7.5A (continued) Incredible Sounds Schedule of Accounts Receivable April 30, 2016 Alto Music Center Country Tunes Hawk Music Center Modern Sounds Music Supply Store Music Warehouse Oldies Sounds Total

Analyze: The total sales on account in April, prior to any returns, allowances, or discounts were $46,525.

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- 0 8 6 0 0 00 - 0 10 3 0 0 00 - 0 - 0 3 2 0 0 00 22 1 0 0 00


PROBLEM 7.6A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 1 Accounts Receivable/Beautiful Kitchens 3 Sales [$5,000 – ($5,000 × 30%)] 4 Sold crystal goods on credit to Beautiful Kitchens, 5 a wholesale customer, Invoice 5950, n/15 6 7 15 Cash ($9,500 + $760) 8 Sales 9 Sales Tax Payable ($9,500 × 8%) 10 Record cash sales, February 1 – 15 11 12 15 Credit Card Expense ($13,000 + $1,040) × 2% 13 Cash ($13,000 + $1,040 - $280.80) 14 Sales 15 Sales Tax Payable ($13,000 × 8%) 16 Record credit card sales, February 1 – 15 17 18 16 Cash 19 Accounts Receivable/Beautiful Kitchens 20 Received payment on account, Invoice 5950 21 22 16 Accounts Receivable/American Express 23 Sales 24 Sales Tax Payable ($9,000 × 8%) 25 Sold merchandise to customers using 26 American Express 27 28 17 Accounts Receivable/Incredible Bedrooms 29 Sales [$9,000 – ($9,000 × 20%)] 30 Sold a set of Roman statues on credit to 31 Incredible Bedrooms, a wholesale customer, 32 Invoice 5951, n/15 33

Post Ref.

DEBIT

121 401

3 5 0 0 00

101 401 222

10 2 6 0 00

521 101 401 222

2 8 0 80 13 7 5 9 20

101 121

3 5 0 0 00

121 401 222

9 7 2 0 00

121 401

7 2 0 0 00

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10

CREDIT 1 2 3 5 0 0 00 3 4 5 6 7 9 5 0 0 00 8 7 6 0 00 9 10 11 12 13 13 0 0 0 00 14 1 0 4 0 00 15 16 17 18 3 5 0 0 00 19 20 21 22 9 0 0 0 00 23 7 2 0 00 24 25 26 27 28 7 2 0 0 00 29 30 31 32 33


PROBLEM 7.6A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 20 Credit Card Expense ($9,720 × 3%) 3 Cash ($9,720 - $291.60) 4 Accounts Receivable/American Express 5 Received payment from American Express for 6 amount billed on February 16 7 8 27 Cash 9 Accounts Receivable/Incredible Bedrooms 10 Received payment on account, Invoice 5951 11 12 28 Cash ($7,750 + $620) 13 Sales 14 Sales Tax Payable ($7,750 × 8%) 15 Record cash sales, February 16 – 28 16 17 28 Credit Card Expense ($15,000 + $1,200) × 2% 18 Cash ($15,000 + $1,200 - $324) 19 Sales 20 Sales Tax Payable ($15,000 × 8%) 21 Record credit card sales, February 16 – 28 22 23 28 Accounts Receivable/American Express 24 Sales 25 Sales Tax Payable ($10,200 × 8%) 26 Sold merchandise to customers using 27 American Express 28

Post Ref.

DEBIT

521 101 121

2 9 1 60 9 4 2 8 40

101 121

7 2 0 0 00

101 401 222

8 3 7 0 00

521 101 401 222

3 2 4 00 15 8 7 6 00

121 401 222

11 0 1 6 00

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11

CREDIT 1 2 3 9 7 2 0 00 4 5 6 7 8 7 2 0 0 00 9 10 11 12 7 7 5 0 00 13 6 2 0 00 14 15 16 17 18 15 0 0 0 00 19 1 2 0 0 00 20 21 22 23 10 2 0 0 00 24 8 1 6 00 25 26 27 28


PROBLEM 7.6A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 Feb. 1 Balance 15 15 16 20 27 28 28

Post Ref. ✔ J10 J10 J10 J11 J11 J11 J11

DEBIT

CREDIT

23 2 3 0 00 33 4 9 0 00 47 2 4 9 20 50 7 4 9 20 60 1 7 7 60 67 3 7 7 60 75 7 4 7 60 91 6 2 3 60

10 2 6 0 00 13 7 5 9 20 3 5 0 0 00 9 4 2 8 40 7 2 0 0 00 8 3 7 0 00 15 8 7 6 00

ACCOUNT NO. 121

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2016 Feb. 1 16 16 17 20 27 28

Post Ref.

DEBIT

J10 J10 J10 J10 J11 J11 J11

3 5 0 0 00

CREDIT

3 5 0 0 00 9 7 2 0 00 7 2 0 0 00 9 7 2 0 00 7 2 0 0 00 11 0 1 6 00

2016 Feb. 15 15 16 28 28 28

DESCRIPTION

BALANCE DEBIT CREDIT 3 5 0 0 00 - 0 9 7 2 0 00 16 9 2 0 00 7 2 0 0 00 - 0 11 0 1 6 00

ACCOUNT NO. 222

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J10 J10 J10 J11 J11 J11

DEBIT

CREDIT

BALANCE DEBIT CREDIT

7 6 0 00 1 0 4 0 00 7 2 0 00 6 2 0 00 1 2 0 0 00 8 1 6 00

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7 6 0 00 1 8 0 0 00 2 5 2 0 00 3 1 4 0 00 4 3 4 0 00 5 1 5 6 00


PROBLEM 7.6A (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2016 Feb. 1 15 15 16 17 28 28 28

Post Ref.

DEBIT

J10 J10 J10 J10 J10 J11 J11 J11

CREDIT

3 5 0 0 00 9 5 0 0 00 13 0 0 0 00 9 0 0 0 00 7 2 0 0 00 7 7 5 0 00 15 0 0 0 00 10 2 0 0 00

2016 Feb. 15 20 28

DESCRIPTION

3 5 0 0 00 13 0 0 0 00 26 0 0 0 00 35 0 0 0 00 42 2 0 0 00 49 9 5 0 00 64 9 5 0 00 75 1 5 0 00

ACCOUNT NO. 521

ACCOUNT Credit Card Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J10 J10 J11

2 8 0 80 2 9 1 60 3 2 4 00

CREDIT

BALANCE DEBIT CREDIT 2 8 0 80 5 7 2 40 8 9 6 40

Analyze: The total credit card expense incurred in February is $896.40.

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PROBLEM 7.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 1 Accounts Receivable/Luis Beltazar, CPA ($600 + $30) 3 Sales 4 Sales Tax Payable ($600 × 5%) 5 Sold merchandise on credit to Luis Beltazar, CPA 6 Sales Slip 101 7 8 4 Accounts Receivable/Cervantes Consulting ($360 + $18) 9 Sales 10 Sales Tax Payable ($360 × 5%) 11 Sold merchandise on credit to Cervantes Consulting 12 Sales Slip 102 13 14 12 Accounts Receivable/Andrew Mitchell ($450 + $22.50) 15 Sales 16 Sales Tax Payable ($450 × 5%) 17 Sold merchandise on credit to Andrew Mitchell, 18 Attorney at Law, Sales Slip 103 19 20 15 Cash ($3,825 + $191.25) 21 Sales 22 Sales Tax Payable ($3,825 × 5%) 23 Record cash sales, October 1 – 15 24 25 25 Accounts Receivable/A.D. & M. Escrow ($980 + $49) 26 Sales 27 Sales Tax Payable ($980 × 5%) 28 Sold merchandise on credit to A.D. & M. Escrow, 29 Sales Slip 104 30 31 28 Cash 32 Accounts Receivable/Cervantes Consulting 33 Received partial payment on account from 34 Cervantes Consulting 35

Post Ref.

DEBIT

111 401 221

6 3 0 00

111 401 221

3 7 8 00

111 401 221

4 7 2 50

101 401 221

4 0 1 6 25

111 401 221

1 0 2 9 00

101 111

1 7 5 00

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1

CREDIT 1 2 6 0 0 00 3 3 0 00 4 5 6 7 8 3 6 0 00 9 1 8 00 10 11 12 13 14 4 5 0 00 15 2 2 50 16 17 18 19 20 3 8 2 5 00 21 1 9 1 25 22 23 24 25 9 8 0 00 26 4 9 00 27 28 29 30 31 1 7 5 00 32 33 34 35


PROBLEM 7.1B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 31 Cash ($4,350 + $217.50) 3 Sales 4 Sales Tax Payable ($4,350 × 5%) 5 Record cash sales, October 16 – 31 6 7 31 Cash 8 Accounts Receivable/Luis Beltazar, CPA 9 Received full payment on account from 10 Luis Beltazar, CPA 11

Post Ref.

DEBIT

101 401 221

4 5 6 7 50

101 111

6 3 0 00

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2

CREDIT 1 2 4 3 5 0 00 3 2 1 7 50 4 5 6 7 6 3 0 00 8 9 10 11


PROBLEM 7.1B (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 Oct. 15 28 31 31

Post Ref.

DEBIT

J1 J1 J2 J2

4 0 1 6 25 1 7 5 00 4 5 6 7 50 6 3 0 00

CREDIT

4 0 1 6 25 4 1 9 1 25 8 7 5 8 75 9 3 8 8 75

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2016 Oct. 1 4 12 25 28 31

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

6 3 0 00 3 7 8 00 4 7 2 50 1 0 2 9 00

CREDIT

1 7 5 00 6 3 0 00

2016 Oct. 1 4 12 15 25 31

DESCRIPTION

BALANCE DEBIT CREDIT 6 3 0 00 1 0 0 8 00 1 4 8 0 50 2 5 0 9 50 2 3 3 4 50 1 7 0 4 50

ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J1 J1 J1 J1 J1 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 0 00 1 8 00 2 2 50 1 9 1 25 4 9 00 2 1 7 50

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3 0 00 4 8 00 7 0 50 2 6 1 75 3 1 0 75 5 2 8 25


PROBLEM 7.1B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE 2016 Oct. 1 4 12 15 25 31

DESCRIPTION

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

CREDIT

BALANCE DEBIT CREDIT

6 0 0 00 3 6 0 00 4 5 0 00 3 8 2 5 00 9 8 0 00 4 3 5 0 00

Analyze: At October 31, $528.25 is owed for sales taxes.

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6 0 0 00 9 6 0 00 1 4 1 0 00 5 2 3 5 00 6 2 1 5 00 10 5 6 5 00


PROBLEM 7.2B PAGE

GENERAL JOURNAL DATE 1 2016 2 Nov. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Alice Chu ($550 + $33)

Post Ref. 111

Sales Sales Tax Payable ($550 × 6%) Sold a dishwasher on credit to Alice Chu, Sales Slip 101

401 221

2 Accounts Receivable/Jane Peters ($825 + $49.50) Sales Sales Tax Payable ($825 × 6%) Sold stereo equipment on credit to Jane Peters, Sales Slip 102

111

7 Accounts Receivable/Bob Huffington ($410 + $24.60) Sales Sales Tax Payable ($410 × 6%) Sold trash compactor on credit to Bob Huffington, Sales Slip 103

111

12 Sales Returns and Allowances Sales Tax Payable ($95 × 6%) Accounts Receivable/Jane Peters

DEBIT

5 8 3 00

8 7 4 50

401 221

4 3 4 60

401 221

421 221 111

9 5 00 5 70

Accept return of defective merchandise, Credit Memorandum 101; original sales made on Sales Slip 102 of November 2 15 Cash ($10,050 + $603) Sales Sales Tax Payable ($10,050 × 6%) Record cash sales, November 1 – 15

101 401 221

16 Accounts Receivable/Gina Silvestri ($550 + $33)

111

Sales Sales Tax Payable ($550 × 6%) Sold microwave oven on credit to Gina Silvestri, Sales Slip 104

10 6 5 3 00

5 8 3 00

401 221

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1

CREDIT 1 2 5 5 0 00 3 3 3 00 4 5 6 7 8 8 2 5 00 9 4 9 50 10 11 12 13 14 4 1 0 00 15 2 4 60 16 17 18 19 20 21 1 0 0 70 22 23 24 25 26 27 10 0 5 0 00 28 6 0 3 00 29 30 31 32 5 5 0 00 33 3 3 00 34 35 36 37


PROBLEM 7.2B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Nov. 17 Accounts Receivable/Dennis Newcombe ($1,375 + $82.50) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Sales Sales Tax Payable ($1,375 × 6%) Sold home entertainment system on credit to Dennis Newcombe, Sales Slip 105 18 Cash Accounts Receivable/Alice Chu

Post Ref. 111

DEBIT

1 4 5 7 50

401 221

101 111

3 2 0 00

Received partial payment on account from Alice Chu 20 Cash ($874.50 - $100.70) Accounts Receivable/Jane Peters

101 111

7 7 3 80

Received full payment on account from Jane Peters less return on November 12 24 Sales Returns and Allowances Sales Tax Payable ($120 × 6%) Accounts Receivable/Dennis Newcombe

421 221 111

1 2 0 00 7 20

Issued allowance due to scratches on home entertainment system, Credit Memorandum 102 28 Cash Accounts Receivable/Bob Huffington

Sales Sales Tax Payable ($675 × 6%) Sold gas stove on credit to Bob Huffington, Sales Slip 106

111

1 2 1 3 7 5 00 3 8 2 50 4 5 6 7 8 3 2 0 00 9 10 11 12 13 7 7 3 80 14 15 16 17 18 19 1 2 7 20 20

26 27 28

4 3 4 60

Received full payment on acct from Bob Huffington 29 Accounts Receivable/Bob Huffington

CREDIT

21 22 23 24 4 3 4 60 25

101 111

2

7 1 5 50

401 221

30 Cash 101 10 9 7 1 00 Sales 401 Sales Tax Payable ($10,350 × 6%) 221 Record cash sales, November 16 – 30 Analyze: The total amount due from Bob Huffington for the November 29 sale is $715.50.

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6 7 5 00 29 4 0 50 30 31 32 33 34 10 3 5 0 00 35 6 2 1 00 36 37


PROBLEM 7.3B GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 Nov. 15 18 20 28 30

Post Ref.

DEBIT

J1 J2 J2 J2 J2

10 6 5 3 00 3 2 0 00 7 7 3 80 4 3 4 60 10 9 7 1 00

CREDIT

10 6 5 3 00 10 9 7 3 00 11 7 4 6 80 12 1 8 1 40 23 1 5 2 40

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DESCRIPTION 2016 Nov.

1 2 7 12 16 17 18 20 24 28 29

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2

5 8 3 00 8 7 4 50 4 3 4 60

CREDIT

1 0 0 70 5 8 3 00 1 4 5 7 50 3 2 0 00 7 7 3 80 1 2 7 20 4 3 4 60 7 1 5 50

BALANCE DEBIT CREDIT 5 8 3 00 1 4 5 7 50 1 8 9 2 10 1 7 9 1 40 2 3 7 4 40 3 8 3 1 90 3 5 1 1 90 2 7 3 8 10 2 6 1 0 90 2 1 7 6 30 2 8 9 1 80

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PROBLEM 7.3B (continued) ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE 2016 Nov.

DESCRIPTION

1 2 7 12 15 16 17 24 29 30

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

CREDIT

BALANCE DEBIT CREDIT

3 3 00 4 9 50 2 4 60

3 3 00 8 2 50 1 0 7 10 1 0 1 40 7 0 4 40 7 3 7 40 8 1 9 90 8 1 2 70 8 5 3 20 1 4 7 4 20

5 70 6 0 3 00 3 3 00 8 2 50 7 20 4 0 50 6 2 1 00

GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE 2016 Nov.

DESCRIPTION

1 2 7 15 16 17 29 30

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2

CREDIT

5 5 0 00 8 2 5 00 4 1 0 00 10 0 5 0 00 5 5 0 00 1 3 7 5 00 6 7 5 00 10 3 5 0 00

2016 Nov. 12 24

DESCRIPTION

5 5 0 00 1 3 7 5 00 1 7 8 5 00 11 8 3 5 00 12 3 8 5 00 13 7 6 0 00 14 4 3 5 00 24 7 8 5 00

ACCOUNT NO. 421

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J2

9 5 00 1 2 0 00

CREDIT

BALANCE DEBIT CREDIT 9 5 00 2 1 5 00

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PROBLEM 7.3B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Alice Chu ADDRESS DATE

DESCRIPTION

2016 Nov. 1 Sales Slip 101 18

Post Ref.

DEBIT

J1 J2

5 8 3 00

Post Ref.

DEBIT

J1 J2 J2

4 3 4 60

Post Ref.

DEBIT

J2 J2

1 4 5 7 50

Post Ref.

DEBIT

J1 J1 J2

8 7 4 50

CREDIT

3 2 0 00

BALANCE

5 8 3 00 2 6 3 00

NAME Bob Huffington ADDRESS DATE

DESCRIPTION

2016 Nov. 7 Sales Slip 103 28 29 Sales Slip 106

CREDIT

4 3 4 60 7 1 5 50

BALANCE

4 3 4 60 - 0 7 1 5 50

NAME Dennis Newcombe ADDRESS DATE

DESCRIPTION

2016 Nov. 17 Sales Slip 105 24 Credit Memorandum 102

CREDIT

1 2 7 20

BALANCE

1 4 5 7 50 1 3 3 0 30

NAME Jane Peters ADDRESS DATE

DESCRIPTION

2016 Nov. 2 Sales Slip 102 12 Credit Memorandum 101 20

CREDIT

1 0 0 70 7 7 3 80

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BALANCE

8 7 4 50 7 7 3 80 - 0 -


PROBLEM 7.3B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Gina Silvestri ADDRESS DATE 2016 Nov. 16 Sales Slip 104

DESCRIPTION

Post Ref.

DEBIT

CREDIT

5 8 3 00

BALANCE

5 8 3 00

Appliances for Less Schedule of Accounts Receivable November 30, 2016 Alice Chu Bob Huffington Dennis Newcombe Jane Peters Gina Silvestri Total

Analyze: Damaged or defective goods decreased sales by $215. This is 0.9% of sales ($215/$24,785).

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2 6 3 00 7 1 5 50 1 3 3 0 30 - 0 5 8 3 00 2 8 9 1 80


PROBLEM 7.4B PAGE

GENERAL JOURNAL DATE 1 2016 2 May 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Annie’s Flowers Sales Sold floral arrangements on credit to Annie’s Flowers, Invoice 9312, 2/10, n/30 4 Sales Discounts Cash Accounts Receivable/Orange County Florist

Post Ref. 111

DEBIT

4 5 0 00

401

452 101 111

2 4 00 1 1 7 6 00

Received payment on account from Orange County Florist, Invoice 9299 6 Cash Sales Sold merchandise for cash to a new customer

101 401

9 2 5 00

7 Sales Returns and Allowances Cash Issued cash refund for merchandise sold on May 6

451 101

2 5 00

8 Accounts Receivable/Rosa’s Flowers and Gifts

111

Sales Sold floral arrangements on credit to Rosa’s Flowers and Gifts, Invoice 9313, 2/10, n/30 10 Sales Discounts Cash Accounts Receivable/Annie’s Flowers

1 5 0 0 00

401

452 101 111

9 00 4 4 1 00

Received payment on account from Annie’s Flowers, Invoice 9312 14 Sales Returns and Allowances Accounts Receivable/Rosa’s Flowers and Gifts

451 111

2 0 0 00

Issued allowance due to withered flowers, Credit Memorandum 109; original sale made on Invoice 9313, May 8, to Rosa’s Flowers and Gifts

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12

CREDIT 1 2 4 5 0 00 3 4 5 6 7 8 1 2 0 0 00 9 10 11 12 13 9 2 5 00 14 15 16 17 2 5 00 18 19 20 21 1 5 0 0 00 22 23 24 25 26 27 4 5 0 00 28 29 30 31 32 2 0 0 00 33 34 35 36 37


PROBLEM 7.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 May 17 Sales Discounts 3 Cash 4 Accounts Receivable/Rosa’s Flowers and Gifts 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Post Ref. 452 101 111

DEBIT

CREDIT

2 6 00 1 2 7 4 00

1 2 3 1 3 0 0 00 4

Received payment on account from Rosa’s Flowers and Gifts, Invoice 9313 19 Cash Accounts Receivable/White Lily Florists, Inc

5 6 7 8 2 9 0 0 00 9

5 8 0 00

10 11 12 13

4 8 0 00

5 8 0 00 14 15 16 17 18

8 5 0 00

4 8 0 00 19 20 21 22 23

101 111

2 9 0 0 00

Received payment on account from White Lily Florists, Inc. Invoice 9279 20 Accounts Receivable/Grand Party Supply Sales Sold table arrangements on credit to Grand Party Supply, Invoice 9314, 2/10, n/30 24 Accounts Receivable/Miyata Floral Designs Sales Sold roses on credit to Miyata Floral Designs, Invoice 9315, 2/10, n/30 26 Accounts Receivable/Cancino’s Flower Shop Sales Sold potted plants on credit to Cancino’s Flower Shop, Invoice 9316, 2/10, n/30 27 Sales Returns and Allowances Accounts Receivable/Miyata Floral Designs

111

401

111

401

111

401

451 111

13

Accept a return of damaged roses and issued Credit Memorandum 110 to Miyata Floral Designs. Original sale made on Invoice 9315, May 24

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4 8 00

8 5 0 00 24 25 26 27 28 4 8 00 29 30 31 32 33


PROBLEM 7.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 May 29 Sales Discounts 3 Cash 4 Accounts Receivable/Grand Party Supply 5 6 7 8 9 10 11

Post Ref.

5 6 7

1 1 60 5 6 8 40

Received payments on account, Invoice 9314 30 Accounts Receivable/White Lily Flowers, Inc. Sales Sold plants on credit to White Lily Flowers, Inc., Invoice 9317, 2/10, n/30

111

CREDIT 1 2 3 5 8 0 00 4

452 101 111

DEBIT

14

1 2 0 0 00

401

Analyze: The amount of the discount taken by Annie's Flowers on May 10 was $9.00.

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1 2 0 0 00 8 9 10 11


PROBLEM 7.5B GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 May 1 Balance 4 6 7 10 17 19 29

Post Ref. ✔ J12 J12 J12 J12 J13 J13 J14

DEBIT

CREDIT

1 1 7 6 00 9 2 5 00 2 5 00 4 4 1 00 1 2 7 4 00 2 9 0 0 00 5 6 8 40

BALANCE DEBIT CREDIT 25 8 0 0 00 26 9 7 6 00 27 9 0 1 00 27 8 7 6 00 28 3 1 7 00 29 5 9 1 00 32 4 9 1 00 33 0 5 9 40

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE 2016 May 1 Balance 1 4 8 10 14 17 19 20 24 26 27 29 30

DESCRIPTION

Post Ref.

DEBIT

J12 J12 J12 J12 J12 J13 J13 J13 J13 J13 J13 J14 J14

4 5 0 00

CREDIT

1 2 0 0 00 1 5 0 0 00 4 5 0 00 2 0 0 00 1 3 0 0 00 2 9 0 0 00 5 8 0 00 4 8 0 00 8 5 0 00 4 8 00 5 8 0 00 1 2 0 0 00

BALANCE DEBIT CREDIT 4 1 0 0 00 4 5 5 0 00 3 3 5 0 00 4 8 5 0 00 4 4 0 0 00 4 2 0 0 00 2 9 0 0 00 - 0 5 8 0 00 1 0 6 0 00 1 9 1 0 00 1 8 6 2 00 1 2 8 2 00 2 4 8 2 00

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PROBLEM 7.5B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2016 May 1 6 8 20 24 26 30

Post Ref.

DEBIT

J12 J12 J12 J13 J13 J13 J14

CREDIT

BALANCE DEBIT CREDIT

4 5 0 00 9 2 5 00 1 5 0 0 00 5 8 0 00 4 8 0 00 8 5 0 00 1 2 0 0 00

4 5 0 00 1 3 7 5 00 2 8 7 5 00 3 4 5 5 00 3 9 3 5 00 4 7 8 5 00 5 9 8 5 00

ACCOUNT NO. 451

ACCOUNT Sales Returns and Allowances DATE

DESCRIPTION

2016 May 7 14 27

Post Ref.

DEBIT

J12 J12 J13

2 5 00 2 0 0 00 4 8 00

CREDIT

BALANCE DEBIT CREDIT 2 5 00 2 2 5 00 2 7 3 00

ACCOUNT NO. 452

ACCOUNT Sales Discounts DATE 2016 May 4 10 17 29

DESCRIPTION

Post Ref. J12 J12 J13 J14

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 4 00 9 00 2 6 00 1 1 60

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2 4 00 3 3 00 5 9 00 7 0 60


PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Annie’s Flowers ADDRESS DATE

DESCRIPTION

2016 May 1 Invoice 9312 10

Post Ref.

DEBIT

J12 J12

4 5 0 00

Post Ref.

DEBIT

J13

8 5 0 00

Post Ref.

DEBIT

J13 J14

5 8 0 00

CREDIT

4 5 0 00

BALANCE

4 5 0 00 - 0 -

NAME Cancino’s Flower Shop ADDRESS DATE

DESCRIPTION

2016 May 26 Invoice 9316

CREDIT

BALANCE

8 5 0 00

NAME Grand Party Supply ADDRESS DATE 2016 May 20 Invoice 9314 29

DESCRIPTION

CREDIT

5 8 0 00

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BALANCE

5 8 0 00 - 0 -


PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Miyata Floral Designs ADDRESS DATE

DESCRIPTION

2016 May 24 Invoice 9315 27 Credit Memorandum 110

Post Ref.

DEBIT

J13 J13

4 8 0 00

Post Ref.

DEBIT

CREDIT

4 8 00

BALANCE

4 8 0 00 4 3 2 00

NAME Orange County Florist ADDRESS DATE

DESCRIPTION

2016 May 1 Balance 4

✔ J12

CREDIT

BALANCE

1 2 0 0 00

1 2 0 0 00 - 0 -

CREDIT

BALANCE

2 0 0 00 1 3 0 0 00

1 5 0 0 00 1 3 0 0 00 - 0 -

NAME Rosa’s Flowers and Gifts ADDRESS DATE

DESCRIPTION

2016 May 8 Invoice 9313 14 Credit Memorandum 109 17

Post Ref.

DEBIT

J12 J12 J13

1 5 0 0 00

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PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME White Lily Florists, Inc. ADDRESS DATE 2016 May 1 Balance 19 30 Invoice 9317

DESCRIPTION

Post Ref.

J13 J14

DEBIT

CREDIT

BALANCE

2 9 0 0 00

2 9 0 0 00 - 0 1 2 0 0 00

1 2 0 0 00

The Urban Florist Schedule of Accounts Receivable May 31, 2016 Annie’s Flowers Cancino’s Flower Shop Grand Party Supply Miyata Floral Designs Orange County Florist Rosa’s Flowers and Gifts White Lily Florists, Inc. Total

- 0 8 5 0 00 - 0 4 3 2 00 - 0 - 0 1 2 0 0 00 2 4 8 2 00

The balance of the Accounts Receivable control account is $2,482.00. Analyze: The total sales on account in May, prior to any returns, allowances, or discounts is $5,060.00 ($5,985.00 – $925.00).

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PROBLEM 7.6B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 1 Accounts Receivable/Wine Country Kitchens 3 Sales [$6,000 - ($6,000 × 30%)] 4 Sold crystal goods on credit to Wine Country 5 Kitchens, a wholesale customer, Invoice 6920, n/15 6 7 15 Cash ($10,200 + $816) 8 Sales 9 Sales Tax Payable ($10,200 × 8%) 10 Record cash sales, June 1 - 15 11 12 15 Credit Card Expense ($14,200 + $1,136) × 3% 13 Cash ($14,200 + $1,136 - $460.08) 14 Sales 15 Sales Tax Payable ($14,200 × 8%) 16 Record credit card sales, June 1 - 15 17 18 16 Cash 19 Accounts Receivable/Wine Country Kitchens 20 Received payment on account, Invoice 6920 21 22 16 Accounts Receivable/American Express 23 Sales 24 Sales Tax Payable ($9,000 × 8%) 25 Sold merchandise to customers using 26 American Express 27 28 17 Accounts Receivable/Victorian Decadence 29 Sales [$18,000 - ($18,000 × 40%)] 30 Sold a set of brass serving trays on credit to 31 Victorian Decadence, a wholesale customer, 32 Invoice 6921, n/15 33

Post Ref.

DEBIT

121 401

4 2 0 0 00

101 401 222

11 0 1 6 00

521 101 401 222

4 6 0 08 14 8 7 5 92

101 121

4 2 0 0 00

121 401 222

9 7 2 0 00

121 401

10 8 0 0 00

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15

CREDIT 1 2 4 2 0 0 00 3 4 5 6 7 10 2 0 0 00 8 8 1 6 00 9 10 11 12 13 14 2 0 0 00 14 1 1 3 6 00 15 16 17 18 4 2 0 0 00 19 20 21 22 9 0 0 0 00 23 7 2 0 00 24 25 26 27 28 10 8 0 0 00 29 30 31 32 33


PROBLEM 7.6B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 19 Credit Card Expense ($9,720 × 4%) 3 Cash ($9,720 - $388.80) 4 Accounts Receivable from American Express 5 Received payment from American Express for 6 amount billed on June 16 7 8 29 Cash 9 Accounts Receivable/Victorian Decadence 10 Received payment on account, Invoice 6921 11 12 30 Cash ($9,550 + $764) 13 Sales 14 Sales Tax Payable ($9,550 × 8%) 15 Record cash sales, June 16 - 30 16 17 30 Credit Card Expense ($11,700 + $936) × 3% 18 Cash ($11,700 + $936 - $379.08) 19 Sales 20 Sales Tax Payable ($11,700 × 8%) 21 Record credit card sales, June 16 - 30 22 23 30 Accounts Receivable/American Express 24 Sales 25 Sales Tax Payable ($8,200 × 8%) 26 Sold merchandise to customers using 27 American Express 28

Post Ref.

DEBIT

521 101 121

3 8 8 80 9 3 3 1 20

101 121

10 8 0 0 00

101 401 222

10 3 1 4 00

521 101 401 222

3 7 9 08 12 2 5 6 92

121 401 222

8 8 5 6 00

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16

CREDIT 1 2 3 9 7 2 0 00 4 5 6 7 8 10 8 0 0 00 9 10 11 12 9 5 5 0 00 13 7 6 4 00 14 15 16 17 18 11 7 0 0 00 19 9 3 6 00 20 21 22 23 8 2 0 0 00 24 6 5 6 00 25 26 27 28


PROBLEM 7.6B (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE 2016 June

DESCRIPTION

1 Balance 15 15 16 19 29 30 30

Post Ref. ✔ J15 J15 J15 J16 J16 J16 J16

DEBIT

CREDIT

30 1 5 5 00 41 1 7 1 00 56 0 4 6 92 60 2 4 6 92 69 5 7 8 12 80 3 7 8 12 90 6 9 2 12 102 9 4 9 04

11 0 1 6 00 14 8 7 5 92 4 2 0 0 00 9 3 3 1 20 10 8 0 0 00 10 3 1 4 00 12 2 5 6 92

ACCOUNT NO. 121

ACCOUNT Accounts Receivable DATE 2016 June

DESCRIPTION

1 16 16 17 19 29 30

Post Ref.

DEBIT

J15 J15 J15 J15 J16 J16 J16

4 2 0 0 00

CREDIT

4 2 0 0 00 9 7 2 0 00 10 8 0 0 00 9 7 2 0 00 10 8 0 0 00 8 8 5 6 00

2016 June 15 15 16 30 30 30

DESCRIPTION

BALANCE DEBIT CREDIT 4 2 0 0 00 - 0 9 7 2 0 00 20 5 2 0 00 10 8 0 0 00 - 0 8 8 5 6 00

ACCOUNT NO. 222

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J15 J15 J15 J16 J16 J16

DEBIT

CREDIT

BALANCE DEBIT CREDIT

8 1 6 00 1 1 3 6 00 7 2 0 00 7 6 4 00 9 3 6 00 6 5 6 00

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8 1 6 00 1 9 5 2 00 2 6 7 2 00 3 4 3 6 00 4 3 7 2 00 5 0 2 8 00


PROBLEM 7.6B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE 2016 June

DESCRIPTION

1 15 15 16 17 30 30 30

Post Ref.

DEBIT

J15 J15 J15 J15 J15 J16 J16 J16

CREDIT

4 2 0 0 00 10 2 0 0 00 14 2 0 0 00 9 0 0 0 00 10 8 0 0 00 9 5 5 0 00 11 7 0 0 00 8 2 0 0 00

2016 June 15 19 30

DESCRIPTION

4 2 0 0 00 14 4 0 0 00 28 6 0 0 00 37 6 0 0 00 48 4 0 0 00 57 9 5 0 00 69 6 5 0 00 77 8 5 0 00

ACCOUNT NO. 521

ACCOUNT Credit Card Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J15 J16 J16

4 6 0 08 3 8 8 80 3 7 9 08

CREDIT

BALANCE DEBIT CREDIT 4 6 0 08 8 4 8 88 1 2 2 7 96

Analyze: The total credit card expense incurred in June is $1,227.96.

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CRITICAL THINKING PROBLEM 7.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 1 Accounts Receivable/Mark Everest ($700 + $56) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Post Ref. 111

DEBIT

111

7 5 6 00

3 2 4 00

7 0 0 00 3 5 6 00 4 5 6 7 8

3 0 0 00 9 2 4 00 10 11 12 13 14 15 1 0 8 00 16

17 18 19 20 21 6 4 8 00 22

23 24 25

Sales Sales Tax Payable ($300 × 8%) Sold merchandise on credit to Emily Ancheta, Sales Slip 102 8 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Mark Everest

1 0 0 00 8 00 111

Accept return of defective merchandise, Credit Memorandum 1; original sales made on Sales Slip 101 of March 1 10 Cash ($756 - $108) Accounts Receivable/Mark Everest

6 4 8 00 111

Received cash from Mark Everest on account 12 Accounts Receivable/Annie Han ($450 + $36)

111

4 8 6 00

Sales Sales Tax Payable ($450 × 8%) Sold merchandise on credit to Annie Han, Sales Slip 103 15 Cash ($5,000 + $400) Sales Sales Tax Payable ($5,000 × 8%) Record cash sales, March 1 - 15

CREDIT 1 2

Sales Sales Tax Payable ($700 × 8%) Sold merchandise on credit to Mark Everest, Sales Slip 101 3 Accounts Receivable/Emily Ancheta ($300 + $24)

1

5 4 0 0 00

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4 5 0 00 26 3 6 00 27 28 29 30 31 5 0 0 0 00 32 4 0 0 00 33 34 35


CRITICAL THINKING PROBLEM 7.1 (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 15 Credit Card Expense ($7,000 + $560) × 3% 3 Cash ($7,000 + $560 - $226.80) 4 Sales 5 Sales Tax Payable ($7,000 × 8%) 6 Record sales to customers using bank credit cards, 7 March 1 -15 8 9 25 Accounts Receivable / Jason Cataldo ($300 + $24) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Post Ref.

DEBIT

3 2 4 00

3 2 4 0 00

3 0 0 00 10 2 4 00 11 12 13 14

Sales Sales Tax Payable ($300 × 8%) Sold merchandise on credit to Jason Cataldo, Sales Slip 104 26 Accounts Receivable / American Express ($3,000 + $240)

111

3 0 0 0 00 15 2 4 0 00 16 17 18 19 1 0 0 00 20

21 22 23 5 5 0 0 00 24 4 4 0 00 25 26 27 28 29 3 2 4 0 00 30

Sales Sales Tax Payable ($3,000 × 8%) Record sales to customers using American Express 28 Cash Accounts Receivable / Annie Han

1 0 0 00 111

Received partial payment on account from Annie Han 31 Cash ($5,500 + $440) Sales Sales Tax Payable ($5,500 × 8%) Record cash sales, March 16 - 31

5 9 4 0 00

31 Credit Card Expense ($3,240 × 4%) Cash ($3,240 - $129.60) Accounts Receivable / American Express

1 2 9 60 3 1 1 0 40

31

Received payment from American Express

32 33 34 35 36 37 38

31 Credit Card Expense ($4,000 + $320) × 3% Cash ($4,000 + $320 - $129.60) Sales Sales Tax Payable ($4,000 × 8%) Record sales to customers using bank credit cards, March 16 – 31

111

CREDIT 1 2 3 7 0 0 0 00 4 5 6 0 00 5 6 7 8 9

2 2 6 80 7 3 3 3 20

111

2

31 1 2 9 60 4 1 9 0 40

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32 33 34 4 0 0 0 00 35 3 2 0 00 36 37 38


CRITICAL THINKING PROBLEM 7.1 (continued) GENERAL LEDGER ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2016 March 1 3 8 10 12 25 26 28 31

Post Ref.

DEBIT

CREDIT

J1 J1 J1 J1 J1 J2 J2 J2 J2

7 5 6 00 3 2 4 00 1 0 8 00 6 4 8 00 4 8 6 00 3 2 4 00 3 2 4 0 00 1 0 0 00 3 2 4 0 00

BALANCE DEBIT CREDIT 7 5 6 00 1 0 8 0 00 9 7 2 00 3 2 4 00 8 1 0 00 1 1 3 4 00 4 3 7 4 00 4 2 7 4 00 1 0 3 4 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Emily Ancheta ADDRESS DATE

DESCRIPTION

2016 March 3 Sales Slip 102

Post Ref.

DEBIT

J1

3 2 4 00

Post Ref.

DEBIT

J2 J2

3 2 4 0 00

CREDIT

BALANCE

3 2 4 00

NAME American Express ADDRESS DATE 2016 March 26 31

DESCRIPTION

CREDIT

BALANCE

3 2 4 0 00

3 2 4 0 00 - 0 -

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CRITICAL THINKING PROBLEM 7.1 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Jason Cataldo ADDRESS DATE DESCRIPTION 2016 March 25 Sales Slip 104

NAME Mark Everest ADDRESS DATE DESCRIPTION 2016 March 1 Sales Slip 101 8 CM 1 10

NAME Annie Han ADDRESS DATE

DESCRIPTION

2016 March 12 Sales Slip 103 28

Post Ref.

DEBIT

J2

3 2 4 00

Post Ref.

DEBIT

J1 J1 J1

7 5 6 00

Post Ref.

DEBIT

J1 J2

4 8 6 00

CREDIT

BALANCE

3 2 4 00

CREDIT

1 0 8 00 6 4 8 00

CREDIT

1 0 0 00

BALANCE

7 5 6 00 6 4 8 00 - 0 -

BALANCE

4 8 6 00 3 8 6 00

Athletic X-Press Sporting Goods Schedule of Accounts Receivable March 31, 2016 Emily Ancheta American Express Jason Cataldo Mark Everest Annie Han Total

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3 2 4 00 - 0 3 2 4 00 - 0 3 8 6 00 1 0 3 4 00


CRITICAL THINKING PROBLEM 7.2 1.

An electronic system would prevent this mistake because the computer would automatically post and update the customer’s subsidiary ledger account. This mistake would not be identified in a manual system until the Accounts Receivable general ledger account was reconciled to the schedule of accounts receivable.

2.

The use of an electronic scanner should reduce unrecorded sales. Each item has to be passed over the scanner, which automatically records the price. This process reduces the chance that an item is overlooked; but with either system, it is possible for the salesclerk to deliberately not charge a customer for a purchase. The owner and supervisors must be alert to this possibility and need to check the salesclerk’s work on a regular basis Discrepancies in the inventory may identify extensive abuses of this nature.

3.

The computer can be programmed to alert the salesclerk by means of a code number or flashing sign on the register/terminal display screen that a particular credit card number has been reported stolen. The register/ terminal will halt processing the transaction or instruct the salesclerk to check with a supervisor before proceeding with the transaction. With a manual system, the salesclerk would have to consult a separate list of stolen numbers before processing a credit card transaction. Provided the stolen credit card numbers are entered promptly in the computer files, the electronic system would prevent charging a sale on a stolen credit card.

4.

An electronic scanner would prevent customers from being charged an incorrect price. Because the computer would be programmed with the sale prices, the scanner would automatically record the correct price. A manual system depends on the salesclerk’s memory of price changes or requires new price tags to be placed on sale items. An electronic system would be more dependable and efficient in this situation.

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Solutions to Business Connections Managerial Focus: 1. Measures damaged or poor quality goods or late deliveries. 2. Advantages: minimized risk of receivable losses; reduced staffing costs. Disadvantages: discount fees; loss of sales if customers do not have credit cards 3. The actual filing of a tax return is procedural, but expert advice is needed to comply with tax laws and minimize taxes. 4. 5. 6. 7. 8.

Credit policies, customer account documentation. Increase sales volume. Losses from uncollectible accounts. Aid in extending credit, identify slow-paying customers. Accurate and complete records.

Ethical Dilemma: Watch when a customer pays a bill to see if Wes puts the money in the cash register or just puts it in his pocket and writes a credit memo to remove it from the Accounts Receivable Ledger. Financial Statement Analysis: 1. Sales Returns and Allowances. 2. 9.9% ($74,754 - $67,997) ÷ $67,997 = 9.9% Analyze Online: Answers will vary depending on the year. Teamwork: Sales associate would not record a transaction. Louisa’s A/P clerk would process a purchase order for $50,000 and record a debit to purchases and a credit to A/P. The A/R clerk would create a sales invoice and record a debit to A/R and credit to Sales. Internet Connection: Auto creation of P.O. from Sales Order, create A/P and A/R Credit memos, quick conversion to other programs, invoice customers, track payments and sales taxes, print checks and create purchase orders from estimates.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. TRUE 4. FALSE 5. FALSE 6. FALSE 7. FALSE

8. FALSE 9. TRUE 10. TRUE 11. TRUE 12. TRUE 13. FALSE 14. FALSE

15. 16. 17. 18. 19. 20.

TRUE FALSE TRUE FALSE FALSE FALSE

Part B Matching 1. g 2. c 3. e 4. a 5. b 6. d 7. f Part C Exercises 1. The balance was carried over from December 2015. 2. By referring to a copy of Sales Slip 101. It was most likely a sales return or allowance. Refer to the January 17 entry on page 1 of the 3. general journal.

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Part D Exercises PAGE

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

2016 April

DESCRIPTION

1 Accounts Receivable/Kisling's Kitchens

Post Ref.

DEBIT

CREDIT

3 5 0 0 00

1 2

2 5 0 00

3 5 0 0 00 3 4 5 6 7

6 5 00

2 5 0 00 8 9 10 11 12

3 1 8 5 00

13

Sales Sold merchandise on account to Kisling's Kitchens, Invoice 1001, terms 2/10, n/30. 5 Sales Returns and Allowances Accounts Receivable/Kisling's Kitchens Issued Credit Memorandum 102 to Kisling's Kitchens for damaged merchandise. 10 Sales Discounts (2% * ($3,500 - $250)) Cash ($3,250 - $65)

#

Accounts Receivable/Kisling's Kitchens Received payment from Kisling's Kitchens for Invoice 1001 dated April 1, less return on April 5.

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CHAPTER 8 ACCOUNTING FOR PURCHASES, ACCOUNTS PAYABLE, AND CASH PAYMENTS Chapter Opener: Thinking Critically Companies want to pay their bills on time to maintain a good relationship with their vendors as well as take advantage of early payment discount opportunities. Fast Facts • Net revenues for fiscal 2012 increased 9%, and exceeded $4 billion for the first time in their company's history. • Williams-Sonoma, Inc. owns and operates separate, home-centered retail businesses: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBTeen, Rejuvenation, Mark and Graham, and West Elm. • The company operates 590 retail stores.

Managerial Implications: Thinking Critically Answers will vary. Students should recognize the need for checks and balances for avoiding theft and waste. • Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1.

Authorization of purchase, check-in of goods, verification of invoice, proper authorization of payment, division of labor and tasks, use of prenumbered forms.

2. 3. 4. 5.

Documentation of credit issued. Return of unsatisfactory merchandise. Allowance made for damaged merchandise. The Accounts Payable account is the control account. It summarizes the balances of the creditor accounts.

6.

List of all creditors and the balance owed by each. Prepared so that its total can be proved against the balance of the Accounts Payable account.

7. 8. 9.

Individual accounts of all creditors. Helps pay bills promptly and maintain a good credit reputation. Add Freight In to Purchases, then deduct Purchases Returns and Allowances and Purchases Discounts.

10. 11. 12. 13. 14.

Equipment. Purchase invoice denotes incoming merchandise, sales invoice denotes outgoing (sold) merchandise. Debit. Income Statement in the Cost of Goods Sold section. Provides a separate record.

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15.

a. Net amount of the invoice is due 30 days after the date of the invoice. b. If the invoice is paid within 10 days of its date, a 2 percent discount may be taken; otherwise, the total amount is due in 30 days. c. The amount of the invoice is due 10 days after the end of the month in which the invoice is issued. d. Payment in full is due 20 days after date of the invoice. e. If the invoice is paid within 10 days of its date, 1% discount may be taken; otherwise, the total amount is due in 20 days. f. If payment is made within 5 days of its date, a 3 percent discount may be taken; otherwise, the total amount is due in 30 days. g. Payment in full is due 15 days after the end of the month in which the invoice is issued.

16. 17. 18.

(a) Purchases (b) Merchandise Inventory (a) Purchases Returns and Allowances (b) Merchandise Inventory (a) Freight In (b) Merchandise Inventory

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EXERCISE 8.1 Dr Purchases Cr Purchases Return and Allowances

Cr Purchases Discounts Dr Freight In

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EXERCISE 8.2 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 4 Purchases 3 Accounts Payable/Sanchez Company 4 Purchased merchandise on account, 5 Invoice 100, n/30 6 7 15 Purchases 8 Cash 9 Purchased merchandise for cash 10 11 30 Accounts Payable/Sanchez Company 12 Cash 13 Paid amount due, Invoice 100 14

Post Ref.

DEBIT 9 5 5 00

1 4 4 0 00

9 5 5 00

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CREDIT 1 2 9 5 5 00 3 4 5 6 7 1 4 4 0 00 8 9 10 11 9 5 5 00 12 13 14


EXERCISE 8.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Apr. 1 Purchases 3 Cash 4 Purchased merchandise for cash 5 6 2 Cash 7 Purchases Returns and Allowances 8 Returned merchandise purchased April 1 for refund 9 10 4 Purchases 11 Freight In 12 Accounts Payable/Ramos Distributors 13 Purchased merchandise on account, 14 Invoice 125, n/30 15 16 7 Accounts Payable/Ramos Distributors 17 Purchases Returns and Allowances 18 Received Credit Memo 202 for return of 19 damaged merchandise 20 21 30 Accounts Payable/Ramos Distributors ($717 – $53) 22 Cash 23 Paid amount due on Invoice 125 after receipt 24 of Credit Memo 202, check 1458 25

Post Ref.

DEBIT 1 3 1 0 00

1 1 8 00

6 7 1 00 4 6 00

5 3 00

6 6 4 00

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CREDIT 1 2 1 3 1 0 00 3 4 5 6 1 1 8 00 7 8 9 10 11 7 1 7 00 12 13 14 15 16 5 3 00 17 18 19 20 21 6 6 4 00 22 23 24 25


EXERCISE 8.4 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Apr. 1 Purchases 3 Freight In 4 Accounts Payable/O’Rourke Fabricators 5 Purchased merchandise on account, 6 Invoice 885, 1/10, n/30 7 8 9 Accounts Payable/O’Rourke Fabricators 9 Purchases Discounts (1% x $3,000) 10 Cash ($3,020 - $30) 11 Paid amount due on Invoice 885, Check 457 12 13 15 Purchases 14 Freight In 15 Accounts Payable/Kroll Company 16 Purchased merchandise on account, 17 Invoice 145, 1/10, n/30 18 19 17 Accounts Payable/Kroll Company 20 Purchases Returns and Allowances 21 Received Credit Memo 332 for return of 22 damaged merchandise 23 24 24 Accounts Payable/Kroll Company ($1,325 - $50) 25 Purchases Discounts (1% x ($1,250 - $50)) 26 Cash ($1,275 - $12) 27 Paid amount due on Invoice 145, 28 Check 470 29

Post Ref.

DEBIT 3 0 0 0 00 2 0 00

3 0 2 0 00

1 2 5 0 00 7 5 00

5 0 00

1 2 7 5 00

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CREDIT 1 2 3 3 0 2 0 00 4 5 6 7 8 3 0 00 9 2 9 9 0 00 10 11 12 13 14 1 3 2 5 00 15 16 17 18 19 5 0 00 20 21 22 23 24 1 2 00 25 1 2 6 3 00 26 27 28 29


EXERCISE 8.5 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2016 2 March 8 Purchases ($5,000 - $1,500 = $3,500; $3,500 - $700 = $2,800) 3 Accounts Payable/Lovely Accessories 4 Purchased merchandise on account, 5 Invoice 1091, 3/10, n/30 6 7 17 Accounts Payable/Lovely Accessories 8 Purchases Discounts (3% x $2,800) 9 Cash ($2,800 - $84) 10 Paid amount due on Invoice 1091, 11 Check 185 12

DEBIT 2 8 0 0 00

2 8 0 0 00

CREDIT 1 2 2 8 0 0 00 3 4 5 6 7 8 4 00 8 2 7 1 6 00 9 10 11 12

EXERCISE 8.6 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 10 Purchases 3 Accounts Payable/Schmidt, Inc. 4 Purchased merchandise on account., 5 Invoice 1980, terms 1/10, n/30 6 7 13 Accounts Payable/Schmidt, Inc. 8 Purchases Returns and Allowances 9 Received Credit Memorandum 230 for return 10 of damaged merchandise, Invoice 1980 11 12 19 Accounts Payable/Schmidt, Inc. ($3,000 - $200) 13 Purchases Discounts ($3,000 - $200) x 1% 14 Cash ($2,800 - $28) 15 Paid amount owed on Invoice 1980 16 less return of February 13, Check #2010 17

Post Ref.

DEBIT 3 0 0 0 00

2 0 0 00

2 8 0 0 00

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20

CREDIT 1 2 3 0 0 0 00 3 4 5 6 7 2 0 0 00 8 9 10 11 12 2 8 00 13 2 7 7 2 00 14 15 16 17


EXERCISE 8.6 (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 10 Accounts Receivable/Brown Company 3 Sales 4 Sold merchandise on account., 5 Invoice 1980, terms 1/10, n/30 6 7 13 Sales Returns and Allowances 8 Accounts Receivable/Brown Company 9 Accepted return of damaged merchandise, Credit 10 Memorandum 230; original sale made on 11 Invoice 1980, February 10 12 13 19 Sales Discounts 14 Cash 15 Accounts Receivable/Brown Company 16 Received payment on on Invoice 1980, 17 less sales discount 18

Post Ref.

DEBIT 3 0 0 0 00

2 0 0 00

2 8 00 2 7 7 2 00

CREDIT 1 2 3 0 0 0 00 3 4 5 6 7 2 0 0 00 8 9 10 11 12 13 14 2 8 0 0 00 15 16 17 18

EXERCISE 8.7 Purchases Add freight in Delivered Cost of Purchases Less Purchase Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases

$41,795 2,326 44,121 $2,910 2,150

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20

5,060 $39,061


EXERCISE 8.8 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 8 Accounts Payable/Stamos Distributors 3 Cash 4 Made partial payment on account, check 1240 5 6 10 Accounts Payable/Evans Enterprises 7 Purchases Returns and Allowances 8 Received Credit Memorandum 123 as allowance 9 for discolored merchandise 10

Post Ref. 202

202

DEBIT

3 0 0 00

2 0 0 00

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40

CREDIT 1 2 3 0 0 00 3 4 5 6 2 0 0 00 7 8 9 10


EXERCISE 8.8 (continued) ACCOUNT NO. 202

ACCOUNT Accounts Accounts Payable Payable DATE 2016 Jan.

ITEM

✔ J40 J40

1 Balance 8 10

NAME

Post Ref.

DEBIT

CREDIT

BALANCE DEBIT CREDIT 6 6 0 0 00 6 3 0 0 00 6 1 0 0 00

3 0 0 00 2 0 0 00

TERMS

Evans Enterprises

ADDRESS DATE 2016 Jan.

DESCRIPTION

✔ J40

1 Balance 10 CM 123

NAME

Post Ref.

DEBIT

CREDIT

BALANCE

1 6 0 0 00 1 4 0 0 00

2 0 0 00

TERMS

Stamos Distributors

ADDRESS DATE 2016 Jan.

NAME

DESCRIPTION

Post Ref. ✔ J40

1 Balance 8

DEBIT

CREDIT

BALANCE

3 1 0 0 00 2 8 0 0 00

3 0 0 00

TERMS

Tonetta Company

ADDRESS DATE 2016 Jan.

DESCRIPTION

1 Balance

Post Ref.

DEBIT

CREDIT

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BALANCE

1 9 0 0 00


EXERCISE 8.9 Bioplast Jewelry, Inc. Schedule of Accounts Payable January 31, 2016 Evans Enterprises Stamos Distributors Tonetta Company Total

1 4 0 0 00 2 8 0 0 00 1 9 0 0 00 6 1 0 0 00

2. Does the total of your accounts payable schedule agree with the balance of the accounts payable account in the general ledger at January 31, 2016? Yes. The total of the schedule of accounts payable is $6,100, and the balance of the Accounts Payable account is $6,100.

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EXERCISE 8.10 GENERAL JOURNAL DATE 1 2016 2 July 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

DESCRIPTION

PAGE Post Ref.

DEBIT

3 Merchandise Inventory Accounts Payable/Fashion Expo Purchased dresses on account from Fashion Expo, Invoice 101 dated July 1. Freight charges of $120 added to invoice. Terms 2/10, n/30.

3 6 2 0 00

5 Accounts Receivable/Alice Chu Sales Cost of Goods Sold Merchandise Inventory Sold two dresses to Alice Chu, Sales Slip 788; terms 30 days. The cost of the dresses was $400.

6 0 0 00

7 Accounts Payable/Fashion Expo Merchandise Inventory Received Credit Memorandum 210 for damaged dresses returned; the goods were originally purchased on Invoice 101 dated July 1.

5 5 0 00

9 Sales Returns and Allowances Accounts Receivable/Alice Chu Merchandise Inventory Cost of Goods Sold Issued Credit Memorandum 89 for $200 to Alice Chu for a returned dress; the dress was originally sold on Sales Slip 788 dated July 5. The cost of the returned dress was $135.

2 0 0 00

12

15

Accounts Payable/Fashion Expo ($3,620 - $550) Merchandise Inventory (($3,620 - $120 - $550) * 2%) Cash ($3,070 - $59) Paid amount due on Invoice 101 to Fashion Expo after receipt of Credit Memo 210, Check 1255 Sales Discounts (($600 - $200) * 1%) Cash ($600 - $200 - $4) Accounts Receivable/Alice Chu ($600 - $200) Received amount due from Alice Chu for sale of July 5, less return of July 9 and less cash discount

CREDIT

3 6 2 0 00

6 0 0 00 4 0 0 00 4 0 0 00

5 5 0 00

2 0 0 00 1 3 5 00 1 3 5 00

3 0 7 0 00 5 9 00 3 0 1 1 00

4 00 3 9 6 00

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8

4 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42


PROBLEM 8.1A PAGE 1

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 April 1 Purchases 3 Freight In 4 Accounts Payable/Camera & Film Products 5 Purchased merchandise on account, 6 Invoice 825, n/30 7 8 3 Purchases 9 Accounts Payable/Vision Supplies, Inc. 10 Purchased lenses on account, 11 Invoice 998, n/30 12 13 11 Purchases 14 Accounts Payable/Optical Products 15 Purchased DVD camcorders on account, 16 Invoice 4101, n/30 17 18 15 Purchases 19 Cash 20 Recorded various cash purchases for April 1 – 15. 21 22 26 Purchases 23 Freight In 24 Accounts Payable/Myers Brothers Camera Supplies 25 Purchased lighting equipment on account, 26 Invoice 9288, n/30 27 28 27 Accounts Payable/Vision Supplies, Inc. 29 Cash 30 Issued Check 102 for partial payment of Invoice 998 31 32 30 Purchases 33 Cash 34 Recorded various cash purchases for April 16 – 30. 35 36 30 Accounts Payable/Camera & Film Products 37 Cash 38 Issued Check 103 for full payment of Invoice 825 39

Post Ref.

DEBIT

501 502 205

1 0 1 5 00 2 1 00

501 205

8 6 0 00

501 205

5 7 0 0 00

501 101

2 6 0 0 00

501 502 205

6 5 0 0 00 2 2 8 00

205 101

5 9 0 00

501 101

3 0 7 0 00

205 101

1 0 3 6 00

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CREDIT 1 2 3 1 0 3 6 00 4 5 6 7 8 8 6 0 00 9 10 11 12 13 5 7 0 0 00 14 15 16 17 18 2 6 0 0 00 19 20 21 22 23 6 7 2 8 00 24 25 26 27 28 5 9 0 00 29 30 31 32 3 0 7 0 00 33 34 35 36 1 0 3 6 00 37 38 39


PROBLEM 8.1A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash Accounts Payable DATE 2016 April

DESCRIPTION

1 Balance 15 27 30 30

Post Ref.

DEBIT

CREDIT

 J1 J1 J1 J1

2 6 0 0 00 5 9 0 00 3 0 7 0 00 1 0 3 6 00

2016 April

DESCRIPTION

1 3 11 26 27 30

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT DEBIT

2016 April

DESCRIPTION

1 3 11 15 26 30

BALANCE CREDIT

1 0 3 6 00 8 6 0 00 5 7 0 0 00 6 7 2 8 00

1 0 3 6 00 1 8 9 6 00 7 5 9 6 00 14 3 2 4 00 13 7 3 4 00 12 6 9 8 00

5 9 0 00 1 0 3 6 00

ACCOUNT NO. 501

ACCOUNT Purchases Accounts Payable DATE

11 9 0 0 00 9 3 0 0 00 8 7 1 0 00 5 6 4 0 00 4 6 0 4 00

ACCOUNT NO. 205

ACCOUNT Accounts Accounts Payable Payable DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J1

1 0 1 5 00 8 6 0 00 5 7 0 0 00 2 6 0 0 00 6 5 0 0 00 3 0 7 0 00

CREDIT

BALANCE DEBIT CREDIT 1 0 1 5 00 1 8 7 5 00 7 5 7 5 00 10 1 7 5 00 16 6 7 5 00 19 7 4 5 00

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PROBLEM 8.1A (continued) GENERAL LEDGER ACCOUNT NO. 502

ACCOUNT Freight Accounts InPayable DATE 2016 April

Analyze:

DESCRIPTION

1 26

Post Ref.

DEBIT

J1 J1

2 1 00 2 2 8 00

CREDIT

BALANCE DEBIT CREDIT 2 1 00 2 4 9 00

The total cash payments on account during April were $1,626.

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PROBLEM 8.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 2 Purchases 3 Freight In 4 Accounts Payable/Colorado Ski Shop 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

Post Ref. 501 502 201

DEBIT

CREDIT

6 6 0 0 00 3 1 0 00

1 2 3 6 9 1 0 00 4

Purchased ski boots on account, Invoice 6672, n/30 3 Purchases Accounts Payable/Alaska Supply Company

5 6 7 8 12 2 0 0 00 9

10 11 12 13

501 201

12 2 0 0 00

Purchased skis on account, Invoice 5916, terms 3/10, n/30 7 Accounts Payable/Colorado Ski Shop Purchases Returns and Allowances Received Credit Memorandum 165 for $1,000 for damaged ski boots purchased on Sept. 2. 11 Purchases Accounts Payable/Cold Mountain Clothing Company

201

1 0 0 0 00

503

1 0 0 0 00 14 15 16 17 18 19 5 0 0 0 00 20

21 22 23 24

501 201

5 0 0 0 00

Purchased ski jackets on account, Invoice 4091, n/30 12 Accounts Payable/Alaska Supply Company Purchases Discounts ($12,200 x 3%) Cash ($12,200 - $366) Paid amount due on Invoice 5916, Check 104 22 Purchases Freight In Accounts Payable/Alaska Supply Company

201

12 2 0 0 00

504 101

501 502 201

1

4 7 6 0 00 1 7 0 00

Purchased ski poles on account, Invoice 5950, terms 3/10, n/30

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3 6 6 00 25 11 8 3 4 00 26 27 28 29 30 4 9 3 0 00 31 32 33 34


PROBLEM 8.2A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 23 Purchases 3 Accounts Payable/Swenson Ski Goods 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Post Ref.

DEBIT

CREDIT

3 2 5 0 00

1 2 3 2 5 0 00 3

4 5 6 7

501 201

Purchased ski pants on account, Invoice 528, n/30 25 Accounts Payable/Swenson Ski Goods Purchases Return and Allowances Received Credit Memorandum 245 for $400 for defective ski pants, original purchase made on Sept. 23. 27 Purchases Freight In Accounts Payable/Colorado Ski Shop

201

4 0 0 00

503

4 0 0 00 8 9 10 11 12 13 14 3 7 5 0 00 15

16 17 18 19

501 502 201

3 6 0 0 00 1 5 0 00

Purchased ski sweaters on account, Invoice 6722, n/30 30 Accounts Payable/Colorado Ski Shop Cash ($6,910 - $1,000) Paid amount due on Invoice 6672 less return of Sept. 7, Check 110

201

2

5 9 1 0 00

101

Analyze: The amount of the cash discount on September 12 was $366.

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5 9 1 0 00 20 21 22 23


PROBLEM 8.3A GENERAL LEDGER ACCOUNT Cash DATE 2016 Sept

DESCRIPTION

1 Balance 12 30

ACCOUNT NO. Post Ref.

DEBIT

CREDIT

 J1 J2

11 5

8 3 4 00 9 1 0 00

BALANCE DEBIT CREDIT 27 15 9

ACCOUNT Accounts Payable DATE 2016 Sept

DESCRIPTION

2 3 7 11 12 22 23 25 27 30

J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

1 12

CREDIT

6 12

9 1 0 00 2 0 0 00

5

0 0 0 00

4 3

9 3 0 00 2 5 0 00

3

7 5 0 00

6 9 1 0 00 19 1 1 0 00 18 1 1 0 00 23 1 1 0 00 10 9 1 0 00 15 8 4 0 00 19 0 9 0 00 18 6 9 0 00 22 4 4 0 00 16 5 3 0 00

0 0 0 00 2 0 0 00

4 0 0 00 5

2016 Sept

DESCRIPTION

9 1 0 00

2 3 11 22 23 27

ACCOUNT NO. Post Ref. J1 J1 J1 J1 J2 J2

DEBIT

6 12 5 4 3 3

6 0 0 00 2 0 0 00 0 0 0 00 7 6 0 00 2 5 0 00 6 0 0 00

201

BALANCE DEBIT CREDIT

ACCOUNT Purchases DATE

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

ACCOUNT NO. Post Ref.

101

CREDIT

501

BALANCE DEBIT CREDIT 6 18 23 28 31 35

6 0 0 00 8 0 0 00 8 0 0 00 5 6 0 00 8 1 0 00 4 1 0 00

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PROBLEM 8.3A (continued) ACCOUNT Freight In DATE 2016 Sept

DESCRIPTION

2 22 27

ACCOUNT NO. Post Ref. J1 J1 J2

DEBIT

CREDIT

3 1 0 00 1 7 0 00 1 5 0 00

2016 Sept

DESCRIPTION

7 25

Post Ref.

ACCOUNT NO. DEBIT

J1 J2

CREDIT

1

2016 Sept

DESCRIPTION

12

1 0 0 0 00 1 4 0 0 00

ACCOUNT NO. Post Ref. J1

DEBIT

CREDIT

503

BALANCE DEBIT CREDIT

0 0 0 00 4 0 0 00

ACCOUNT Purchases Discounts DATE

BALANCE DEBIT CREDIT 3 1 0 00 4 8 0 00 6 3 0 00

ACCOUNT Purchases Returns and Allowances DATE

502

504

BALANCE DEBIT CREDIT

3 6 6 00

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3 6 6 00


PROBLEM 8.3A (continued)

NAME

ACCOUNTS PAYABLE SUBSIDIARY LEDGER Alaska Supply Company

TERMS

3/10, n/30

ADDRESS DATE 2016 Sept.

DESCRIPTION

3 Invoice 5916 12 22 Invoice 5950

NAME

Post Ref. J1 J1 J1

DEBIT

CREDIT

BALANCE

12 2 0 0 00

12 2 0 0 00 - 0 4 9 3 0 00

12 2 0 0 00 4 9 3 0 00

TERMS

Cold Mountain Clothing Company

n/30

ADDRESS DATE

DESCRIPTION

2016 Sept. 11 Invoice 4091

NAME

Post Ref.

DEBIT

J1

CREDIT

BALANCE

5 0 0 0 00

5 0 0 0 00

TERMS

Colorado Ski Shop

n/30

ADDRESS DATE 2016 Sept.

DESCRIPTION

2 Invoice 6672 7 CM 165 27 Invoice 6722 30

NAME

Post Ref. J1 J1 J2 J2

DEBIT

CREDIT

BALANCE

6 9 1 0 00

6 9 1 0 00 5 9 1 0 00 9 6 6 0 00 3 7 5 0 00

1 0 0 0 00 3 7 5 0 00 5 9 1 0 00

TERMS

Swenson Ski Goods

n/30

ADDRESS DATE 2016 Sept. 23 Invoice 528 25 CM 245

DESCRIPTION

Post Ref. J2 J2

DEBIT

CREDIT

BALANCE

3 2 5 0 00

3 2 5 0 00 2 8 5 0 00

4 0 0 00

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PROBLEM 8.3A (continued) Big Country Ski Shop Schedule of Accounts Payable September 30, 2016 Alaska Supply Company Cold Mountain Clothing Company Colorado Ski Shop Swenson Ski Goods Total

The balance of the Accounts Payable control account is $16,530. Analyze: $6,600 + $5,000 + $3,250 + $3,600 = $18,450. The portion of purchases in September for clothing items is $18,450.

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4 9 3 0 00 5 0 0 0 00 3 7 5 0 00 2 8 5 0 00 1 6 5 3 0 00


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PROBLEM 8.4A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 1 Purchases 3 Cash 4 Purchased merchandise, Check 101 5 6 3 Purchases 7 Accounts Payable/BioCenter Inc. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Post Ref.

DEBIT

501 101

4 5 0 0 00

501

1 7 0 0 00

201

Purchased merchandise on account, Invoice 606, terms 2/10, n/30 5 Purchases Freight In Accounts Payable/New Concepts Corporation

Purchases Discounts ($1,700 x 2%) Cash ($1,700 - $34) Paid amount due to Invoice 606, Check 102 10 Accounts Payable/New Concepts Corporation Purchases Returns and Allowances Received Credit Memorandum 227 for return of damaged merchandise 11 Purchases Accounts Payable/BioCenter Inc.

201

1 7 0 0 00

14 15 16 17

1 5 0 00

3 4 00 18 1 6 6 6 00 19 20 21 22 23

1 6 8 0 00 +

1 5 0 00 24 25 26 27 28 1 6 8 0 00 29

503

201

502

501 201

1 2 4 5 0 0 00 3 4 5 6 1 7 0 0 00 7

5 8 5 0 00 1 1 0 00

Purchased merchandise on account, Invoice 1011, terms 2/10, n/30 9 Accounts Payable/BioCenter Inc.

CREDIT

8 9 10 11 12 5 9 6 0 00 13

501 504 201

1

Purchased merchandise on account, Invoice 612, terms 2/10, n/30

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30 31 32


PROBLEM 8.4A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 14 Accounts Payable/New Concepts Corporation ($5,960 - $150) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Purchases Discounts (($5,850-150) x 2%) Cash ($5,810 - $114) Paid amount owed on Invoice 1011, Check 103 15 Purchases ($9,200-$1,840 = $7,360; $7,360-$1,104 = $6,256) Accounts Payable/Park Research

Post Ref. 201

DEBIT

501 201

6 2 5 6 00

Purchased merchandise on account, Invoice 1029, terms n/30 20 Purchases Cash Purchased merchandise, Check 104

501 101

3 0 0 0 00

25 Cash Purchases Returns and Allowances Received cash for return of defective merchandise purchased June 20

101 502

2 8 0 00

30 Purchases Freight In Accounts Payable/New Concepts Corporation

501 504

3 2 0 0 00 8 5 00

201

CREDIT 1 2

5 8 1 0 00

503 101

1 1 4 00 3 5 6 9 6 00 4 5 6 7 8 6 2 5 6 00 9 10 11 12 13 3 0 0 0 00 14 15 16 17 2 8 0 00 18 19 20 21 22 23 3 2 8 5 00 24

Purchased merchandise on account, Invoice 1080, terms 2/10, n/30

Analyze: The amount of trade discounts received on the June 15 purchase from Park Research was $2,944 (List price, $9,200, less purchase price, $6,256).

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2

25 26 27


PROBLEM 8.5A GENERAL LEDGER ACCOUNT DATE 2016 June

DESCRIPTION

1 Balance 1 9 14 20 25

ACCOUNT

Accounts Payable

DATE

DESCRIPTION

2016 June

3 5 9 10 11 14 15 30

ACCOUNT

Post Ref.

DEBIT

CREDIT

 J1 J1 J2 J2 J2

4 5 0 0 00 1 6 6 6 00 5 6 9 6 00 3 0 0 0 00 2 8 0 00

Post Ref.

J1 J1 J1 J1 J1 J2 J2 J2

DESCRIPTION

1 3 5 11 15 20 30

BALANCE DEBIT CREDIT 37 4 0 0 00 32 9 0 0 00 31 2 3 4 00 25 5 3 8 00 22 5 3 8 00 22 8 1 8 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 7 0 0 00 5 9 6 0 00

1 7 0 0 00 7 6 6 0 00 5 9 6 0 00 5 8 1 0 00 7 4 9 0 00 1 6 8 0 00 7 9 3 6 00 11 2 2 1 00

1 7 0 0 00 1 5 0 00 1 6 8 0 00 5 8 1 0 00 6 2 5 6 00 3 2 8 5 00

ACCOUNT NO. 501

Purchases

DATE 2016 June

ACCOUNT NO. 101

Cash

Post Ref.

J1 J1 J1 J1 J2 J2 J2

DEBIT

4 5 0 0 00 1 7 0 0 00 5 8 5 0 00 1 6 8 0 00 6 2 5 6 00 3 0 0 0 00 3 2 0 0 00

CREDIT

BALANCE DEBIT CREDIT 4 5 0 0 00 6 2 0 0 00 12 0 5 0 00 13 7 3 0 00 19 9 8 6 00 22 9 8 6 00 26 1 8 6 00

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PROBLEM 8.5A (continued) ACCOUNT DATE 2016 June

DESCRIPTION

10 25

Purchases Discounts

DATE

DESCRIPTION

9 14

ACCOUNT

DEBIT

CREDIT

5 30

1 5 0 00 4 3 0 00

ACCOUNT NO. 503 Post Ref.

DEBIT

J1 J2

DESCRIPTION

BALANCE DEBIT CREDIT

1 5 0 00 2 8 0 00

CREDIT

BALANCE DEBIT CREDIT

3 4 00 1 1 4 00

3 4 00 1 4 8 00

ACCOUNT NO. 504

Freight In

DATE 2016 June

Post Ref.

J1 J2

ACCOUNT

2016 June

ACCOUNT NO. 502

Purchases Returns and Allowances

Post Ref.

J1 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 1 0 00 8 5 00

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1 1 0 00 1 9 5 00


PROBLEM 8.5A (continued)

NAME

ACCOUNTS PAYABLE SUBSIDIARY LEDGER BioCenter Inc.

TERMS

2/10, n/30

ADDRESS DATE 2016 June

DESCRIPTION

3 Invoice 606 9 11 Invoice 612

NAME

Post Ref. J1 J1 J1

DEBIT

CREDIT

BALANCE

1 7 0 0 00

1 7 0 0 00 0 00 1 6 8 0 00

1 7 0 0 00 1 6 8 0 00

TERMS

New Concepts Corporation

2/10, n/30

ADDRESS DATE 2016 June

DESCRIPTION

5 Invoice 1011 10 CM 227 14 30 Invoice 1080

NAME

Post Ref. J1 J1 J2 J2

DEBIT

CREDIT

BALANCE

5 9 6 0 00

5 9 6 0 00 5 8 1 0 00 0 00 3 2 8 5 00

1 5 0 00 5 8 1 0 00 3 2 8 5 00

TERMS

Park Research

n/30

ADDRESS DATE

DESCRIPTION

2016 June 15 Invoice 1029

Post Ref. J2

DEBIT

CREDIT

BALANCE

6 2 5 6 00

6 2 5 6 00

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PROBLEM 8.5A (continued) NewTech Medical Devices Schedule of Accounts Payable June 30, 2016 BioCenter Inc. New Concepts Corporation Park Research Total

1 3 6 11

6 8 0 00 2 8 5 00 2 5 6 00 2 2 1 00

Analyze: The amount of merchandise returned to vendors by NewTech Medical Devices in June was $430.

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PROBLEM 8.6A Bruno Company PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 8 Accounts Payable/Smith, Inc. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Post Ref. 201

DEBIT 3 0 0 0 00

Purchases Discounts Cash Paid amount owed on Invoice 1885 less cash discount, Check # 2101 10 Purchases Accounts Payable/Smith, Inc.

2 0 0 0 00 201

Purchased merchandise on account, Invoice 1920, terms 2/10, n/30 15 Accounts Payable/Smith, Inc. Purchases Returns and Allowances Received Credit Memorandum 320 for return of damaged merchandise, Invoice 1920

201 ✔

19 Accounts Payable/Smith, Inc. ($2,000 - $200)

201

2 0 0 00

1 8 0 0 00

Purchases Discounts ($2,000 - $200) x 2% Cash Paid amount owed on Invoice 1920 less return of January 15, Check # 2130 30 Purchases Accounts Payable/Smith, Inc.

4 2 0 0 00 201

Purchased merchandise on account, Invoice 1950, terms 2/10, n/30

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21

CREDIT 1 2 6 0 00 3 2 9 4 0 00 4 5 6 7 8 2 0 0 0 00 9 10 11 12 13 2 0 0 00 14 15 16 17 18 3 6 00 19 1 7 6 4 00 20 21 22 23 24 4 2 0 0 00 25 26 27 28


PROBLEM 8.6A (continued) Smith, Inc. PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 8 Sales Discounts 3 Cash 4 Accounts Receivable/Bruno Company 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Post Ref.

111

DEBIT

CREDIT

6 0 00 2 9 4 0 00 ✔

1 2 3 3 0 0 0 00 4

5 6 7 8

Received payment on Invoice 1885, less sales discount 10 Accounts Receivable/Bruno Company

111

2 0 0 0 00

Sales Sold merchandise on account, Invoice 1920, terms 2/10, n/30 15 Sales Returns and Allowances Accounts Receivable/Bruno Company

2 0 0 0 00 9 10 11 12 13 2 0 0 00 14

15 16 17 18 19 20 1 8 0 0 00 21

22 23 24 25

2 0 0 00 111

Accepted return of damaged merchandise, Credit Memorandum 320; original sale made on Invoice 1920, January 10 19 Sales Discounts Cash Accounts Receivable/Bruno Company

3 6 00 1 7 6 4 00 111

Received payment on Invoice 1920, less sale discount 30 Accounts Receivable/Bruno Company

111

21

4 2 0 0 00

Sales Sold merchandise on account, Invoice 1950, 2/10, n/30

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4 2 0 0 00 26 27 28 29


PROBLEM 8.6A (continued) GENERAL LEDGER – Bruno Company ACCOUNT Accounts Payable DATE 2016 Jan.

DESCRIPTION

1 Balance 8 10 15 19 30

ACCOUNT NO. 201 Post Ref.

DEBIT

CREDIT

BALANCE DEBIT CREDIT

 J21 J21 J21 J21 J21

3 0 0 0 00 - 0 2 0 0 0 00 1 8 0 0 00 - 0 4 2 0 0 00

3 0 0 0 00 2 0 0 0 00 2 0 0 00 1 8 0 0 00 4 2 0 0 00

ACCOUNTS PAYABLE SUBSIDIARY LEDGER – Bruno Company TERMS 2/10, n/30 Smith, Inc.

NAME ADDRESS DATE 2016 Jan.

Post Ref. 1 Balance 8 10 15 19 30

DEBIT

CREDIT

 J21 J21 J21 J21 J21

3 0 0 0 00 2 0 0 0 00 2 0 0 00 1 8 0 0 00 4 2 0 0 00

BALANCE

3 0 0 0 00 - 0 2 0 0 0 00 1 8 0 0 00 - 0 4 2 0 0 00

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PROBLEM 8.6A (continued) GENERAL LEDGER – Smith, Inc. ACCOUNT DATE 2016 Jan.

Accounts Receivable DESCRIPTION Post Ref.

1 Balance 8 10 15 19 30

NAME

DEBIT

ACCOUNT NO. 111 BALANCE DEBIT CREDIT

CREDIT

 J21 J21 J21 J21 J21

3 0 0 0 00 - 0 2 0 0 0 00 1 8 0 0 00 - 0 4 2 0 0 00

3 0 0 0 00 2 0 0 0 00 2 0 0 00 1 8 0 0 00 4 2 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER – Smith, Inc. TERMS Bruno Company

ADDRESS DATE 2016 Jan.

1 Balance 8 10 15 19 30

Post Ref.

DEBIT

CREDIT

 J21 J21 J21 J21 J21

3 0 0 0 00 2 0 0 0 00 2 0 0 00 1 8 0 0 00 4 2 0 0 00

BALANCE

3 0 0 0 00 - 0 2 0 0 0 00 1 8 0 0 00 - 0 4 2 0 0 00

Analyze: The balance of the accounts payable for Smith, Inc. in the Bruno Company accounts payable subsidiary ledger is $4,200. The balance of the accounts receivable for Bruno Company in the Smith, Inc. accounts receivable subsidiary ledger is $4,200.

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PROBLEM 8.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 1 Purchases 3 Freight In 4 Accounts Payable/Mow Down Corporation 5 Purchased lawn mowers on account, 6 Invoice 925, n/30 7 8 5 Purchases 9 Accounts Payable/Patio Furniture, Inc. 10 Purchased outdoor chairs and tables on account, 11 Invoice 992, n/30 12 13 9 Purchases 14 Accounts Payable/Summer Lawn Center 15 Purchased grass seed on account, 16 Invoice 4001, n/30 17 18 15 Purchases 19 Cash 20 Recorded various cash purchases for June 1 – 15. 21 22 20 Purchases 23 Freight In 24 Accounts Payable/Mason Industries 25 Purchased sprinkler system on account, 26 Invoice 9228, n/30 27 28 27 Accounts Payable/Patio Furniture, Inc. 29 Cash 30 Issued chk 104 for partial payment of Invoice 992 31 32 30 Purchases 33 Cash 34 Recorded various cash purchases for June 16 – 30. 35 36 30 Accounts Payable/Mow Down Corporation 37 Cash 38 Issued chk 105 for full payment of Invoice 925 39

Post Ref.

DEBIT

501 502 205

5 0 2 5 00 1 2 5 00

501 205

6 7 6 0 00

501 205

9 4 8 00

501 101

2 9 0 0 00

501 502 205

7 2 5 0 00 3 2 0 00

205 101

3 0 0 0 00

501 101

2 6 5 0 00

205 101

5 1 5 0 00

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1

CREDIT 1 2 3 5 1 5 0 00 4 5 6 7 8 6 7 6 0 00 9 10 11 12 13 9 4 8 00 14 15 16 17 18 2 9 0 0 00 19 20 21 22 23 7 5 7 0 00 24 25 26 27 28 3 0 0 0 00 29 30 31 32 2 6 5 0 00 33 34 35 36 5 1 5 0 00 37 38 39


PROBLEM 8.1B (continued) GENERAL LEDGER ACCOUNT Cash DATE 2016 June

DESCRIPTION

1 Balance 15 27 30 30

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

 J1 J1 J1 J1

2 9 0 0 00 3 0 0 0 00 2 6 5 0 00 5 1 5 0 00

ACCOUNT Accounts Payable DATE 2016 June

DESCRIPTION

1 5 9 20 27 30

Post Ref. J1 J1 J1 J1 J1 J1

2016 June

DESCRIPTION

1 5 9 15 20 30

20 0 0 0 00 17 1 0 0 00 14 1 0 0 00 11 4 5 0 00 6 3 0 0 00

ACCOUNT NO. 205 DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 1 5 0 00 6 7 6 0 00 9 4 8 00 7 5 7 0 00

5 1 5 0 00 11 9 1 0 00 12 8 5 8 00 20 4 2 8 00 17 4 2 8 00 12 2 7 8 00

3 0 0 0 00 5 1 5 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J1 J1

5 0 2 5 00 6 7 6 0 00 9 4 8 00 2 9 0 0 00 7 2 5 0 00 2 6 5 0 00

CREDIT

BALANCE DEBIT CREDIT 5 0 2 5 00 11 7 8 5 00 12 7 3 3 00 15 6 3 3 00 22 8 8 3 00 25 5 3 3 00

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PROBLEM 8.1B (continued) GENERAL LEDGER ACCOUNT Freight In DATE 2016 June

DESCRIPTION

1 20

ACCOUNT NO. 502 Post Ref.

DEBIT

J1 J1

1 2 5 00 3 2 0 00

CREDIT

BALANCE DEBIT CREDIT 1 2 5 00 4 4 5 00

Analyze: The total freight costs incurred during June were $445.

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PROBLEM 8.2B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 April 2 Purchases 3 Freight In 4 Accounts Payable/Mailing and Packing Center 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Post Ref. 501 502

DEBIT

CREDIT

2 3 0 0 00 2 1 0 00

1 2 3 2 5 1 0 00 4

201 

Purchased copy paper on account, Invoice 3772, n/30 8 Purchases Accounts Payable/Special Occasion Cards

201 

5 6 7 8 1 9 0 0 00 9

201 

10 11 12 13

501

1 9 0 0 00

Purchased gift cards on account, Invoice 9516, terms 1/10, n/30 9 Accounts Payable/Mailing and Packing Center Purchases Returns and Allowances Received Credit Memorandum 155 for water-damaged copy paper purchased on April 2 12 Purchases Accounts Payable/Specialty Cards

2 2 0 00

503

201 

2 2 0 00 14 15 16 17 18 1 2 0 0 00 19

201 

20 21 22 23

501

1 2 0 0 00

Purchased novelty items on account, Invoice 4901, n/30 17 Accounts Payable/Special Occasion Cards Purchases Discounts ($1,900 x 1%) Cash ($1,900 - $19) Paid amount due on Invoice 9516, Check 105 22 Purchases Accounts Payable/Specialty Cards

1

1 9 0 0 00

504 101

501

7 5 0 00

201 

Purchased cards on account, Invoice 4921, n/30

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1 9 00 24 1 8 8 1 00 25 26 27 28 29 7 5 0 00 30 31 32 33


PROBLEM 8.2B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2010 2 April 23 Purchases 3 Freight In 4 Accounts Payable/Business Forms, Inc. 5 7 8 9 10 11 13 14 15 16 17 18 19 20 21 22 23 24

Post Ref.

DEBIT

CREDIT

1 9 8 0 00 7 0 00

201 

1 2 3 2 0 5 0 00 4

201 

5 7 8

501 502

Purchased forms on account, Invoice 2020, n/30 25 Accounts Payable/Specialty Cards Purchases Returns and Allowances Received Credit Memorandum 225 for return of defective cards originally purchased on April 22

2

7 5 00

201 

7 5 00 9 10 11 13 14 15 2 8 6 0 00 16

30 Accounts Payable/Mailing and Packing Center

201 

17 18 19 20

Cash ($2,510 - $220) Paid amount due on Invoice 3772 less return of April 9, Check 111

101

27 Purchases Freight In Accounts Payable/Business Forms, Inc.

503

501 502

2 7 7 5 00 8 5 00

Purchased toner and other office supplies on account, Invoice 2029, n/30 2 2 9 0 00

Analyze: The cost per card was $1.50 ($750 ÷ 500 cards).

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2 2 9 0 00 21 22 23 24


PROBLEM 8.3B GENERAL LEDGER ACCOUNT Cash DATE 2016 April

DESCRIPTION

1 Balance 17 30

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

 J1 J2

1 8 8 1 00 2 2 9 0 00

ACCOUNT Accounts Payable DATE 2016 April

DESCRIPTION

2 8 9 12 17 22 23 25 27 30

Post Ref. J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

2016 April

DESCRIPTION

2 8 12 22 23 27

12 5 0 0 00 10 6 1 9 00 8 3 2 9 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 5 1 0 00 1 9 0 0 00

2 5 1 0 00 4 4 1 0 00 4 1 9 0 00 5 3 9 0 00 3 4 9 0 00 4 2 4 0 00 6 2 9 0 00 6 2 1 5 00 9 0 7 5 00 6 7 8 5 00

2 2 0 00 1 2 0 0 00 1 9 0 0 00 7 5 0 00 2 0 5 0 00 7 5 00 2 8 6 0 00 2 2 9 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J2 J2

2 3 0 0 00 1 9 0 0 00 1 2 0 0 00 7 5 0 00 1 9 8 0 00 2 7 7 5 00

CREDIT

BALANCE DEBIT CREDIT 2 3 0 0 00 4 2 0 0 00 5 4 0 0 00 6 1 5 0 00 8 1 3 0 00 10 9 0 5 00

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PROBLEM 8.3B (continued) ACCOUNT Freight In DATE 2016 April

DESCRIPTION

2 23 27

ACCOUNT NO. 502 Post Ref.

DEBIT

J1 J2 J2

2 1 0 00 7 0 00 8 5 00

CREDIT

2 1 0 00 2 8 0 00 3 6 5 00

ACCOUNT NO. 503

ACCOUNT Accounts PurchasesPayable Returns and Allowances DATE 2016 April

DESCRIPTION

9 25

Post Ref.

DEBIT

J1 J2

CREDIT

2016 April

DESCRIPTION

17

BALANCE DEBIT CREDIT

2 2 0 00 7 5 00

2 0 0 00 2 9 5 00

ACCOUNT NO. 504

ACCOUNT Accounts PurchasesPayable Discounts DATE

BALANCE DEBIT CREDIT

Post Ref. J1

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 9 00

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1 9 00


PROBLEM 8.3B (continued)

NAME

ACCOUNTS PAYABLE SUBSIDIARY LEDGER Business Forms, Inc.

TERMS

1/10, n/30

ADDRESS DATE

DESCRIPTION

2016 April 23 Invoice 2020 27 Invoice 2029

NAME

Post Ref.

DEBIT

J2 J2

CREDIT

BALANCE

2 0 5 0 00 2 8 6 0 00

2 0 5 0 00 4 9 1 0 00

TERMS

Mailing and Packing Center

n/30

ADDRESS DATE 2016 April

DESCRIPTION

2 Invoice 3772 9 CM 155 30

NAME

Post Ref. J1 J1 J2

DEBIT

CREDIT

BALANCE

2 5 1 0 00

2 5 1 0 00 2 2 9 0 00 - 0 -

2 2 0 00 2 2 9 0 00

TERMS

Special Occasion Cards

n/30

ADDRESS DATE 2016 April

DESCRIPTION

8 Invoice 9516 17

NAME

Post Ref. J1 J1

DEBIT

CREDIT

BALANCE

1 9 0 0 00

1 9 0 0 00 - 0 -

1 9 0 0 00

TERMS

Specialty Cards

n/30

ADDRESS DATE 2016 April 12 Invoice 4901 22 Invoice 4921 25 CM 225

DESCRIPTION

Post Ref. J1 J1 J2

DEBIT

CREDIT

BALANCE

1 2 0 0 00 7 5 0 00

1 2 0 0 00 1 9 5 0 00 1 8 7 5 00

7 5 00

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PROBLEM 8.3B (continued) Tara's Card and Novelty Shop Schedule of Accounts Payable April 30, 2016 Business Forms, Inc. Mailing and Packing Center Special Occasion Cards Specialty Cards Total

The balance of the Accounts Payable control account is $6,785. Analyze: The amount of purchase discounts in April was $19.

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4 9 1 0 00 - 0 - 0 1 8 7 5 00 6 7 8 5 00


PROBLEM 8.4B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Aug. 1 Purchases 3 Cash 4 Purchased merchandise, Check 101 5 6 2 Purchases 7 Accounts Payable/Brown Dental Corporation 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Post Ref.

DEBIT

501 101

2 5 0 0 00

501

2 2 0 0 00

201

Purchased merchandise on account, Invoice 866, terms 1/10, n/30 5 Purchases Freight In Accounts Payable/Dental Concepts

Purchases Discounts ($2,200 x 1%) Cash ($2,200 - $22) Paid amount due on Invoice 866, Check 102 10 Accounts Payable/Dental Concepts Purchases Returns and Allowances Received Credit Memorandum 272 for return of damaged merchandise purchased on August 5 11 Purchases Accounts Payable/Brown Dental Corporation

201

2 2 0 0 00

14 15 16 17

3 0 0 00

2 2 00 18 2 1 7 8 00 19 20 21 22 23

503 101

201

502

501 201

1 2 2 5 0 0 00 3 4 5 6 2 2 0 0 00 7

3 9 0 0 00 1 0 0 00

Purchased merchandise on account, Invoice 2111, terms 2/10, n/30 10 Accounts Payable/Brown Dental Corporation

CREDIT

8 9 10 11 12 4 0 0 0 00 13

501 504 201

1

1 7 0 0 00

Purchased merchandise on account, Invoice 898, terms 1/10, n/30

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3 0 0 00 24 25 26 27 28 1 7 0 0 00 29 30 31 32


PROBLEM 8.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Aug. 14 Accounts Payable/Dental Concepts ($4,000 - $300) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Purchases Discounts ($3,600 x 2%) Cash Paid amount owed on Invoice 2111, less return of August 10, Check 103 15 Purchases Accounts Payable/Surgical Supplies

Post Ref. 201

DEBIT 3 7 0 0 00

503 101

501 201

2 8 8 0 00

Purchased merchandise on account, Invoice 1902, terms n/30 $4,000 - ($4,000 x 20%) = $3,200 $3,200 - ($3,200 x 10%) = $2,880 20 Purchases Cash Purchased merchandise, Check 104

501 101

1 9 0 0 00

24 Cash Purchases Returns and Allowances Received cash for return of defective merchandise purchased August 20

101 502

1 7 5 00

30 Purchases Freight In Accounts Payable/Dental Concepts

501 504

2 1 2 5 00 7 5 00

201

Purchased merchandise on account, Invoice 2285, terms 2/10, n/30

Analyze: 2.5% ($100 ÷ $4,000).

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2

CREDIT 1 2 7 2 00 3 3 6 2 8 00 4 5 6 7 8 2 8 8 0 00 9 10 11 12 13 14 15 1 9 0 0 00 16 17 18 19 1 7 5 00 20 21 22 23 24 25 2 2 0 0 00 26 27 28 29


PROBLEM 8.5B GENERAL LEDGER ACCOUNT Cash DATE 2016 Aug.

DESCRIPTION

1 Balance 1 10 14 20 24

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

 J1 J1 J2 J2 J2

2 5 0 0 00 2 1 7 8 00 3 6 2 8 00 1 9 0 0 00 1 7 5 00

ACCOUNT Accounts Payable DATE 2016 Aug.

DESCRIPTION

2 5 10 10 11 14 15 30

Post Ref. J1 J1 J1 J1 J1 J2 J2 J2

2016 Aug.

DESCRIPTION

1 2 5 11 15 20 30

39 7 0 0 00 37 2 0 0 00 35 0 2 2 00 31 3 9 4 00 29 4 9 4 00 29 6 6 9 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 2 0 0 00 4 0 0 0 00

2 2 0 0 00 6 2 0 0 00 4 0 0 0 00 3 7 0 0 00 5 4 0 0 00 1 7 0 0 00 4 5 8 0 00 6 7 8 0 00

2 2 0 0 00 3 0 0 00 1 7 0 0 00 3 7 0 0 00 2 8 8 0 00 2 2 0 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J2 J2 J2

2 5 0 0 00 2 2 0 0 00 3 9 0 0 00 1 7 0 0 00 2 8 8 0 00 1 9 0 0 00 2 1 2 5 00

CREDIT

BALANCE DEBIT CREDIT 2 5 0 0 00 4 7 0 0 00 8 6 0 0 00 10 3 0 0 00 13 1 8 0 00 15 0 8 0 00 17 2 0 5 00

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PROBLEM 8.5B (continued) ACCOUNT Purchases Returns and Allowances DATE 2016 Aug.

DESCRIPTION

10 24

Post Ref.

DEBIT

J1 J2

ACCOUNT NO. 502 CREDIT

3 0 0 00 1 7 5 00

ACCOUNT Purchases Discounts DATE 2016 Aug.

DESCRIPTION

10 14

Post Ref.

DEBIT

J1 J2

2016 Aug.

DESCRIPTION

5 30

3 0 0 00 4 7 5 00

ACCOUNT NO. 503 CREDIT

BALANCE DEBIT CREDIT

2 2 00 7 2 00

ACCOUNT Freight In DATE

BALANCE DEBIT CREDIT

2 2 00 9 4 00

ACCOUNT NO. 504 Post Ref.

DEBIT

J1 J2

1 0 0 00 7 5 00

CREDIT

BALANCE DEBIT CREDIT 1 0 0 00 1 7 5 00

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PROBLEM 8.5B (continued)

NAME

ACCOUNTS PAYABLE SUBSIDIARY LEDGER Brown Dental Corporation

TERMS

1/10, n/30

ADDRESS DATE 2016 Aug.

DESCRIPTION

2 Invoice 866 10 11 Invoice 898

NAME

Post Ref. J1 J1 J1

DEBIT

CREDIT

BALANCE

2 2 0 0 00

2 2 0 0 00 - 0 1 7 0 0 00

2 2 0 0 00 1 7 0 0 00

TERMS

Dental Concepts

2/10, n/30

ADDRESS DATE 2016 Aug.

DESCRIPTION

5 Invoice 2111 10 CM 272 14 30 Invoice 2285

NAME

Post Ref. J1 J1 J2 J2

DEBIT

CREDIT

BALANCE

4 0 0 0 00

4 0 0 0 00 3 7 0 0 00 - 0 2 2 0 0 00

3 0 0 00 3 7 0 0 00 2 2 0 0 00

TERMS

Surgical Supplies

n/30

ADDRESS DATE 2016 Aug. 15 Invoice 1902

DESCRIPTION

Post Ref. J2

DEBIT

CREDIT

BALANCE

2 8 8 0 00

2 8 8 0 00

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PROBLEM 8.5B (continued) Dental Supplies, Inc. Schedule of Accounts Payable August 31, 2016 Brown Dental Corporation Dental Concepts Surgical Supplies Total

Analyze: On August 31, Dental Supplies, Inc. owes Dental Concepts $2,200.

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 8-46

1 2 2 6

7 0 0 00 2 0 0 00 8 8 0 00 7 8 0 00


PROBLEM 8.6B Banh Company PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 8 Accounts Payable/Santoni, Inc. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Post Ref.

DEBIT

201 

6 0 0 0 00

Purchases Discounts Cash Paid amount owed on Invoice 1985, less cash discount, Check 2001 9 Purchases Accounts Payable/Santoni, Inc.

201 

4 0 0 00

10 11 12 13

3 4 0 0 00

4 0 0 00 14 15 16 17 18

3 8 0 0 00

201 

Purchases Discounts ($3,400 x 2%) Cash ($3,400 - $68) Paid amount owed on Invoice 1990, less return of February 15, Check 2009 28 Purchases Accounts Payable/Santoni, Inc.

1 2

201 

Purchases Returns and Allowances Received Credit Memorandum 220 for return of damaged merchandise, Invoice 1990 18 Accounts Payable/Santoni, Inc. ($3,800 - $400)

CREDIT

1 2 0 00 3 5 8 8 0 00 4 5 6 7 8 3 8 0 0 00 9

Purchased merchandise on account, Invoice 1990, terms 2/10, n/30 15 Accounts Payable/Santoni, Inc.

12

6 2 0 0 00 201 

Purchased merchandise on account, Invoice 2008, terms 2/10, n/30

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6 8 00 19 3 3 3 2 00 20 21 22 23 24 6 2 0 0 00 25 26 27 28


PROBLEM 8.6B (continued) Santoni, Inc. PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 8 Sales Discounts 3 Cash 4 Accounts Receivable/Banh Company 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Post Ref.

DEBIT

CREDIT

1 2 0 00 5 8 8 0 00 111 

1 2 3 6 0 0 0 00 4

111 

5 6 7 8

Received payment for Invoice 1985, less sales discount 9 Accounts Receivable/Banh Company

3 8 0 0 00

Sales Sold merchandise on account, Invoice 1990, 2/10, n/30 15 Sales Returns and Allowances Accounts Receivable/Banh Company

111 

3 8 0 0 00 9 10 11 12 13 4 0 0 00 14

111 

15 16 17 18 19 20 3 4 0 0 00 21

111 

22 23 24 25

4 0 0 00

Accepted return for damaged merchandise, Credit Memorandum 220; original sale made on Invoice 1990, February 9. 18 Sales Discounts ($3,800 - $400) x 2% Cash Accounts Receivable/Banh Company

6 8 00 3 3 3 2 00

Received payment for Invoice 1990, less sale discount 28 Accounts Receivable/Banh Company

12

6 2 0 0 00

Sales Sold merchandise on account, Invoice 2008, 2/10, n/30

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6 2 0 0 00 26 27 28 29


PROBLEM 8.6B (continued) GENERAL LEDGER – Banh Company ACCOUNT Accounts Payable DATE 2016 Jan.

DESCRIPTION

1 Balance 8 9 15 18 28

NAME ADDRESS

Post Ref.

DEBIT

CREDIT

BALANCE DEBIT CREDIT

 J12 J12 J12 J12 J12

6 0 0 0 00 - 0 3 8 0 0 00 3 4 0 0 00 - 0 6 2 0 0 00

6 0 0 0 00 3 8 0 0 00 4 0 0 00 3 4 0 0 00 6 2 0 0 00

ACCOUNTS PAYABLE SUBSIDIARY LEDGER – Banh Company TERMS 2/10, n/30 Santoni, Inc.

DATE 2016 Jan.

ACCOUNT NO. 201

Post Ref. 1 Balance 8 9 Invoice 1990 15 CM 220 18 28 Invoice 2008

DEBIT

CREDIT

 J12 J12 J12 J12 J12

6 0 0 0 00 3 8 0 0 00 4 0 0 00 3 4 0 0 00 6 2 0 0 00

BALANCE

6 0 0 0 00 - 0 3 8 0 0 00 3 4 0 0 00 - 0 6 2 0 0 00

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PROBLEM 8.6B (continued) GENERAL LEDGER – Santoni, Inc ACCOUNT Accounts Receivable DATE DESCRIPTION 2016 Jan.

1 Balance 8 9 15 18 28

Post Ref.

DEBIT

CREDIT

 J12 J12 J12 J12 J12

6 0 0 0 00 3 8 0 0 00 4 0 0 00 3 4 0 0 00 6 2 0 0 00

ACCOUNT NO. 111 BALANCE DEBIT CREDIT 6 0 0 0 00 - 0 3 8 0 0 00 3 4 0 0 00 - 0 6 2 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER – Santoni, Inc. NAME Banh Company ADDRESS DATE Post DEBIT CREDIT BALANCE Ref. 2016 Jan.

1 Balance 8 9 15 18 28

 J12 J12 J12 J12 J12

6 0 0 0 00 3 8 0 0 00 4 0 0 00 3 4 0 0 00 6 2 0 0 00

6 0 0 0 00 - 0 3 8 0 0 00 3 4 0 0 00 - 0 6 2 0 0 00

Analyze: The balance of the accounts payable for Santoni, Inc. in the Banh Company accounts payable subsidiary ledger is $6,200. The balance of the accounts receivable for Banh Company in the Santoni, Inc. accounts receivable subsidiary ledger is $6,200.

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CRITICAL THINKING PROBLEM 8.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 1 Cash 3 Supplies 4 William Evans, Capital 5 Original investments by owner 6 7 2 Purchases 8 Cash 9 Purchased merchandise, Check 100 10 11 3 Accounts Receivable/Chu Corporation 12 Sales 13 Sold merchandise on account, Invoice 1001, 14 terms 2/10, n/30 15 16 4 Purchases 17 Accounts Payable/Whitson Company 18 Purchased merchandise on account, 19 Invoice 1125, terms 1/10, n/30 20 21 5 Freight In 22 Cash 23 Paid freight charges for January 4 purchase, Check 101 24 25 10 Sales Returns and Allowances 26 Accounts Receivable/Chu Corporation 27 Issued Credit Memorandum 101 for return of 28 merchandise 29 30 11 Sales Discounts ($750 - $100 = $650; $650 x 2% = $13) 31 Cash ($750 - $100 - $13) 32 Accounts Receivable/Chu Corporation ($750 - $100) 33 Received payment for invoice 1001 34 35 13 Accounts Payable/Whitson Company 36 Purchases Discounts ($1,800 x 1%) 37 Cash ($1,800 - $18) 38 Paid amount owed on Invoice 1125, Check 102

Post Ref.

DEBIT 49 0 0 0 00 1 0 0 0 00

10 5 0 0 00

7 5 0 00

1 8 0 0 00

1 0 0 00

1 0 0 00

1 3 00 6 3 7 00

1 8 0 0 00

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1

CREDIT 1 2 3 50 0 0 0 00 4 5 6 7 10 5 0 0 00 8 9 10 11 7 5 0 00 12 13 14 15 16 1 8 0 0 00 17 18 19 20 21 1 0 0 00 22 23 24 25 1 0 0 00 26 27 28 29 30 31 6 5 0 00 32 33 34 35 1 8 00 36 1 7 8 2 00 37 38


CRITICAL THINKING PROBLEM 8.1 (continued)

DATE

GENERAL JOURNAL DESCRIPTION

1 2016 2 Jan. 15 Cash 3 Sales 4 Recorded cash sales, January 1 – 15 5 6 15 Credit Card Expense ($1,200 x 3%) 7 Cash ($1,200 - $36) 8 Sales 9 Recorded sales to customers using bank credit 10 cards, January 1 – 15 11 12 15 Wages Expense 13 Cash 14 Paid wages, Check 103 15 16 16 Equipment 17 Cash 18 Purchased equipment, Check 104 19 20 17 Equipment 21 Cash 22 Paid freight for equipment purchase of January 16, 23 Check 105 24 25 18 Purchases ($4,500 - $1,800) 26 Accounts Payable/Terri Manufacturing 27 Purchased merchandise on account, 28 Invoice 2078, terms 1/10, n/30 29 30 20 Accounts Receivable/Moloney Corp. 31 Sales 32 Sold merchandise on account, 33 Invoice 1002, terms 1/10, n/30 34

PAGE Post Ref.

DEBIT 5 7 5 0 00

3 6 00 1 1 6 4 00

1 4 0 0 00

1 7 5 0 00

2 5 0 00

2 7 0 0 00

2 5 0 0 00

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2

CREDIT 1 2 5 7 5 0 00 3 4 5 6 7 1 2 0 0 00 8 9 10 11 12 1 4 0 0 00 13 14 15 16 1 7 5 0 00 17 18 19 20 2 5 0 00 21 22 23 24 25 2 7 0 0 00 26 27 28 29 30 2 5 0 0 00 31 32 33 34


CRITICAL THINKING PROBLEM 8.1 (continued)

DATE

GENERAL JOURNAL DESCRIPTION

1 2016 2 Jan. 21 Purchases 3 Freight In 4 Accounts Payable/Schmidt Company 5 Purchased merchandise on account, 6 Invoice 3204, terms 1/10, n/30 7 8 27 Accounts Payable/Terri Manufacturing 9 Purchases Discounts ($2,700 x 1%) 10 Cash ($2,700 - $27) 11 Paid amount owed on Invoice 2078, 12 Check 106 13 14 29 Sales Discounts ($2,500 x 1%) 15 Cash ($2,500 - $25) 16 Accounts Receivable/Moloney Corp. 17 Received payment for Invoice 1002 18 19 30 Accounts Payable/Schmidt Company 20 Purchases Discounts ($3,000 x 1%) 21 Cash 22 Paid amount due on Invoice 3204, Check 107 23 24 31 Cash 25 Sales 26 Recorded cash sales, January 16 – 31 27 28 31 Credit Card Expense ($2,200 x 3%) 29 Cash ($2,200 - $66) 30 Sales 31 Recorded sales to customers using bank credit 32 cards, January 16 – 31 33

PAGE Post Ref.

DEBIT 3 0 0 0 00 7 0 00

2 7 0 0 00

2 5 00 2 4 7 5 00

3 0 7 0 00

6 2 0 0 00

6 6 00 2 1 3 4 00

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3

CREDIT 1 2 3 3 0 7 0 00 4 5 6 7 8 2 7 00 9 2 6 7 3 00 10 11 12 13 14 15 2 5 0 0 00 16 17 18 19 3 0 00 20 3 0 4 0 00 21 22 23 24 6 2 0 0 00 25 26 27 28 29 2 2 0 0 00 30 31 32 33


CRITICAL THINKING PROBLEM 8.2 1.

To determine whether Sensual Linens Shop was billed in error: a. Review Sensual Linens Shop's purchase order file for duplicate orders to Passionate Linens Company. If two orders were placed for the same merchandise, check the receiving reports to determine if both shipments were received. If Sensual Linens Shop does not prenumber its purchase orders, two orders may have been issued for the same merchandise. If only one purchase order was placed, check the receiving reports for a duplicate shipment. b. If no duplicate purchase order or duplicate receipt of merchandise is found, ask Passionate Linens Company to identify why they made two shipments of sheets. If Passionate Linens Company made the second shipment in error, they will be obligated to accept return of the sheets.

2.

To prevent this situation from occuring again: a. Prenumber all purchase order forms and periodically check to be sure that all forms can be accounted for. b. Require all purchase orders to have proper authorization before they are issued. Celeste can authorize all purchase orders, or she can designate appropriate personnel to handle this function. c. Require all shipments of merchandise received by the shop to be compared to the corresponding purchase order and the invoice received from the supplier. Any shipment for which there is no purchase order should be questioned immediately. d. Require the purchase order and corresponding receiving report to be attached to the invoice before it is presented for payment. Celeste can establish internal control procedures to reduce the possibility of issuing duplicate purchase orders, but she cannot prevent suppliers from making duplicate shipments in error. If the appropriate documentation accompanies invoices, though, she will know that the error was not commited by Sensual Linens Shop.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Maintenance of good credit reputation, taking advantage of cash discounts. 2. Allows a business to buy on credit, using resources more effectively. 3. It is important to establish a good credit rating for future cash needs. Additionally, cash could be used for other purposes. 4. 5. 6.

Creates a storage problem, risks obsolescence of the merchandise, and ties up funds. Ensure authorized-only purchases, verifies receipt of goods and accuracy of invoices, distributes tasks. Protect against fraud and excessive investment in merchandise.

Ethical Dilemma: Anna’s actions are not ethical. If she cannot get a raise from this company, she should find a new job. When she performs the unethical action of getting money from a fictitious vendor she is stealing dollar for dollar from her company. Her money comes from the net income of this company. When Anna finds how easy it is to perpetrate this fraud, she will create more vendors and more invoices. To prevent these actions, the controller should require each new vendor to receive his/her approval. The procedure to only view the checks over $100 can still be maintained with this one approval process.

Financial Statement Analysis: 1. 2013: 65.6% ($48,912 ÷ $74,574). 2012: 65.5% ($46,133 ÷ $70,395). 2. Answers will vary. Students may suggest price changes on merchandise from suppliers, discounts, or shipping costs variances. Analyze Online: Answers will vary depending on the year. Teamwork: The most advantageous would be net 45 days to pay the vendors, with customers on terms of 2/10 net 30. Your customers would then be paying you before you need to pay vendors. Internet Connection: Your Company address and phone number and the vendor’s name and address. The amount of the check or purchase order. Reference for the purchase order number of purchase requisition.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. FALSE 4. FALSE 5. TRUE 6. TRUE 7. FALSE

8. 9. 10. 11. 12. 13. 14.

FALSE TRUE TRUE FALSE FALSE FALSE TRUE

15. 16. 17. 18. 19. 20.

FALSE TRUE FALSE FALSE TRUE TRUE

Part B Exercises 1. $1,200.00 2. $2,475.00 3. $3,600.00 4. $3,140.00 5. $3,318.00

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CHAPTER 9 CASH Chapter Opener: Thinking Critically Business’s should write checks for most expenses as it provides proof of payment and provides assurance that outlays of cash are for legitimate business purposes. However, sometimes payment by check is impractical and businesses use a Petty Cash account.

Fast Facts • In 1990, Gary Erickson lived in a garage with his dog. • In 2000, Clif Bar was nearly sold to Quaker Oats for $120 million—Erickson backed out of the deal when he experienced panic attacks about the sale. The company has tripled in size since. • •

Clif Bar currently has 330 employees. In 2012, Clif Bar & Co.'s 10-year compounded annual growth rate was 17%.

Managerial Implications: Thinking Critically Answers will vary, but should recognize the need to weigh the earning power (interest income) and the need • for liquidity (access to the cash). Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Balance of Cash account in the general ledger. 2. To reconcile any difference between depositor’s checkbook, Cash account, and bank statement. 3. Day-by-day checking account activity, as well as beginning and ending balances. 4. Outstanding checks, deposits in transit, service charges. 5. To record items that have not yet been entered in firm’s records. 6. Access to checkbook is restricted; use of prenumbered check forms; checks examined by someone who did not prepare them before they are signed; bank statement reconciled by someone other than employees who handle cash. 7.

Signed, authorized written order instructing a bank to pay a specific sum of money to a designated person.

8.

Date, amount, payee, current balance, purpose of check. Stub should be prepared before the check so that it will not be forgotten.

9. 10. 11. 12.

Electronic processing of documents. Restrictive endorsement. Shortages are debited and overages are credited to the Cash Short or Over account. Use only for minor payments; establishment check made out to person to be in charge of funds; keep funds locked; payments made from funds should be documented with signatures of recipient.

13. At month-end or when petty cash is replenished. 14. Written promise to pay amount on specific date. Dr. Cash, Cr. Notes Rec., Cr. Interest Income. © 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 9-1


15. Employees are investigated by an insurance company, and, if their backgrounds are satisfactory, their employer is insured against losses that may occur because of employee theft or mishandling of funds. 16. Only approved employees can handle cash; keep cash in locked location; record cash receipts as they arrive; check funds against receipt log before bank deposits are made; make deposits promptly; separation of cash deposits, recording, reconciliation duties. 17. Payments made by check and issued only with approved invoice; invoices approved only by designated personnel; checks prepared and recorded in the checkbook or check register by someone different from the person who approves the payments; use prenumbered checks. 18. See Glossary for terms and definitions.

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EXERCISE 9.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2016 2 Apr. 29 Cash 3 Cash Short and Over 4 Sales 5 Record sales and cash shortage 6 7 30 Cash 8 Cash Short and Over 9 Sales 10 Record sales and cash overage 11

DEBIT

1 5 1 4 00 6 00

1 4 3 2 00

1

CREDIT 1 2 3 1 5 2 0 00 4 5 6 7 1 00 8 1 4 3 1 00 9 10 11

EXERCISE 9.2 PAGE

GENERAL JOURNAL DATE 1 2016 2 Jan. 3 4 5

DESCRIPTION

Post Ref.

2 Petty Cash Fund Cash Establish Petty Cash Fund, Check No. 2108

DEBIT

1

CREDIT 1 2 3 5 0 00 3 4 5

3 5 0 00

EXERCISE 9.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Jan. 31 Supplies 3 Delivery Expense 4 Miscellaneous Expense 5 Cash 6 Replenish Petty Cash Fund, Check No. 3159 7

Post Ref.

DEBIT

4 8 00 8 9 00 2 4 00

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3

CREDIT 1 2 3 4 1 6 1 00 5 6 7


EXERCISE 9.4 Chan Corporation Bank Reconciliation Statement October 31, 2016 Balance on bank statement Additions: Deposit in transit

Deductions for outstanding checks: Check 7017 Check 7098 Check 7107 Total outstanding checks Adjusted bank balance Balance in books Deductions: Bank service charge NSF check from James Dear Adjusted book balance

14 7 0 0 00 8 5 7 00 15 5 5 7 00

1 2 4 00 5 5 00 1 5 6 0 00 1 7 3 9 00 13 8 1 8 00 14 2 6 2 00 2 0 00 4 2 4 00

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4 4 4 00 13 8 1 8 00


EXERCISE 9.4 (continued) PAGE 14

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

DEBIT

1 2016 2 Oct. 31 Miscellaneous Expense 3 Cash 4 Bank service charge for October 5 6 31 Accounts Receivable/James Dear 7 Cash 8 To record NSF check returned by bank 9

2 0 00

4 2 4 00

EXERCISE 9.5 Book Balance

Accounting Entry

2.

X

X

3.

X

X

4.

X

X

X

X

1.

5.

Bank Balance X

X

6. 7.

X

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CREDIT 1 2 2 0 00 3 4 5 6 4 2 4 00 7 8 9


EXERCISE 9.6 Di Sisto Office Supply Company Bank Reconciliation Statement March 31, 2016 Balance on bank statement Additions: Deposit in transit Check incorrectly charged Deductions for outstanding checks: Check 3782 Check 3840 Total outstanding checks Adjusted bank balance

68 0 0 5 00 3 7 0 0 00 2 4 8 00

2 2 0 0 00 1 5 1 00 2 3 5 1 00 69 6 0 2 00

Balance in books Additions: Noninterest-bearing note collected by bank Deductions: Bank collection fee for note NSF check from Wilson Construction Company Adjusted book balance

3 9 4 8 00 71 9 5 3 00

69 4 8 7 00 6 3 0 0 00 75 7 8 7 00 5 0 00 6 1 3 5 00

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6 1 8 5 00 69 6 0 2 00


EXERCISE 9.6 (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 31 Cash 3 Notes Receivable 4 To record receipt of note collected by bank 5 6 31 Miscellaneous Expense 7 Cash 8 To record bank collection fee 9 10 31 Accounts Receivable/Wilson Construction Company 11 Cash 12 To record NSF check returned by bank 13

Post Ref.

DEBIT

6 3 0 0 00

5 0 00

6 1 3 5 00

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8

CREDIT 1 2 6 3 0 0 00 3 4 5 6 5 0 00 7 8 9 10 6 1 3 5 00 11 12 13


EXERCISE 9.7 Fierro Company Bank Reconciliation Statement November 30, 2016 Balance on bank statement Additions: Check incorrectly charged Check 2782 written for $200; paid by bank as $1,200 Check 2920 written for $85 paid by the bank twice

12 8 0 0 00 1 5 1 00 1 0 0 0 00 8 5 00 1 2 3 6 00 14 0 3 6 00

Deductions: November 22 deposit of $580 credited by bank for $850 Outstanding checks Adjusted bank balance

2 7 0 00 2 1 5 0 00

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2 4 2 0 00 11 6 1 6 00


EXERCISE 9.8 PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

DATE DESCRIPTION 2016 Sept. 22 Robert Savage, Drawing Cash To record ATM withdrawal by Robert Savage for personal use. 22 Cash Accounts Receivable/Edwards UK To record wire-transfer of funds received on account from Edwards UK 23 Utilities Expense Cash To record on-line payment to Waste Control Trash Services 24 Note Payable Cash To record loan payment to Central Motors

POST. REF.

DEBIT

21

CREDIT

2 4 0 00 2 4 0 00

8 9 0 0 00 8 9 0 0 00

3 6 05 3 6 05

3 5 0 0 00 3 5 0 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


PROBLEM 9.1A PAGE

GENERAL JOURNAL DATE 1 2016 2 June 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

DESCRIPTION

25 Cash Cash Short and Over Sales 26 Cash Cash Short and Over Sales 27 Cash Cash Short and Over Sales 28 Cash Cash Short and Over Sales

Post Ref.

DEBIT

620

1 2 2 1 00 6 00

620

1 3 3 2 00 8 00

1 3 5 3 00 620

620

29 Cash Cash Short and Over Sales

620

30 Cash Cash Short and Over Sales

620

1 2 7 4 00 8 00

1 1 3 1 00

1 3 6 0 00 8 00

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1

CREDIT 1 2 3 1 2 2 7 00 4 5 6 7 1 3 4 0 00 8 9 10 5 00 11 1 3 4 8 00 12 13 14 15 1 2 8 2 00 16 17 18 2 00 19 1 1 2 9 00 20 21 22 23 1 3 6 8 00 24 25


PROBLEM 9.1A (continued) GENERAL LEDGER ACCOUNT NO. 620

ACCOUNT Cash Short and Over DATE 2016 June 25 26 27 28 29 30

DESCRIPTION

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT

6 00 8 00 5 00 8 00 2 00 8 00

BALANCE DEBIT CREDIT 6 00 1 4 00 9 00 1 7 00 1 5 00 2 3 00

Analyze: The $23 debit balance in Cash Short and Over will be reported as expense on the Income Statement.

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PROBLEM 9.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 June 1 Petty Cash Fund 3 Cash 4 Establish Petty Cash Fund, Check No. 550 5 6 30 Supplies 7 Delivery Expense 8 Miscellaneous Expense 9 Rosa Calderon, Drawing 10 Cash 11 Replenish Petty Cash Fund, Check No. 590 12

Post Ref.

DEBIT

3 5 0 00

5 0 00 9 8 00 9 8 00 6 0 00

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8

CREDIT 1 2 3 5 0 00 3 4 5 6 7 8 9 3 0 6 00 10 11 12


PROBLEM 9.2A (continued) PAGE 1

PETTY CASH ANALYSIS SHEET DATE VOU NO.

2016 June

1 5 8 15 22 25 29 30 30 30 30 30

— 1 2 3 4 5 6 — — — — —

DESCRIPTION

RECEIPTS

PAYMENTS

DISTRIBUTION OF PAYMENTS SUPPLIES DEBIT

Establish fund Office supplies Postage stamps Delivery service Personal withdrawal Store windows washed service Delivery Totals Balance on hand Balance on hand Replenish fund Carried forward

MISC. EXPENSE DEBIT

OTHER ACCOUNTS DEBIT ACCOUNT NAME

AMOUNT

3 5 0 00

3 5 0 00 3 5 0 00 4 4 00 3 0 6 00 3 5 0 00

5 0 00 5 1 00 3 8 00 6 0 00 4 7 00 6 0 00 3 0 6 00 4 4 00 3 5 0 00

Analyze: The total payments from the petty cash fund were $306 in June.

9-13

DELIVERY EXPENSE DEBIT

5 0 00 5 1 00 3 8 00 Rosa Calderon, Drawing

6 0 00

4 7 00 5 0 00

6 0 00 9 8 00

9 8 00

6 0 00


PROBLEM 9.3A HPF Vacations Bank Reconciliation Statement April 30, 2016 Balance on bank statement Additions: Deposit of April 30 in transit

3 6 3 9 00 2 0 0 00 3 8 3 9 00

Deductions for outstanding checks: Check 1214 of April 28 Check 1215 of April 30 Total outstanding checks Adjusted bank balance

1 8 00 1 5 00 3 3 00 3 8 0 6 00

Balance in books Deductions: NSF check from Doris Fisher Bank charges Adjusted book balance

3 9 7 2 00 1 6 0 00 6 00

PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 April 30 Accounts Receivable/Doris Fisher 3 Cash 4 To record NSF check returned by bank 5 6 30 Miscellaneous Expense 7 Cash 8 To record bank charges 9

1 6 6 00 3 8 0 6 00

POST. REF.

DEBIT

1

CREDIT

1 6 0 00 1 6 0 00

6 00

Analyze: Outstanding checks are 1214 and 1215 totaling $33.00.

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6 00

1 2 3 4 5 6 7 8 9


PROBLEM 9.4A Sonoma Inn Bank Reconciliation Statement August 31, 2016 Balance on bank statement Additions: Deposit of August 30 in transit Deposit of August 31 in transit Deductions for outstanding checks: Check 712 Check 713 Check 716 Check 736 Check 739 Check 741 Total outstanding checks Adjusted bank balance Balance in books Additions: Note receivable collected by bank Interest on note receivable Deductions: NSF check from Art Corts Bank service charge Adjusted book balance

13 1 9 7 00 1 4 5 0 00 7 0 1 00

2 1 5 1 00 15 3 4 8 00

1 1 0 00 1 2 5 00 2 3 8 00 5 7 7 00 7 8 00 1 2 0 00 1 2 4 8 00 14 1 0 0 00 12 2 8 1 00 2 0 8 4 00 6 3 00

3 2 0 00 8 00

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2 1 4 7 00 14 4 2 8 00

3 2 8 00 14 1 0 0 00


PROBLEM 9.4A (continued) PAGE 10

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Aug. 31 Cash 3 Notes Receivable 4 Interest Income 5 To record receipt of amount due on note 6 plus interest collected by bank in August 7 8 31 Accounts Receivable/Art Corts 9 Cash 10 To record NSF check returned by bank 11 12 31 Miscellaneous Expense 13 Cash 14 To record bank service charge for August 15

Post Ref.

DEBIT

CREDIT

2 1 4 7 00

3 2 0 00

8 00

1 2 2 0 8 4 00 3 6 3 00 4 5 6 7 8 3 2 0 00 9 10 11 12 8 00 13 14 15

Analyze: Net effect on the accounting equation of the journal entries recorded as a result of the bank reconciliation was an increase in assets by $55 and an increase in equity by $55 ($63 - $8).

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PROBLEM 9.5A A. Fontes Consultancy Bank Reconciliation Statement April 30, 2016 Balance in books Additions: Check 2206 dated April 17 was recorded as $695; check was actually written for $14 Deductions: Check 2247 dated April 20 was recorded as $130; check was actually written for $164 Adjusted book balance

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20 2 7 5 00

6 8 1 00 20 9 5 6 00

3 4 00 20 9 2 2 00


PROBLEM 9.5A (continued) PAGE 11

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Apr. 30 Cash 3 Supplies 4 To correct error in entry for check 2206 5 of April 17 6 7 30 Utilities Expense 8 Cash 9 To correct error in entry for check 2247 10 of April 20 11

Post Ref.

DEBIT

6 8 1 00

3 4 00

Analyze: Net income would have been overstated by $34.

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CREDIT 1 2 6 8 1 00 3 4 5 6 7 3 4 00 8 9 10 11


PROBLEM 9.6A Western Imports Bank Reconciliation Statement July 31, 2016 Balance on Bank Statement Additions: Deposit of July 31 in transit Check 1422 for $1,200 incorrectly charged as $1,280 Deductions for outstanding checks: Check 1429 Check 1430 Total outstanding checks Adjusted Bank Balance

28 7 6 0 00 9 0 0 00 8 0 00

1 2 4 9 00 1 4 1 00 1 3 9 0 00 28 3 5 0 00

Balance in Books Additions: EFT received on account from Foncier Ricard Deductions: Check 1425 written for $90; incorrectly recorded as $60 Online payment on July 31 to CentralComm Adjusted Bank Balance

9 8 0 00 29 7 4 0 00

14 0 4 2 00 14 6 0 0 00 28 6 4 2 00 3 0 00 2 6 2 00

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2 9 2 00 28 3 5 0 00


PROBLEM 9.6A (continued) PAGE 19

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 July 31 Cash 3 Accounts Receivable/Foncier Ricard 4 EFT received on account from Foncier Ricard 5 on July 31 6 7 31 Supplies 8 Cash 9 To correct error for Check 1425 10 11 31 Telephone Expense 12 Cash 13 To record online payment to CentralComm

Post Ref.

DEBIT

14 6 0 0 00

3 0 00

2 6 2 00

Analyze: Total expenses increased by $262 as a result of the general journal entries recorded.

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CREDIT 1 2 14 6 0 0 00 3 4 5 6 7 3 0 00 8 9 10 11 2 6 2 00 12 13


PROBLEM 9.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 April 25 Cash 3 Cash Short and Over 4 Sales 5 6 26 Cash 7 Cash Short and Over 8 Sales 9 10 27 Cash 11 Cash Short and Over 12 Sales 13 14 28 Cash 15 Cash Short and Over 16 Sales 17 18 29 Cash 19 Cash Short and Over 20 Sales 21 22 30 Cash 23 Cash Short and Over 24 Sales 25

Post Ref.

620

DEBIT

1 2 9 9 00 1 00

1 0 5 1 00 620

620

1 2 2 7 00 3 00

1 1 8 6 00 620

1 0 8 3 00 620

1 2 1 9 00 620

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1

CREDIT 1 2 3 1 3 0 0 00 4 5 6 1 00 7 1 0 5 0 00 8 9 10 11 1 2 3 0 00 12 13 14 4 00 15 1 1 8 2 00 16 17 18 1 00 19 1 0 8 2 00 20 21 22 2 00 23 1 2 1 7 00 24 25


PROBLEM 9.1B (continued) GENERAL LEDGER ACCOUNT NO. 620

ACCOUNT Cash Short and Over DATE 2016 April 25 26 27 28 29 30

DESCRIPTION

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT

1 00 1 00 3 00

BALANCE DEBIT CREDIT 1 00 0 00 3 00

4 00 1 00 2 00

Analyze: The $4 credit balance in Cash Short and Over will be reported as revenue on the Income Statement.

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1 00 2 00 4 00


PROBLEM 9.2B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 4 Petty Cash Fund 3 Cash 4 Establish Petty Cash Fund, Check No. 910 5 6 30 Supplies 7 Delivery Expense 8 Miscellaneous Expense 9 Fred Chin, Drawing 10 Cash 11 Replenish Petty Cash Fund, Check No. 950 12

Post Ref.

DEBIT

2 5 0 00

3 2 00 5 4 00 3 0 00 7 5 00

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7

CREDIT 1 2 2 5 0 00 3 4 5 6 7 8 9 1 9 1 00 10 11 12


PROBLEM 9.2B (continued) PAGE

PETTY CASH ANALYSIS SHEET DATE VOU NO.

2016 Sept. 4 6 12 18 24 28 30 30 30 30 30

— 1 2 3 4 5 — — — — —

DESCRIPTION

RECEIPTS

PAYMENTS

DISTRIBUTION OF PAYMENTS SUPPLIES DEBIT

Establish fund Delivery service Bought office supplies Personal withdrawal Bought stamps Delivery service Totals Balance on hand Balance on hand Replenish fund Carried forward

DELIVERY EXPENSE DEBIT

MISC. EXPENSE DEBIT

OTHER ACCOUNTS DEBIT ACCOUNT NAME

AMOUNT

2 5 0 00

2 5 0 00 2 5 0 00 5 9 00 1 9 1 00 2 5 0 00

2 2 00 3 2 00 7 5 00 3 0 00 3 2 00 1 9 1 00 5 9 00 2 5 0 00

2 2 00 3 2 00 Fred Chin, Drawing

7 5 00

3 0 00 3 2 00

Analyze: The balance of the petty cash fund on September 30, after replenishment, is $250.

9-24

1

3 2 00 5 4 00

3 0 00

7 5 00


PROBLEM 9.3B Peter Chen, Attorney-at-Law Bank Reconciliation Statement September 30, 2016 Balance on bank statement Additions: Deposit of September 28 in transit Deductions for outstanding checks: Check 108 of September 15 Check 112 of September 27 Total outstanding checks Adjusted bank balance Balance in books Deductions: NSF check Bank service charge Adjusted book balance

7 3 2 3 50 9 0 0 00 8 2 2 3 50 7 5 00 1 4 0 00 2 1 5 00 8 0 0 8 50 8 1 3 4 00 1 1 8 00 7 50

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1 2 5 50 8 0 0 8 50


PROBLEM 9.3B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Sept. 30 Accounts Receivable/Annette Cole 3 Cash 4 To record NSF check returned by bank 5 6 30 Miscellaneous Expense 7 Cash 8 To record bank service charge for September 9

Post Ref.

DEBIT

1

CREDIT

1 1 8 00

7 50

Analyze: Seven checks were paid.

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1 2 1 1 8 00 3 4 5 6 7 50 7 8 9


PROBLEM 9.4B Gourmet Kitchen Appliances Bank Reconciliation Statement July 31, 2016 Balance on bank statement Additions: Deposit of July 31 in transit

Deductions for outstanding checks: Check 533 Check 535 Check 537 Total outstanding checks Adjusted bank balance Balance in books Additions: Note receivable collected by bank Interest on note receivable Deductions: NSF check from Robert Briggs Bank service charge Adjusted book balance

8 4 4 2 03 1 0 9 4 07 9 5 3 6 10

1 4 8 95 1 2 2 50 6 2 5 40 8 9 6 85 8 6 3 9 25 7 3 1 8 59 1 4 5 0 00 3 0 00

1 4 5 00 1 4 34

1 4 8 0 00 8 7 9 8 59

1 5 9 34 8 6 3 9 25

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PROBLEM 9.4B (continued) PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DATE 2016 July 31 Cash

DESCRIPTION

POST. REF.

DEBIT

1

CREDIT

1 4 8 0 00 Notes Receivable Interest Income To record receipt of amount due on note plus interest collected

1 4 5 0 00 3 0 00

31 Accounts Receivable/Robert Briggs Cash To record NSF check returned by bank

1 4 5 00

31 Miscellaneous Expense Cash To record bank service charge for July

1 4 34

1 4 5 00

Analyze: After all journal entries have been posted, the balance in the Cash account is $8,639.25.

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1 4 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15


PROBLEM 9.5B Big Dudes Moving Corporation Bank Reconciliation Statement February 29, 2016 Balance in books Additions: Check 1301 dated February 18 was recorded as $316; check was actually written for $308 Deductions: Check 1322 dated February 24 was recorded as $404; check was actually written for $440 Adjusted book balance

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19 8 5 1 00

8 00 19 8 5 9 00

3 6 00 19 8 2 3 00


PROBLEM 9.5B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Feb. 29 Cash 3 Hauling Expense 4 To correct error in entry for check 1301 5 of February 18 6 7 29 Telephone Expense 8 Cash 9 To correct error in entry for check 1322 10 of February 24 11

Post Ref.

DEBIT

1

CREDIT

8 00

3 6 00

Analyze: The net change to the Cash account was an decrease of $28.

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1 2 8 00 3 4 5 6 7 3 6 00 8 9 10 11


PROBLEM 9.6B Euro Specialty Products Bank Reconciliation Statement November 30, 2016 Balance on Bank Statement Additions: Deposit of November 30 in transit Deductions: Deductions for outstanding checks: Check 4129 Check 4130 Total outstanding checks Check 4122 written for $1,200, paid by bank as $1,000 Adjusted Bank Balance Balance in Books Additions: EFT received on account from Cantori Cucine Check 4125 written for $890; incorrectly recorded as $980

29 7 3 4 00 1 2 2 4 00 30 9 5 8 00

1 3 2 2 00 2 3 9 00 1 5 6 1 00 2 0 0 00 29 1 9 7 00 16 6 3 0 00 12 8 0 0 00 9 0 00

Deductions: Online payment on November 30 to ClearComm Adjusted book balance

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12 8 9 0 00 29 5 2 0 00 3 2 3 00 29 1 9 7 00


PROBLEM 9.6B (continued) PAGE 44

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Nov 30 Cash 3 Accounts Receivable/Cantori Cucine 4 EFT received on account from Cantori Cucine 5 6 30 Cash 7 Equipment 8 To correct error for Check 4125 9 10 30 Telephone Expense 11 Cash 12 To record online payment to ClearComm

Post Ref.

DEBIT

12 8 0 0 00

9 0 00

3 2 3 00

Analyze: Total assets decreased by $323 as a result of the general journal entries recorded.

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CREDIT 1 2 12 8 0 0 00 3 4 5 6 9 0 00 7 8 9 10 3 2 3 00 11 12


CRITICAL THINKING PROBLEM 9.1 1. DATE

CASH COUNT

BANK DEPOSIT

SALES, PER CASH REGISTER TAPE

AMOUNT SHORT

$2,496.20

LESS: CHANGE FUND $400.00

August 1

$2,096.20

$2,222.50

$ (126.30)

August 2

2,352.80

$400.00

1,952.80

2,135.90

(183.10)

August 3

2,451.45

$400.00

2,051.45

2,303.45

(252.00)

August 4

2,597.20

$400.00

2,197.20

2,287.30

(90.10)

August 5

2,644.05

$400.00

2,244.05

2,335.45

(91.40)

August 6

2,460.10

$400.00

2,060.10

2,155.50

(95.40)

August 7

2,592.40

$400.00

2,192.40

2,255.90

(63.50)

Totals

$17,594.20

$14,794.20

$15,696.00

$ (901.80)

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CRITICAL THINKING PROBLEM 9.1 (continued) 2. PAGE 56

GENERAL JOURNAL DATE 1 2016 2 Aug. 7 Cash 3 Cash Short and Over 4 Sales 5

DESCRIPTION

Post Ref.

DEBIT

14 7 9 4 20 9 0 1 80

CREDIT 1 2 3 15 6 9 6 00 4 5

3. Jim should count the cash in the cash register with George at the end of his shift. Jim should print a cash register tape and compare it with the amount of cash in the cash register, less the $400 change fund. Jim should perform the same procedure with Alice at the end of her shift. Jim should also compare the amount of the sales for the day per the cash register tape with the amount of the bank deposit, and investigate any significant variances.

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CRITICAL THINKING PROBLEM 9.2 Lucci Contractors Bank Reconciliation Statement August 31, 2016 Balance on bank statement Addition: Deposit in transit, August 28 Deductions for outstanding checks Check 1590 Check 1680 Check 1724 Check 1780 Check 1784 Check 1806 Total outstanding checks Adjusted bank balance Balance in books Deduction: Bank service charge Adjusted book balance Less: Cash shortage Corrected adjusted book balance

16 5 8 9 00 4 8 8 2 00 21 4 7 1 00 2 6 3 00 1 2 1 8 00 4 8 6 00 7 9 2 00 1 8 1 9 00 3 8 4 00 4 9 6 2 00 16 5 0 9 00 18 7 8 6 00 1 0 00 18 7 7 6 00 2 2 6 7 00 16 5 0 9 00

The cash shortage is the difference between the adjusted bank balance of $16,509 and the adjusted book balance of $18,776. This is the amount needed to have both parts of the bank reconciliation equal. Gloria concealed her theft by omitting checks 1590 ($263), 1680 ($1,218), and 1724 ($486). The total amount of these checks is $1,967. Additionally, Gloria purposely understated the total outstanding checks on her bank reconiliation by $300. The ommision of the three outstanding checks, added with the $300 error, equals the total cash shortage of $2,267. Since Gloria handled all cash records, it was relatively easy for her to conceal her theft. Mike should separate the jobs of receiving cash, making disbursements, maintaining accounting records, and preparing bank reconciliations. If the company is not large enough to permit different people to handle these jobs, then Mike should oversee the cash/accounting functions more closely, including reconciliation of the bank account. If Mike does not have the time to do this, he should consider hiring an independent accountant to review the cash/accounting records on a monthly basis and then report any discrepancies to him.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. a. No assurance money taken actually accounted for. b. A gap in the control of cash exists, and unauthorized expenditures can be made. c. Increases the opportunity for theft; no current cash position is known. d. Increases risk of theft. e. Weakens internal control over cash receipts. 2. Payment of bills in timely fashion, anticipation of fund shortages or overages, take advantage of investment opportunities. 3. Loss of control and check-and-balance system. 4. a. Yes. Blank endorsements are not secure. b. Yes. Checkbook should be kept in a locked drawer and should be available only to specified employee. c. Yes. To deter fraud, different tasks should be assigned to different employees. d. Yes. Reconciliation should be done soon after receiving bank statement. e. Yes. Financial records should be maintained for a reasonable number of years in case of a tax audit or if records are destroyed. f. No. The task would be impractical for a large firm. 5. Essential assets should be safeguarded against loss and theft. 6. Up-to-date cash position; information for day-to-day business decisions. 7. Insures again losses. 8. Control of cash; audit trail. Ethical Dilemma: Daniel should be sure to pay this $30 to petty cash immediately. He can then record cash short/over the next month. Daniel should be sure to never borrow money from petty cash, as it is not his money. Financial Statement Analysis: 1. 6.1% ($2,494 ÷ $41,084) 2. Increased by $507 million ($2,494 - $1,987) 3. The balance reported for “Cash and cash equivalents” would be understated by $125,000. Teamwork: A sales invoice for each job should be given to each customer with a place to incorporate any additions or subtractions for service. Any changes must be communicated to the home office and an approval number will be given. The Sales Invoice, as well as each change, should be signed by the customer. Only cash and money orders should be allowed since the families have just moved and do not currently have a local bank. Internet Connection: Each bank should list the possible interest rates, both variable and fixed. Most banks will be within a few tenths of points of each other.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. FALSE 3. FALSE 4. FALSE 5. TRUE 6. FALSE 7. FALSE 8. TRUE

Part B Matching 1. a 2. c 3. j 4. k 5. l 6. b 7. e

9. 10. 11. 12. 13. 14. 15. 16.

TRUE TRUE FALSE FALSE TRUE FALSE TRUE FALSE

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

f h g d i m

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CHAPTER 10 PAYROLL COMPUTATIONS, RECORDS, AND PAYMENT Chapter Opener: Thinking Critically Federal and state income taxes. Some employees may also work in locations that require local income taxes be withheld. In addition, there are a host of other voluntary deductions like retirement savings plans, health, dental, vision, life, accidental death & dismemberment, short-term and long-term disability insurance, savings bonds and employee stock purchase plans. Some additional non-voluntary deductions may be associated with past-due child support payments or taxes owed to the IRS. Fast Facts • H&R Block worked with the IRS to file the first electronic tax returns in 1986, 22,000 in all. Since 1994, H&R Block has filed over 50 million tax returns electronically. •

The company’s 100,000 tax professionals have an average of five years experience and more than 300 hours of training.

In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 25.4 million tax returns worldwide.

Managerial Implications: Thinking Critically Answers will vary, but students may suggest payroll audits, monitoring of cards, and division of labor for payroll tasks. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new concepts, and procedures presented in the chapter. 1. Earnings during the pay period, length of pay period, marital status, number of allowances. 2. Sets minimum hourly wages and maximum work hours per week. Applies to firms engaged directly or indirectly in interstate commerce. 3. Fair Labor Standards Act sets the minimum hourly rate of pay and maximum hours of work per week. It is also referred to as the Wage and Hour Law. 4. Two common payroll frauds are overstating hours worked and the issuance of checks to nonexistent employees. 5. Salaried employees who hold supervisory or managerial positions, not subject to maximum hours and overtime. 6. The Federal amounts can be reduced by amount charged by the state government. 7. No, levied on the employer only. 8. Number of hours worked is multiplied by the hourly wage. For hours above 40 in a week, the rate used is one and one-half times the regular hourly rate. 9. To provide medical care for the employee and the employee’s spouse after each has reached 65 years of age. 10. Used to finance retirement benefits for the employee, benefits for dependents of the retired employee, and benefits for a disabled employee. 11. Funds are automatically deposited in the employee’s account from the employer’s bank. 12. Hourly-rate, salary, commission, piece-rate. 13. Withholding tables 14. Circular E 15. One depends solely on the number of hours worked each week; the other is a fixed amount per month, per week, or other pay period. © 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 10-1


EXERCISE 10.1 EMPLOYEE NO.

HOURLY RATE

HOURS WORKED

GROSS EARNINGS

1 2 3 4

$9.71 9.25 9.92 9.13

38 30 33 32

$368.98 $277.50 $327.36 $292.16

OVERTIME RATE

REGULAR HOURS WORKED

OVERTIME HOURS WORKED

46 47 38 48

6 7 0 8

DECEMBER SALARY

YEAR TO DATE EARNINGS THROUGH NOVEMBER 30

SOC. SEC. TAXABLE EARNINGS DECEMBER

SOCIAL SECURITY TAX 6.20%

$9,900.00 10,000.00 10,709.00 10,000.00

$98,900.00 73,000.00 106,800.00 100,000.00

$9,900.00 10,000.00 6,900.00 10,000.00

$613.80 620.00 427.80 620.00

EXERCISE 10.2

HOURLY RATE

$11.00 10.62 10.46 10.80

$16.50 15.93 15.69 16.20

REGULAR PAY

OVERTIME PAY

GROSS PAY

$440.00 424.80 397.48 432.00

$99.00 111.51 0.00 129.60

$539.00 536.31 397.48 561.60

EXERCISE 10.3

EMPLOYEE NO.

1 2 3 4

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EXERCISE 10.4

EMPLOYEE NO. 1 2 3 4

DECEMBER SALARY

MEDICARE TAXABLE EARNINGSDECEMBER

$9,900.00 10,000.00 10,709.00 10,000.00

$9,900.00 10,000.00 10,709.00 10,000.00

MEDICARE TAX 1.45% $143.55 145.00 155.28 145.00

EXERCISE 10.5 EMPLOYEE NO.

MARITAL STATUS

WITHHOLDING ALLOWANCES

WEEKLY SALARY

INCOME TAX WITHHOLDING

1 2 3 4

M S M S

2 1 2 1

$675 565 665 495

$47 61 45 51

EXERCISE 10.6 GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13

DATE 2016 Aug.

DESCRIPTION 7 Office Salaries Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Salaries Payable Payroll for week 7 Salaries Payable Cash Issued checks, weekly payroll

PAGE POST. REF.

DEBIT

16

CREDIT

1 2 7 1 0 00 2 1 6 8 02 3 3 9 30 4 6 1 2 48 5 1 8 9 0 20 6 7 8 1 8 9 0 20 9 1 8 9 0 20 10 11 12 13

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EXERCISE 10.7 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 July 31 Sales Salaries Expense 3 Office Salaries Expense 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Salaries Payable Payroll for month ended July 31, 2016 8 9 10 11 12 13 14 15

POST. REF.

DEBIT

20

CREDIT

31 2 5 8 46 8 3 4 1 54 2 4 5 5 20 5 7 4 20 3 1 3 5 16 33 4 3 5 44

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PROBLEM 10.1A 1. EMPLOYEE NO.

REGULAR HOURS, HOURLY RATE

Kathy Burnett

$13.44

Gross Pay Less: Social Security Tax Medicare Tax Income Tax Withholding Health & Disability Charitable Contribution U.S. Savings Bond Net Pay 2.

1 2 3 4 5

HOURS WORKED

REGULAR TIME EARNINGS

OVERTIME EARNINGS

GROSS EARNINGS

42

$537.60

$40.32

$577.92

$577.92 35.83 8.38 24.00 161.00 18.00 100.00 $230.71 GENERAL JOURNAL

DATE DESCRIPTION 2016 Dec. 31 Salaries Payable Cash Issued check for weekly payroll

PAGE POST. REF.

DEBIT

54

CREDIT

2 3 0 71 2 3 0 71

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1 2 3 4 5


PROBLEM 10.1A (continued) Analyze: Kathy earned overtime pay of $1,622.72, calculated as follows: Cumulative earnings, prior to December 31 payroll Add: gross pay for week ending December 31 Gross pay for the year Less: regular pay (40 hrs X 52 weeks X $13.44) Overtime pay for the year

$29,000.00 577.92 $29,577.92 27,955.20 $1,622.72

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PROBLEM 10.2A WEEK BEGINNING

PAYROLL REGISTER

June 24, 2016 EARNINGS

NAME Nelda Anderson Earl Benson Frank Cortez Winnie Wu

NO. OF ALLOW. 1 4 1 2

10-7

MARITAL STATUS M M M S

CUMULATIVE NO. OF EARNINGS HRS. RATE 17 6 4 0 00 48 $12.70 16 9 7 5 00 48 11.50 16 0 8 0 00 40 11.20 14 6 6 0 00 50 10.70

REGULAR TIME EARNINGS 5 0 8 00 4 6 0 00 4 4 8 00 4 2 8 00

65 3

1 8 4 4 00

5 5

00

OVERTIME EARNINGS 1 5 2 40 1 3 8 00

GROSS AMOUNT 6 6 0 40 5 9 8 00 4 4 8 00 5 8 8 50

CUMULATIVE EARNINGS 18 3 0 0 40 17 5 7 3 00 16 5 2 8 00 15 2 4 8 50

4 5 0 90 2 2 9 4 90

67 6 4 9 90

1 6 0 50


PROBLEM 10.2A (continued) AND ENDING

June 30, 2016

TAXABLE WAGES SOCIAL SECURITY MEDICARE FUTA 6 6 0 40 6 6 0 40 5 9 8 00 5 9 8 00 4 4 8 00 4 4 8 00 5 8 8 50 5 8 8 50 2 2 9 4 90 2 2 9 4 90

10-8

PAID July 3, 2016

DEDUCTIONS DISTRIBUTION CHECK SOCIAL INCOME NET WAGES NO. SECURITY MEDICARE TAX AMOUNT EXPENSE 4 0 94 9 58 5 4 00 5 5 5 88 6 6 0 40 3 7 08 8 67 2 0 00 5 3 2 25 5 9 8 00 2 7 78 6 50 2 3 00 3 9 0 72 4 4 8 00 3 6 49 8 53 5 5 00 4 8 8 48 5 8 8 50 1 4 2 29 3 3 28 1 5 2 00 1 9 6 7 33 2 2 9 4 90


PROBLEM 10.2A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 June 30 Wages Expense 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Employee Income Tax Payable 6 Wages Payable 7 Weekly payroll 8 9 July 3 Wages Payable 10 Cash 11 Issued check for weekly payroll 12

POST. REF.

DEBIT

15

CREDIT

2 2 9 4 90 1 4 2 29 3 3 28 1 5 2 00 1 9 6 7 33

1 9 6 7 33 1 9 6 7 33

Analyze: Nelda Anderson’s cumulative earnings at June 30, 2016 are $18,300.40.

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1 2 3 4 5 6 7 8 9 10 11 12


PROBLEM 10.3A WEEK BEGINNING

PAYROLL REGISTER

December 15, 2016 EARNINGS

NAME Gloria Bahamon Alex Garcia Ron Price Sara Russell

NO. OF ALLOW. 4 1 3 0

10-10

MARITAL STATUS M S M S

CUMULATIVE NO. OF EARNINGS HRS. RATE 32 8 6 0 00 47 $16.70 57 3 0 0 00 43 28.50 53 9 7 2 00 49 26.90 26 6 2 0 00 40 13.70

REGULAR TIME EARNINGS 6 6 8 00 1 1 4 0 00 1 0 7 6 00 5 4 8 00

OVERTIME EARNINGS 1 7 5 35 1 2 8 25 3 6 3 15

170 7 5 2 00

3 4 3 2 00

6 6 6 75

GROSS AMOUNT 8 4 3 35 1 2 6 8 25 1 4 3 9 15 5 4 8 00

CUMULATIVE EARNINGS 33 7 0 3 35 58 5 6 8 25 55 4 1 1 15 27 1 6 8 00

4 0 9 8 75 174 8 5 0 75


PROBLEM 10.3A (continued) AND ENDING

December 21, 2016

TAXABLE WAGES SOCIAL MEDICARE SECURITY 8 4 3 35 8 4 3 35 1 2 6 8 25 1 2 6 8 25 1 4 3 9 15 1 4 3 9 15 5 4 8 00 5 4 8 00 4 0 9 8 75

4 0 9 8 75

10-11

FUTA

PAID December 23, 2016 DEDUCTIONS SOCIAL SECURITY MEDICARE 5 2 29 1 2 23 7 8 63 1 8 39 8 9 23 2 0 87 3 3 98 7 95 2 5 4 13

5 9 44

INCOME TAX 1 1 2 00 3 2 3 00 2 5 8 00 6 7 00

NET AMOUNT 6 6 6 83 8 4 8 23 1 0 7 1 05 4 3 9 07

7 6 0 00

3 0 2 5 18

DISTRIBUTION CHECK OFFICE NO. WAGES 8 4 3 35

DELIVERY WAGES 1 2 6 8 25 1 4 3 9 15

5 4 8 00 1 3 9 1 35

2 7 0 7 40


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PROBLEM 10.3A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 21 Office Wages 3 Delivery Wages 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable 8 Weekly payroll 9 10 23 Wages Payable 11 Cash 12 Payment of payroll 13

POST. REF.

DEBIT

32

CREDIT

1 3 9 1 35 2 7 0 7 40 2 5 4 13 5 9 44 7 6 0 00 3 0 2 5 18

3 0 2 5 18 3 0 2 5 18

Analyze: Delivery wages were 66.1% of total taxable wages.

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1 2 3 4 5 6 7 8 9 10 11 12 13


PROBLEM 10.4A

EMPLOYEE CUMULATIVE NAME. EARNINGS

Sara Parker Carolyn Wells James Wu Totals

$171,700 152,700 52,800 $377,200

MONTHLY PAY

SOCIAL SECURITY

$20,400 16,600 6,000 $43,000

372 $372

EMPLOYEE INCOME TAX MEDICARE WITHHOLDING

$295.80 240.70 87.00 $623.50

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Oct. 31 Salaries Expense 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Employee Income Tax Payable 6 Salaries Payable 7 8 31 Salaries Payable 9 Cash 10 11 Analyze:

$5,348 4,668 1,377 $11,393 PAGE

POST. REF.

DEBIT

NET PAY

$14,756.20 11,691.30 4,164.00 $30,611.50

22

CREDIT

1 43 0 0 0 00 2 3 7 2 00 3 6 2 3 50 4 11 3 9 3 00 5 30 6 1 1 50 6 7 30 6 1 1 50 8 30 6 1 1 50 9 10 11

An employee is hired by and works under the control and direction of the employer. An independent contractor is paid by the company to carry out a specific task but is not under the direct supervision or control of the company.

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PROBLEM 10.1B 1. EMPLOYEE NO.

REGULAR HOURS, HOURLY RATE

HOURS WORKED

Juan Padronas

$13.00

48

Gross Pay Less: Social Security Tax Medicare Tax Income Tax Withholding Health Insurance Charitable Contribution Credit Union Savings Net Pay 2.

1 2 3 4 5 6

REGULAR TIME OVERTIME EARNINGS EARNINGS $520.00

$156.00

GROSS EARNINGS $676.00

$676.00 41.91 9.80 38.00 150.00 20.00 25.00 $391.29 GENERAL JOURNAL

DATE DESCRIPTION 2016 Dec. 31 Salaries Payable Cash Issued check for weekly payroll

PAGE

POST. REF.

DEBIT 3 9 1 29

18

CREDIT 1 2 3 9 1 29 3 4 5 6

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PROBLEM 10.1B (continued) Analyze:

Juan earned overtime pay of $1,636.00, calculated as follows: Cumulative earnings, prior to December 31 payroll Add: gross pay for week ending December 31 Gross pay for the year Less: regular pay (40 hrs. X 52 weeks X $13.00) Overtime pay for the year

$28,000.00 676.00 $28,676.00 27,040.00 $1,636.00

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PROBLEM 10.2B PAYROLL REGISTER

WEEK BEGINNING

December 25, 2016 EARNINGS

NAME Betty Brooks Cynthia Carter Mary Easley James Periot

NO. OF ALLOW. 3 2 4 2

10-16

MARITAL STATUS M M M S

CUMULATIVE NO. OF RATE EARNINGS HRS. 44 1 7 9 00 45 $12.80 53 0 1 5 00 48 13.40 82 7 4 8 00 44 29.50 104 4 8 6 00 30 37.00

REGULAR TIME EARNINGS 5 1 2 00 5 3 6 00 1 1 8 0 00 1 1 1 0 00

OVERTIME GROSS CUMULATIVE EARNINGS AMOUNT EARNINGS 9 6 00 6 0 8 00 44 7 8 7 00 1 6 0 80 6 9 6 80 53 7 1 1 80 1 7 7 00 1 3 5 7 00 84 1 0 5 00 1 1 1 0 00 105 5 9 6 00

284 4

3 3 3 8 00

4 3 3 80 3 7 7 1 80 288 1 9 9 80

2 8

00


PROBLEM 10.2B (continued) AND ENDING

December 31, 2016

PAID December 31, 2016

TAXABLE WAGES SOCIAL SECURITY MEDICARE 6 0 8 00 6 0 8 00 6 9 6 80 6 9 6 80 1 3 5 7 00 1 3 5 7 00 1 1 1 0 00 1 1 1 0 00

DEDUCTIONS FUTA

3 7 7 1 80 3 7 7 1 80

SOCIAL SECURITY MEDICARE 3 7 70 8 82 4 3 20 1 0 10 8 4 13 1 9 68 6 8 82 1 6 10 2 3 3 85

10-17

5 4 70

INCOME TAX 2 7 00 5 0 00 2 3 5 00 2 3 8 00

NET AMOUNT 5 3 4 48 5 9 3 50 1 0 1 8 19 7 8 7 08

5 5 0 00

2 9 3 3 25

DISTRIBUTION CONSULTIN CHECK G WAGES NO. EXPENSE

OFFICE WAGES 6 0 8 00 6 9 6 #

1 3 5 7 00 1 1 1 0 00 2 4 6 7 00 1 3 0 4 #


PROBLEM 10.2B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Consulting Wages Expense 3 Office Wages Expense 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable Payroll for week ending December 31 8 9 10 31 Wages Payable 11 Cash Paid wages for week ending December 31 12 13

POST. REF.

DEBIT

18

CREDIT

2 4 6 7 00 1 3 0 4 80 2 3 3 5 4 5 5 0 2 9 3 3

2 9 3 3 25 2 9 3 3

Analyze: The difference is the total deductions of $838.55, which must be remitted to the IRS.

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1 2 3 85 4 70 5 00 6 25 7 8 9 10 25 11 12 13


PROBLEM 10.3B PAYROLL REGISTER

WEEK BEGINNING

November 6, 2016 EARNINGS

NAME Kathryn Allen Calvin Cooke Maria Vasquez Hollie Visage

NO. OF ALLOW. 3 2 4 2

MARITAL STATUS M S M S

10-19

CUMULATIVE NO. OF EARNINGS HRS. RATE 26 5 6 5 00 43 10.50 25 9 3 3 00 36 10.25 75 2 6 8 00 45 29.75 82 8 5 8 00 41 32.75

REGULAR TIME EARNINGS 4 2 0 00 3 6 9 00 1 1 9 0 00 1 3 1 0 00

210 6 2 4 00

3 2 8 9 00

OVERTIME EARNINGS 4 7 25 2 2 3 13 4 9 13

GROSS AMOUNT 4 6 7 25 3 6 9 00 1 4 1 3 13 1 3 5 9 13

CUMULATIVE EARNINGS 27 0 3 2 25 26 3 0 2 00 76 6 8 1 13 84 2 1 7 13

3 1 9 51

3 6 0 8 51 214 2 3 2 51


PROBLEM 10.3B (continued) AND ENDING

November 12, 2016

TAXABLE WAGES SOCIAL SECURITY 4 6 7 25 3 6 9 00 1 4 1 3 13 1 3 5 9 13 3 6 0 8 51

MEDICARE 4 6 7 25 3 6 9 00 1 4 1 3 13 1 3 5 9 13 3 6 0 8 51

10-20

PAID November 12, 2016 DEDUCTIONS

FUTA

DISTRIBUTION

CHECK SOCIAL INCOME NET NO. SECURITY MEDICARE TAX AMOUNT 2 8 97 6 78 1 3 00 4 1 8 50 2 2 88 5 35 2 2 00 3 1 8 77 8 7 61 2 0 49 1 9 2 00 1 1 1 3 03 8 4 27 1 9 71 2 6 7 00 9 8 8 15 2 2 3 73 5 2 33 4 9 4 00 2 8 3 8 45

OFFICE WAGES 4 6 7 25 3 6 9 00

8 3 6 25

CONSULTING WAGES

1 1 2

4 3 7

1 3 13 5 9 13 7 2 26


PROBLEM 10.3B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Nov. 12 Office Wages 3 Consulting Wages 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable 8 Record weekly Payroll 9 10 15 Wages Payable 11 Cash 12 Paid payroll 13 14 Analyze:

POST. REF.

DEBIT

32

CREDIT

8 3 6 25 2 7 7 2 26 2 2 3 73 5 2 33 4 9 4 00 2 8 3 8 45

2 8 3 8 45 2 8 3 8 45

Total deductions of $770.06 were taken from employee paychecks for the period ended November 12.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14


PROBLEM 10.4B

EMPLOYEE NAME.

Tony Constantino Chris Stamos Elaine Hayakawa Totals

CUMULATIVE MONTHLY EARNINGS PAY

$180,000 150,000 64,000 $394,000

$18,000 15,000 6,400 $39,400

SOCIAL SECURITY

0 $0.00 396.80 $396.80

EMPLOYEE INCOME TAX MEDICARE WITHHOLDING NET PAY

$261.00 217.50 92.80 $571.30

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11

$5,110 $12,629.00 3,700 11,082.50 1,200 4,710.40 $10,010 $28,421.90

PAGE 2

POST. REF. DATE DESCRIPTION DEBIT CREDIT 2016 Nov. 30 Salaries Expense 39 4 0 0 00 Social Security Tax Payable 3 9 6 80 Medicare Tax Payable 5 7 1 30 Employee Income Tax Payable 10 0 1 0 00 Salaries Payable 28 4 2 1 90 30 Salaries Payable Cash

28 4 2 1 90 28 4 2 1 90

24

1 2 3 4 5 6 7 8 9 10 11

Analyze: Chris Stamos reached the limit for social security withholdings in August 2016.

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CRITICAL THINKING PROBLEM 10.1

CUMULATIVE EARNINGS

MONTHLY PAY

Mark Anthony

$132,000.00

Carol Swartz

100,000.00

EMPLOYEE NAME

Henry House Totals

SOCIAL SECURITY

MEDICARE

$12,000.00

–0–

$174.00

$3,216.00

$8,610.00

10,000.00

620.00

145.00

2,646.00

6,589.00

NET PAY

71,500.00

6,500.00

403.00

94.25

1,244.00

4,758.75

$303,500.00

$28,500.00

$1,023.00

$413.25

$7,106.00

$19,957.75

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12

EMPLOYEE INCOME TAX WITH HOLDING

DATE DESCRIPTION 2016 Dec. 31 Salaries Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Salaries Payable Monthly payroll 31 Salaries Payable Cash Payment of Monthly Payroll

PAGE POST . REF.

DEBIT 28

CREDIT

0 0 00 1 0 2 3 4 1 3 7 1 0 6 19 9 5 7

19

32

00 25 00 75

5 7 75 19 9 5 7 75

1 2 3 4 5 6 7 8 9 10 11 12

Analyze: The balance after all entries have been posted is zero.

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CRITICAL THINKING PROBLEM 10.2 1. Some of the weaknesses in Tito’s Tacos payroll system include: a. Managers are able to add new employees to the payroll without written authorization or verification. There is no check on the qualifications of employees hired and managers could add bogus employees to the payroll. b. Employees should not have access to blank time cards. c. Payroll functions should be allocated to more than one employee; there are no checks on the accuracy of Anna’s work. d. Anna should not sign the payroll checks. The person who prepares the checks should not sign the checks. 2. Since there are no checks on who the managers hire, it would be possible for a manager to add a fictitious employee to the payroll. This fraud would be further aided because the manager is responsible for sending time cards to headquarters and distributes the paychecks. 3. To prevent fictitious employees from being placed on the payroll: a. New employees should not be added to the payroll without written authorization from headquarters. b. Payroll checks should not be distributed by the managers. The paychecks could be mailed directly to the employees or someone from headquarters could distribute the checks.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. If overtime is excessive, profits are drastically reduced. 2. Paying by check would eliminate security risk and reduce work involved in preparing pay envelopes. 3. Various federal, state, and local payroll laws require that detailed payroll records be maintained. These records provide management with information needed to make decisions about the firm’s needs. 4. Used by management to see that operations meet previously established goals and that related outlays for wages are within previously established limits. Ethical Dilemma: It is ethical for the company to offer the promotion, but they should allow the managers to decide whether to accept it. The managers should not accept the promotion since they will be receiving $10 less per day from $224 to $200. Financial Statement Analysis: 1. 12.3%. 2. Increased by $42 million. Teamwork: Employee signs the time card and gives it to the manager. The manager approves the hours and gives it to the payroll clerk. The payroll clerk runs the payroll and prints the checks. The treasurer signs the checks and gives them back to the payroll clerk who gives them to the manager. The controller enters any necessary adjusting entry. The manager gives the check to the employee. Internet Connection: Experience necessary is 3 out of 5 years preceding the date of the exam. Exam is offered in April and October at several testing sites. The fee for the CPP exam for the period September 11, 2010 to October 9, 2011 is $360. Testing includes: Core Payroll Concepts (27.5%), Compliance (23%), Principles of Paycheck Calculations (20%), Payroll Process and Systems (8.5%), Management and Administration (15%) and Accounting (6%).

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. FALSE 2. FALSE 3. FALSE 4. TRUE 5. FALSE 6. FALSE 7. FALSE 8. FALSE 9. FALSE 10. TRUE 11. FALSE 12. FALSE Part B Matching 1. a 2. g 3. h 4. f 5. k 6. c 7. b 8. e 9. i 10. j

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CHAPTER 11 PAYROLL TAXES, DEPOSITS, AND REPORTS Chapter Opener: Thinking Critically Companies can offer many benefits such as paid vacations, sick leave, flexible work schedules, health insurance, pension benefits, workman’s compensation, child care and even the use of company vehicles to name just a few. Fast Facts • John L. Marek started Marek Brothers Sheetrock company in 1938 with his brothers Bill and Ralph. • The company operates 8 different divisions in Austin, Dallas, Houston and San Antonio Texas as well as an Interior System division in Atlanta, Georgia.

Managerial Implications: Thinking Critically The 941 is prepared from the Quarterly Summary of Earnings. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of the new Questions terms, concepts, and procedures presented in the chapter. 1. b, c, d 2. Federal deposits are due on the 15th day of the following month. 3. Federal deposits are due on either Wednesdays or Fridays, depending on the employer’s payday. 4. Electronic Federal Tax Payment System; use if the annual federal tax deposits are more than $200,000. 5. Unique ID number assigned by the federal government to employers. 6. SUTA, FUTA, social security, and Medicare 7. A four-quarter period ending June 30 of the preceding year. 8. Summarizes employees’ earnings and deductions for the year; sent with W-2 forms to Social Security Administration by last day of February following close of calendar year. 9. To each employee by January 31 following the close of the calendar year. 10. 11. 12. 13.

Employer is responsible and must pay any taxes due. Circular E Start of the year Employer

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Discussion Questions (continued) 14. Reports employee earnings subject to federal income, social security, and Medicare taxes. Filed quarterly. 15. Yes, if FUTA payable is $500 or more, deposit by last day of month following end of quarter. 16. 5.4 percent 17. Filed once a year, it reports net federal unemployment tax; indicates amount of additional tax due. 18. Intended to encourage states to adopt state unemployment tax programs. 19. To alleviate hardship on employees who lose their jobs.

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EXERCISE 11.1 1. No deposit is necessary at this time since tax due is less than $2,500. 2. No deposit is necessary at this time since the tax due is less than $2,500. 3. No deposit is necessary at this time since tax due is less than $2,500. 4. March 15, 2016. A deposit is required by the 15th of the month following the period where $2,500 or more in tax is owed. In 1, 2, and 3, the taxes may be paid with Form 941 on or before April 30, 2016.

EXERCISE 11.2 PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7

POST. REF.

DATE DESCRIPTION 2016 July 16 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes

DEBIT

24

CREDIT

20 7 0 0 00 4 2 4 6 00 19 2 6 0 00 44 2 0 6 00

EXERCISE 11.3 TAX

BASE

RATE

AMOUNT

Social Security Medicare FUTA SUTA Total

$71,900.00 71,900.00 41,430.00 41,430.00

6.2% 1.45% 0.6% 5.4%

$4,457.80 1,042.55 248.58 2,237.22 $7,986.15

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EXERCISE 11.4 PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2016 Apr. 30 Federal Unemployment Tax Payable Cash FUTA deposit

POST. REF.

DEBIT

14

CREDIT

1 5 0 7 00 1 5 0 7 00

1 2 3 4 5

EXERCISE 11.5 SUTA = $1,400.70 ($100,050 x 0.014)

EXERCISE 11.6 PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2016 July 31 State Unemployment Tax Payable Cash SUTA deposit

POST. REF.

DEBIT

CREDIT

2 1 4 8 00 2 1 4 8 00

EXERCISE 11.7 Gross tax (0.006 × $150,000) Less Deposit Net tax payable

= = =

30

$900.00 800.00 $100.00

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EXERCISE 11.8 WORK CLASSIFICATION

ESTIMATED EARNINGS

Office Factory Total

RATE

$215,000 970,000

ESTIMATED PREMIUM

$ .60/$100 $8.40/$100

$1,290.00 81,480.00 $82,770.00

PROBLEM 11.1A TAX Social Security Medicare FUTA SUTA Total

BASE

RATE $4,500.00 4,500.00 4,500.00 4,500.00

AMOUNT

6.2% 1.45% 0.6% 5.4%

PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8

DATE DESCRIPTION 2016 July 14 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Record employer’s payroll taxes

Analyze:

$279.00 65.25 27.00 243.00 $614.25

POST. REF.

DEBIT

30

CREDIT

6 1 4 25 2 7 9 00 6 5 25 2 7 00 2 4 3 00

Social Security and Medicare taxes are withheld from the employee paycheck and matched by the employer.

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PROBLEM 11.2A PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 April 8 Payroll Taxes Expense 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Federal Unemployment Tax Payable 6 State Unemployment Tax Payable 7 Payroll tax expense 8 9 May 15 Social Security Tax Payable 10 Medicare Tax Payable 11 Employee Income Tax Payable 12 Cash 13 Deposit payroll taxes for April 14 15 June 17 Social Security Tax Payable 16 Medicare Tax Payable 17 Employee Income Tax Payable 18 Cash 19 Deposit payroll taxes for May 20

Analyze:

POST. REF.

DEBIT 4 6 4 10

1 9 3 4 40 4 5 2 40 1 4 7 7 00

1 7 8 5 60 4 1 7 60 1 4 3 0 00

12

CREDIT 1 2 2 1 0 80 3 4 9 30 4 2 0 40 5 1 8 3 60 6 7 8 9 10 11 3 8 6 3 80 12 13 14 15 16 17 3 6 3 3 20 18 19 20

The amounts of income tax withheld were determined based on tables for the filing status and withholding allowances claimed by each employee.

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PROBLEM 11.3A PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7

DATE DESCRIPTION 2016 July 15 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes for June

Analyze:

POST. REF.

DEBIT

24

CREDIT

2 2 4 4 40 5 2 4 90 1 7 9 5 00 4 5 6 4 30

The balance of the Employee Income Tax Payable account is zero.

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PROBLEM 11.3A (continued)

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PROBLEM 11.3A (continued)

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PROBLEM 11.4A State unemployment insurance

=

0.017 × $27,363.00

=

$465.17

PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 April 30 State Unemployment Tax Payable 3 Cash 4 Payment of quarterly SUTA 5

Analyze:

POST. REF.

DEBIT

82

CREDIT

4 6 5 17 4 6 5 17

1 2 3 4 5

An employer’s experience rating determines the amount of state unemployment taxes paid. Generally, a more favorable rating will result in a lower state unemployment tax rate for the business.

PROBLEM 11.5A PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2017 Jan. 28 Federal Unemployment Tax Payable Cash Pay balance of tax due

Analyze:

POST. REF.

DEBIT

15

CREDIT

8 2 41

The total debits made to liability accounts were $547.58.

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8 2 41

1 2 3 4 5


PROBLEM 11.5A (continued)

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PROBLEM 11.5A (continued)

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PROBLEM 11.6A 1. WORK CLASSIFICATION

Office work Shop work Total

ESTIMATED EARNINGS

INSURANCE RATE

$64,000 $308,000

ESTIMATED PREMIUMS

$0.30/$100 $6.00/$100

$192.00 18,480.00 $18,672.00

2. PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2016 Jan. 15 Prepaid Workers’ Compensation Insurance Cash Pay estimated workers’ compensation for year

3. WORK CLASSIFICATION

Office work Shop work Total Estimated premiums paid Additional premium due

POST. REF.

DEBIT

8

CREDIT

18 6 7 2 00 18 6 7 2 00

ACTUAL EARNINGS

INSURANCE RATE

$69,960 $315,320

$0.30/$100 $6.00/$100

1 2 3 4 5 6

ACTUAL PREMIUMS

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$209.88 18,919.20 19,129.08 18,672.00 $457.08


PROBLEM 11.6A (continued) 4. PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10

DATE DESCRIPTION 2016 Dec. 31 Workers’ Compensation Insurance Expense Workers’ Compensation Insurance Payable Adjust workers’ compensation insurance expense 31 Workers’ Compensation Insurance Expense Prepaid Workers' Compensation Insurance Adjust prepaid workers’ compensation insurance

POST. REF.

DEBIT

98

CREDIT

1 4 5 7 08 2 4 5 7 08 3 4 5 6 18 6 7 2 00 7 18 6 7 2 00 8 9 10

Analyze: The premium estimate would have been $22,320=($64,000+$308,000) x ($6.00/$100).

PROBLEM 11.1B TAX Social Security Medicare FUTA SUTA Total

BASE

RATE $4,000 4,000 4,000 4,000

AMOUNT

6.2% 1.45% 0.6% 2.2%

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$248.00 58.00 24.00 88.00 $418.00


PROBLEM 11.1B (continued) PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8

DATE DESCRIPTION 2016 April 8 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Record taxes on payroll

Analyze:

POST. REF.

DEBIT

28

CREDIT

4 1 8 00 2 4 8 00 5 8 00 2 4 00 8 8 00

1 2 3 4 5 6 7 8

The total employer's payroll taxes would be $378.00 ($248 + $58 + $24 FUTA + $48 SUTA).

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PROBLEM 11.2B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 2016 July 7 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Payroll taxes for week ended July 7

1 2 3 4 5 6 7 8 9 Aug. 15 Employee Income Tax Payable 10 Social Security Tax Payable 11 Medicare Tax Payable 12 Cash 13 Deposit of payroll taxes for July 14 15 Sept. 15 Employee Income Tax Payable 16 Social Security Tax Payable 17 Medicare Tax Payable 18 Cash 19 Deposit of payroll taxes for August 20

POST. REF.

DEBIT 2 0 9 00

7 0 0 00 1 0 0 1 92 2 3 4 32

8 4 0 00 1 1 7 8 00 2 7 5 50

31

CREDIT 1 2 1 2 4 00 3 2 9 00 4 1 2 00 5 4 4 00 6 7 8 9 10 11 1 9 3 6 24 12 13 14 15 16 17 2 2 9 3 50 18 19 20

Analyze: A SUTA rate of .015 would reduce the amount of tax by $14.00 [(0.022 – 0.015) x $2,000].

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PROBLEM 11.3B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Oct. 15 Employee Income Tax Payable 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Cash 6 Deposit payroll taxes for September 7

POST. REF.

DEBIT

CREDIT

9 1 5 00 1 2 7 7 20 2 9 8 70 2 4 9 0 90

Analyze: The total taxes deposited with the IRS for the quarter ended September 30 was $6,720.64 determined as follows: Social Security - employer Social Security - employee Medicare - employer Medicare - employee Income tax withheld

31

$1,728.56 1,728.56 404.26 404.26 2,455.00 $6,720.64

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PROBLEM 11.3B (continued)

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PROBLEM 11.3B (continued)

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PROBLEM 11.4B State unemployment insurance

=

0.023 × $20,335.00

=

PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2016 April 30 State Unemployment Tax Payable Cash Paid state unemployment tax

$467.71

POST. REF.

DEBIT

21

CREDIT

4 6 7 71 4 6 7 71

1 2 3 4 5

Analyze: If Brian Morris made the same amount for the quarter ended June 30, 2016, $3,120 ($7,000 - $3,880) would be subject to the federal unemployment tax.

PROBLEM 11.5B PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2017 Jan. 27 Federal Unemployment Tax Payable Cash Pay balance of tax due

POST. REF.

DEBIT

48

CREDIT

5 5 1 08 5 5 1 08

Analyze: The balance of the Federal Unemployment Tax Payable account is zero.

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1 2 3 4 5


PROBLEM 11.5B (continued)

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PROBLEM 11.5B (continued)

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PROBLEM 11.6B 1. WORK CLASSIFICATION Office work Delivery work Total

ESTIMATED EARNINGS $50,000 $308,000

INSURANCE RATE

ESTIMATED PREMIUMS

$0.50/$100 $6.00/$100

$250.00 18,480.00 $18,730.00

2. PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2016 Jan. 17 Prepaid Workers’ Compensation Insurance Cash Pay estimated workers' compensation for year

POST. REF.

DEBIT

7

CREDIT

18 7 3 0 00 18 7 3 0 00

3. WORK CLASSIFICATION

ACTUAL EARNINGS

INSURANCE RATE

ACTUAL PREMIUMS

Office work Delivery work Total actual premiums Estimated premiums paid Additional premium due

$52,970 $316,240

$0.50/$100 $6.00/$100

$264.85 18,974.40 19,239.25 18,730.00 $509.25

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4. PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11

DATE DESCRIPTION 2016 Dec. 31 Workers’ Compensation Insurance Expense Workers' Compensation Insurance Payable Adjust workers’ compensation insurance expense 31 Workers’ Compensation Insurance Expense Prepaid Worker's Compensation Insurance Adjust prepaid workers’ compensation insurance

POST. REF.

DEBIT

88

CREDIT

1 5 0 9 25 2 5 0 9 25 3 4 5 6 18 7 3 0 00 7 18 7 3 0 00 8 9 10 11

Analyze: The balance of the Workers’ Compensation Insurance Expense account is $19,239.25 ($18,730.00 + $509.25).

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CRITICAL THINKING PROBLEM 11.1 1.

Payroll information needed: the hourly rate paid the truck drivers; the rates for social security, medicare, and federal and state unemployment taxes; and the employer’s obligations for workers’ compensation insurance and fringe benefits such as health insurance, pension contributions, and group life insurance.

YEARLY COST—CURRENT SYSTEM

2.

Truck Drivers: Wages (100 × $42,000) Social Security Tax ($4,200,000 × 0.062) Medicare Tax ($4,200,000 × 0.0145) State Unemployment Tax (100 × $7,000 × .05) Federal Unemployment Tax (100 × $7,000 × .006) Workers’ Compensation Insurance ($4,200,000 × $.70 ÷ 100) Health Insurance (100 × $300 × 12) Pensions (100 × $250 × 12) Total Payroll Costs Teenage Carriers: Payment per paper (90,000 × $0.04 × 5 days × 52 weeks) Liability Insurance Total Cost

$4,200,000 260,400 60,900 35,000 4,200 29,400 360,000 300,000 $5,249,900 936,000 100,000 $6,285,900

YEARLY COST—PROPOSED SYSTEM Truck Drivers: Wages (20 × $42,000) Social Security Tax ($840,000 × 0.0620) Medicare Tax ($840,000 × 0.0145) State Unemployment Tax (20 × $7,000 × 0.05) Federal Unemployment Tax (20 × $7,000 × .006) Workers’ Compensation Insurance ($840,000 × $0.70 ÷ 100) Health Insurance (20 × $300 × 12) Pensions (20 × $250 × 12) Total Payroll Costs Independent Contractor Payments (90,000 × $0.20 × 5 days × 52 weeks) Total Cost

$840,000 52,080 12,180 7,000 840 5,880 72,000 60,000 $1,049,980 4,680,000 $5,729,980

HARLEY would save $555,920 if the proposed system were adopted ($6,285,900-$5,729,980). NOTE:

3

Federal income tax withholding is not a factor in this analysis since it is the employees' obligation, not the employer’s.

In addition to analyzing payroll costs, Harley should consider costs of operating the fleet of delivery trucks. What is the current cost to operate the trucks? How much would be saved by reducing the fleet? He should also consider the effect on employee morale of terminating 80 truck drivers and the commitments the paper has to union contracts. He should also assess the dependability and stability of the independent contractors; it may be worthwhile to spend more in order to have control of the paper’s distribution system through its own employees and trucks.

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CRITICAL THINKING PROBLEM 11.2 1. 2. 3.

Tony is not an employee. A self-employed person cannot be his or her own employee. Guy is probably not an employee. He has the right to refuse jobs, which is not characteristic of an employee’s rights. Ken is an employee, paid on an hourly basis by Dr. Liu, who provides all facilities, supplies, and equipment. He is not hired by the patients for professional services.

4.

Lisa is not an employee. The employer does not provide a work place or tools, or meet other conditions for her to be classified as an employee.

5.

Ron is definitely a part-time employee. The titles of president, secretary, and treasurer make him officially an employee. Analyze: The employees are hired and work under the control and direction of the employer. The employer determines how the employee completes the job.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Only authorized persons able to add new employees to payroll; review of payroll by different employee; distribution of paychecks by yet another person. 2. Premiums for workers’ compensation insurance are based on the amount earned by classes of employees. 3. Penalties and fines for the employer. 4. Experience rating is a potential source of tax savings. Ethical Dilemma: Johan is paying $1,720 more per month for wages. The extra expense represents an additional employee that he did not hire. He should consult his accountant to find the approval for an additional sales associate. To prevent this from happening in the future, he should pass out the paychecks personally to match the paycheck to the person. Financial Statement Analysis: 1. $182,000,000/340,000 employees = $535.29 Teamwork: Hire temporary employees for jobs that occur seasonally. Only pay 98% of deposit required. The IRS states that 98% is considered in compliance. Stop any unnecessary overtime by requiring management approval for all overtime. Find less expensive benefits. Internet Connection: The 940 and 941 form is available to download and use. However, the W-2, W-3, W-4 and W-5 must be original forms.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. FALSE 3. FALSE 4. TRUE 5. FALSE 6. TRUE 7. FALSE 8. FALSE 9. TRUE 10. FALSE 11. TRUE 12. FALSE 13. TRUE 14. FALSE 15. FALSE 16. FALSE 17. FALSE 18. FALSE Part B Matching 1. j 2. i 3. h 4. a 5. g 6. e 7. f 8. b 9. d 10. c

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CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET Chapter Opener: Thinking Critically The store needs to evaluate which items are selling well and which are not. They need to consider the selling price of each of their products to determine if adjustments in prices need to be made. They also must decide what to do with items that didn’t sell. Furthermore, each store will need to take a physical count to verify that their accounting records match what is actually on the shelf. They made need to recognize some loss due to inventory shrinkage (theft, damage or obsolescence). Each store will need to use both the beginning inventory count as well as the ending inventory count in order to prepare their income statement at period end.

Fast Facts Urban Outfitters achieved compounded annual sales growth of approximately 13% from 2009 to • 2013, with sales of approximately $2.8 billion in fiscal year end Jan. 31, 2013. Urban Outfitters achieved compounded annual sales growth of approximately 13% from 2009 to • 2013, with sales of approximately $2.8 billion in fiscal year end Jan. 31, 2013. •

Urban Outfitters achieved compounded annual sales growth of approximately 13% from 2009 to 2013, with sales of approximately $2.8 billion in fiscal year end Jan. 31, 2013.

Urban Outfitters achieved compounded annual sales growth of approximately 13% from 2009 to 2013, with sales of approximately $2.8 billion in fiscal year end Jan. 31, 2013.

Managerial Implications: Thinking Critically Financial results and financial condition will be incorrectly stated. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Dr. Uncollectible Accounts Expense, Cr. Allowance for Doubtful Accounts. 2. Debiting Allowance for Doubtful Accounts and Crediting Accounts Receivable. 3. To the Income Statement columns. 4. Transfers cost of asset to expense over life of asset. 5. Long-term assets whose usefulness is consumed over the life of the assets. (Buildings, furniture and fixtures, machinery.) 6. a. Estimated selling price upon disposal of an asset. b. Cost of asset less salvage value. c. Number of years that asset will be used. d. Equal amount of depreciation taken in each year of the asset’s useful life. 7. Dr. Depreciation Exp.— Office Equipment., Cr. Accum. Depr.—Office Equipment.

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Discussion Questions (continued) 8.

An expense that does not yet appear in the accounts. (Accrued salaries, accrued payroll taxes, and accrued interest on notes payable.)

9. 10.

Dr. Salaries Expense, Cr. Salaries Payable. Item that has been paid for and recorded in the accounts in advance of its use. (Prepaid rent, prepaid insurance, prepaid interest on notes payable.) Dr. Prepaid Insurance, Cr. Cash. Dr. Insurance Expense, Cr. Prepaid Insurance Charge cost to expense account at the time cost is incurred. At end of period, amount still prepaid is debited to prepaid expense account and credited to the expense account. Income earned but not yet received in cash or recorded as a receivable. (Interest on notes receivable.) Dr. Interest Receivable, Cr. Interest Income. Income for which payment has been received in advance, but which has not been earned. (Rent income received in advance; magazine subscriptions income received in advance.)

11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Dr. Cash, Cr. Unearned Income. Dr. Unearned Income, Cr. Income. Record amount received in advance as income at the time it is received in cash. At period end, unearned amount debited to Income and credited to Unearned Income. Liability. Provides a single location for all information necessary to journalize adjusting entries and to prepare the financial statements.

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EXERCISE 12.1 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Income Summary 3 Merchandise Inventory 4 5 31 Merchandise Inventory 6 Income Summary 7

POST. REF.

DEBIT

CREDIT

131 0 0 0 00 131 0 0 0 00 111 5 1 9 00 111 5 1 9 00

1 2 3 4 5 6 7

EXERCISE 12.2 Beginning Merchandise Inventory is $189,000 and ending Merchandise Inventory is $212,344.

EXERCISE 12.3 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Uncollectible Accounts Expense 3 Allowance for Doubtful Accounts 4 5 31 Depreciation Expense—Equipment 6 Accumulated Depreciation—Equipment 7 8 31 Wages Expense 9 Wages Payable 10 11 31 Payroll Taxes Expense 12 Social Security Tax Payable 13 Medicare Tax Payable 14 15 31 Payroll Taxes Expense 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18

POST. REF.

DEBIT

CREDIT

4 9 5 0 00 4 9 5 0 00 3 1 9 0 00 3 1 9 0 00 5 7 0 0 00 5 7 0 0 00 4 3 6 05 3 5 3 40 8 2 65 3 4 2 00 3 4 20 3 0 7 80

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18


EXERCISE 12.4 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Interest Expense 3 Interest Payable 4 5 31 Supplies Expense 6 Supplies 7 8 31 Insurance Expense 9 Prepaid Insurance 10 11 31 Advertising Expense 12 Prepaid Advertising 13

POST. REF.

DEBIT

CREDIT

2 8 5 00 2 8 5 00 4 6 2 0 00 4 6 2 0 00 5 6 0 0 00 5 6 0 0 00 10 6 2 0 00 10 6 2 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13

EXERCISE 12.5 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 1 Cash 3 Prepaid Interest 4 Notes Payable 5 6 31 Interest Expense 7 Prepaid Interest 8

POST. REF.

DEBIT

CREDIT

49 0 0 0 00 1 0 0 0 00 50 0 0 0 00 2 5 0 00 2 5 0 00

1 2 3 4 5 6 7 8

EXERCISE 12.6 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Interest Expense 3 Interest Payable 4

POST. REF.

DEBIT

CREDIT

6 4 0 00 6 4 0 00

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1 2 3 4


EXERCISE 12.7 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec. 31 Interest Receivable 3 Interest Income 4 5 31 Unearned Subscription Revenue 6 Subscription Revenue 7 8 31 Unearned Rent 9 Rent Income 10 11 31 Unearned Season Ticket Income 12 Season Ticket Income 13

POST. REF.

DEBIT

CREDIT

7 0 0 00 7 0 0 00 25 0 0 0 00 25 0 0 0 00 18 0 0 0 00 18 0 0 0 00 680 0 0 0 00 680 0 0 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13


PROBLEM 12.1A PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 June 30 (Adjustment a) 3 Income Summary 4 Merchandise Inventory 5 6 30 (Adjustment b) 7 Merchandise Inventory 8 Income Summary 9 10 30 (Adjustment c) 11 Unearned Seminar Fees 12 Seminar Fees Income 13 14 30 (Adjustment d) 15 Insurance Expense 16 Prepaid Insurance 17 18 30 (Adjustment e) 19 Depreciation Expense - Store Equipment 20 Accumulated Depreciation - Store Equipment 21 22 30 (Adjustment f) 23 Wages Expense 24 Wages Payable 25 26 30 (Adjustment g) 27 Payroll Taxes Expense 28 State Unemployment Taxes Payable 29 Federal Unemployment Taxes Payable 30 Medicare Taxes Payable 31 Social Security Taxes Payable 32 33 30 (Adjustment h) 34 Uncollectible Accounts Expense 35 Allowance for Doubtful Accounts 36 37 30 (Adjustment i) 38 Rent Expense 39 Prepaid Rent

POST. REF.

DEBIT

18

CREDIT

8 5 0 0 00 8 5 0 0 00

9 0 0 0 00 9 0 0 0 00

2 8 0 0 00 2 8 0 0 00

6 0 0 0 00 6 0 0 0 00

5 1 0 00 5 1 0 00

3 5 0 00 3 5 0 00

3 9 38 1 0 50 2 10 5 08 2 1 70

30 0 0 0 00 30 0 0 0 00

5 4 0 0 00 5 4 0 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39


PROBLEM 12.1A (continued) PAGE

GENERAL JOURNAL

41 42 43 44 45 46 47

DATE DESCRIPTION 30 (Adjustment j) Supplies Expense Supplies 30 (Adjustment k) Interest Expense Interest Payable

POST. REF.

DEBIT 3 0 0 00

1 0 1 00

18

CREDIT 41 42 3 0 0 00 43 44 45 46 1 0 1 00 47

Notes on calculations: a.-b. Amounts given. c. $7,000 cash received/5 seminars = $1,400/seminar. $1,400/seminar  2 seminars conducted = $2,800 earned. d. $18,000/6 months in policy = $3,000/month. $3,000/month  2 months expired (May and June) = $6,000 insurance expense. e. ($8,760 cost - $600 salvage value)/48 months = $170/month depreciation. $170/month  3 months of use (April, May and June) = $510. f. Amounts given. g. Amounts given. h. $3,000,000  1% = $30,000 i. $8,100/6 months in policy = $1,350/month; $1,350  4 months expired = $5,400. j. $500 balance - $200 supplies on hand = $300 of supplies used. k. $10,100 principal  12% interest rate  1/12 time factor = $101 Analyze: The balance of the Prepaid Rent account will be $2,700 ($8,100 - $5,400 expired).

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PROBLEM 12.2A 1. PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 July 1 Prepaid Rent 3 Cash 4 5 1 Cash 6 Prepaid Interest 7 Notes Payable 8 9 1 Cash 10 Unearned Accounting Fees 11 12 1 Office Equipment 13 Notes Payable 14 15 1 Prepaid Insurance 16 Cash 17 18 3 Office Furniture 19 Cash 20 Accounts Payable 21 22 5 Supplies 23 Cash 24

POST. REF.

DEBIT

1

CREDIT

14 7 0 0 00 14 7 0 0 00 38 8 0 0 00 1 2 0 0 00 40 0 0 0 00 84 0 0 0 00 84 0 0 0 00 15 9 0 0 00 15 9 0 0 00 1 7 4 0 00 1 7 4 0 00 16 0 8 0 00 8 4 8 0 00 7 6 0 0 00 2 0 1 0 00 2 0 1 0 00

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PROBLEM 12.2A (continued) 2. GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 3 July 31 Rent Expense 4 Prepaid Rent 5 6 31 Interest Expense 7 Prepaid Interest 8 9 31 Unearned Accounting Fees 10 Accounting Fees 11 12 31 Interest Expense 13 Interest Payable 14 15 31 Depreciation Expense—Office Equipment 16 Accumulated Depreciation—Office Equipment 17 18 31 Insurance Expense 19 Prepaid Insurance 20 21 31 Depreciation Expense—Office Furniture 22 Accumulated Depreciation—Office Furniture 23 24 31 Supplies Expense 25 Supplies 26

Analyze:

PAGE POST. REF.

DEBIT

2

CREDIT

2 4 5 0 00 2 4 5 0 00 3 0 0 00 3 0 0 00 7 0 0 0 00 7 0 0 0 00 1 5 9 00 1 5 9 00 2 4 0 00 2 4 0 00 1 4 5 00 1 4 5 00 3 1 0 00 3 1 0 00 1 1 1 0 00 1 1 1 0 00

The Unearned Accounting Fees account would be $77,000.

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


PROBLEM 12.3A Michael Domenici, Consultant Worksheet Month Ended July 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Prepaid Insurance 6 Prepaid Interest 7 Office Furniture 8 Accumulated Depreciation— 9 Office Furniture 10 Office Equipment 11 Accumulated Depreciation—Equipment 12 Notes Payable 13 Accounts Payable 14 Interest Payable 15 Unearned Consulting Fees 16 Michael Domenici, Capital 17 Michael Domenici, Drawing 18 Consulting Fees 19 Salaries Expense 20 Utilities Expense 21 Telephone Expense 22 Supplies Expense 23 Rent Expense 24 Insurance Expense 25 Depreciation Expense—Furniture 26 Depreciation Expense—Equipment 27 Interest Expense 28 29 Totals 30

Analyze:

TRIAL BALANCE DEBIT CREDIT 25 5 1 0 00 1 4 4 0 00 9 6 0 00 10 5 0 0 00 2 2 2 0 00 4 0 0 00 14 7 6 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 3 3 0 00 (b) 1 7 5 0 00 (c) 1 8 5 00 (d) 1 0 0 00

(e)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 25 5 1 0 00 1 4 4 0 00 6 3 0 00 8 7 5 0 00 2 0 3 5 00 3 0 0 00 14 7 6 0 00

1 3 5 00

7 2 5 0 00

1 3 5 00 7 2 5 0 00

(f)

9 0 00

9 0 00

(g)

4 9 00

17 7 0 0 00 5 5 0 0 00 4 9 00 5 5 0 0 00 32 5 2 0 00

(h)

5 0 0 00

17 7 0 0 00 5 5 0 0 00 6 0 0 0 00 (h) 32 5 2 0 00

5 0 0 00

3 0 0 0 00

3 0 0 0 00 9 0 0 0 00

4 2 0 0 00 2 7 0 00 2 1 0 00 (a) 3 3 0 00 (b) 1 7 5 0 00 (c) 1 8 5 00 (e) 1 3 5 00

70 7 2 0 00 70 7 2 0 00

(f)

9 0 00

(d) (g)

1 0 0 00 4 9 00 3 1 3 9 00

9 5 0 0 00 4 2 0 0 00 2 7 0 00 2 1 0 00 3 3 0 00 1 7 5 0 00 1 8 5 00 1 3 5 00 9 0 00

3 1 3 9 00

The expense accounts of the business were adjusted by $2,639 ($3,139 - $500).

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1 0 0 00 4 9 00 70 9 9 4 00 70 9 9 4 00


PROBLEM 12.4A The Green Thumb Gardener Worksheet Year Ended December 31, 2016 TRIAL BALANCE 1 Cash

ACCOUNT NAME

DEBIT 6 7 0 0 00

2 Accounts Receivable

3 6 0 0 00

3 Allowance for Doubtful Accounts

ADJUSTMENTS

CREDIT

DEBIT

6 2 00

CREDIT

(c)

2 2 5 00

4 Merchandise Inventory

12 3 0 0 00

5 Supplies

1 3 0 0 00

(d)

9 7 5 00

6 Prepaid Advertising

1 0 8 0 00

(e)

5 4 0 00

7 Store Equipment

8 7 0 0 00 1 6 0 0 00

(f) 1

6 0 0 00

3 8 0 00

(g)

3 8 0 00

5 3 0 00

(i)

1 1 9 66

8 8 00

(i)

2 7 99

14 Federal Unemployment Tax Payable

(j)

1 1 58

15 State Unemployment Tax Payable

(j)

1 0 4 22

16 Salaries Payable

(h)

1 9 3 0 00

8 Accumulated Depr.—Store Equipment 9 Office Equipment

2 2 0 0 00

10 Accumulated Depr.—Office Equipment 11 Accounts Payable

2 7 2 5 00

12 Social Security Tax Payable 13 Medicare Tax Payable

17 Beth Argo, Capital 18 Beth Argo, Drawing

30 6 7 7 00 21 0 0 0 00

19 Sales

95 0 4 8 00

20 Sales Returns & Allowances

1 2 0 0 00

21 Purchases

49 4 0 0 00

22 Purchases Returns & Allowances 23 Rent Expense 24 Telephone Expense

(b) 13 3 2 1 00 (a) 12 3 0 0 00

5 3 0 00 7 0 0 0 00 6 9 0 00

25 Salaries Expense

15 1 0 0 00

(h) 1 9 3 0 00

26 Payroll Taxes Expense

1 3 7 0 00

(i)

1 4 7 65

27

(j)

1 1 5 80

28 Income Summary

(a) 12 3 0 0 00 (b) 13 3 2 1 00

29 Supplies Expense

(d)

9 7 5 00

30 Advertising Expense

(e)

5 4 0 00

31 Depreciation expense—Store Equipment

(f)

1 6 0 0 00

32 Depreciation expense—Office Equipment

(g)

3 8 0 00

33 Uncollectible accounts expense

(c)

2 2 5 00

34

131 6 4 0 00 131 6 4 0 00

31 5 3 4 45

31 5 3 4 45

35 Net income

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PROBLEM 12.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 6 7 0 0 00 3 6 0 0 00 2 8 7 00 13 3 2 1 00 3 2 5 00 5 4 0 00 8 7 0 0 00 3 2 0 0 00 2 2 0 0 00 7 6 0 00 2 7 2 5 00 6 4 9 66 1 1 5 99 1 1 58 1 0 4 22 1 9 3 0 00 30 6 7 7 00 21 0 0 0 00 95 0 4 8 00 1 2 0 0 00 49 4 0 0 00 5 3 0 00 7 0 0 0 00 6 9 0 00 17 0 3 0 00 1 6 3 3 45 12

1

149

3 9 5 6 3 2 3

Analyze:

0 7 4 0 8 2 5

0 00 5 00 0 00 0 00 0 00 5 00 9 45

13 3 2 1 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 6 7 0 0 00 3 6 0 0 00 2 8 7 00 13 3 2 1 00 3 2 5 00 5 4 0 00 8 7 0 0 00 3 2 0 0 00 2 2 0 0 00 7 6 0 00 2 7 2 5 00 6 4 9 66 1 1 5 99 1 1 58 1 0 4 22 1 9 3 0 00 30 6 7 7 00 21 0 0 0 00

95 0 4 8 00 1 2 0 0 00 49 4 0 0 00 5 3 0 00 7 0 0 0 00 6 9 0 00 17 0 3 0 00 1 6 3 3 45

12 3 0 0 00 13 3 2 1 00 9 7 5 00 5 4 0 00 1 6 0 0 00 3 8 0 00 2 2 5 00 149 3 5 9 45 92 9 7 3 45 108 8 9 9 00 56 3 8 15 9 2 5 55 ## 8 9 9 00 108 8 9 9 00 56 3 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 6 00 40 4 6 0 45 34 15 9 2 5 55 35 6 00 56 3 8 6 00

Adjustments decreased total assets (assets less accumulated depreciation) by $2,699.

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PROBLEM 12.5A Healthy Eating Foods Company Worksheet Year Ended December 31, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Office Equipment 8 Accumulated Depr.—Office Equipment 9 Warehouse Equipment 10 Accumulated Depr.—Warehouse Equipment 11 Notes Payable—Bank 12 Accounts Payable 13 Interest Payable 14 Social Security Tax Payable 15 Medicare Tax Payable 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Salaries Payable 19 Phillip Tucker, Capital 20 Phillip Tucker, Drawing 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Purchases Returns and Allowance 25 Income Summary 26 Rent Expenses 27 Telephone Expense 28 Salaries Expense 29 Payroll Taxes Expense 30 31 Supplies Expense 32 Insurance Expense 33 Totals Carried Forward 34

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 4 2 0 00 (c) 2 8 0 0 00 86 0 0 0 00 (b) 78 0 0 0 00 (a) 86 0 0 0 00 10 4 0 0 00 (d) 9 2 2 0 00 5 4 0 0 00 (e) 3 6 0 0 00 8 3 0 0 00 2 6 5 0 00 (f) 1 3 2 5 00 28 0 0 0 00 9 6 0 0 00 (g) 4 8 0 0 00 32 0 0 0 00 12 2 0 0 00 (h) (j) (j) (k) (k) (i) 5

1 6 8 0 00 3 8 8 00

6 4 0 00 3 1 0 00 7 2 50 3 0 00 2 7 0 00 0 0 0 00

108 6 8 4 00 56 0 0 0 00 653 7 7 8 00 10 0 0 0 00 350 0 0 0 00 9 2 0 0 00 (a) 86 0 0 0 00 (b) 78 0 0 0 00 36 0 0 0 00 2 2 0 0 00 160 0 0 0 00 13 0 0 0 00

830 6 0 0 00 830 6 0 0 00

(i) 5 (j) (k) (d) 9 (e) 3

0 0 0 00 3 8 2 50 3 0 0 00 2 2 0 00 6 0 0 00

182 5 0 2 50

192 0 6 7 50

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PROBLEM 12.5A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 3 2 2 0 00 78 0 0 0 00 1 1 8 0 00 1 8 0 0 00 8 3 0 0 00 3 9 7 5 00 28 0 0 0 00 14 4 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 3 2 2 0 00 78 0 0 0 00 1 1 8 0 00 1 8 0 0 00 8 3 0 0 00 3 9 7 5 00 28 0 0 0 00 14 4 0 0 00

32 0 0 0 00 12 2 0 0 00 6 4 0 00 1 9 9 0 00 4 6 0 50 3 0 00 2 7 0 00 5 0 0 0 00 108 6 8 4 00

32 0 0 0 00 12 2 0 0 00 6 4 0 00 1 9 9 0 00 4 6 0 50 3 0 00 2 7 0 00 5 0 0 0 00 108 6 8 4 00

56 0 0 0 00

56 0 0 0 00 653 7 7 8 00

10 0 0 0 00 350 0 0 0 00 86 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50

9 2 0 0 00 78 0 0 0 00

9 2 2 0 00 3 6 0 0 00 914 2 8 2 50

653 7 7 8 00 10 0 0 0 00 350 0 0 0 00 86 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50

9 2 0 0 00 78 0 0 0 00

9 2 2 0 00 3 6 0 0 00 923 8 4 7 50

675 7 0 2 50

740 9 7 8 00

238 5 8 0 00

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

182 8 6 9 50 33 34

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PROBLEM 12.5A (continued)

ACCOUNT NAME 1 Totals Brought Forward 2 Depr. Expense—Office Equipment 3 Depr. Expense—Warehouse Equipment 4 Uncollectible Accounts Expense 5 Interest Expense 6 Totals 7 Net Income 8 9

TRIAL BALANCE DEBIT CREDIT 830 6 0 0 00 830 6 0 0 00

830 6 0 0 00

ADJUSTMENTS DEBIT CREDIT 182 5 0 2 50 192 0 6 7 50 (f) 1 3 2 5 00 (g) 4 8 0 0 00

(c) 2 8 0 0 00 (h) 6 4 0 00 830 6 0 0 00 192 0 6 7 50

192 0 6 7 50

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PROBLEM 12.5A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 914 2 8 2 50 923 8 4 7 50 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 923 8 4 7 50 923 8 4 7 50

INCOME STATEMENT DEBIT CREDIT 675 7 0 2 50 740 9 7 8 00 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 685 2 6 7 50 740 9 7 8 00 55 7 1 0 50 740 9 7 8 00 740 9 7 8 00

BALANCE SHEET DEBIT CREDIT 238 5 8 0 00 182 8 6 9 50 1 2 3 4 5 238 5 8 0 00 182 8 6 9 50 6 55 7 1 0 50 7 238 5 8 0 00 238 5 8 0 00 8 9

Analyze: The net income will be $55,710.50.

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PROBLEM 12.6A Artisan Wines Worksheet Year Ended December 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Prepaid Advertising 4 Supplies 5 Merchandise Inventory 6 Store Equipment 7 Accum. Depr., Store Equip. 8 Office Equipment 9 Accum. Depr., Office Equip. 10 Notes Payable, due 2017 11 Accounts Payable 12 Wages Payable 13 Social Security Tax Payable 14 Medicare Tax Payable 15 Unearned Seminar Fees 16 Interest Payable 17 Vincent Arroyo, Capital 18 Vincent Arroyo, Drawing 19 Income Summary 20 Sales 21 Sales Discounts 22 Seminar Fee Income 23 Purchases 24 Purchases Returns & Allow. 25 Freight In 26 Rent Expense 27 Wages Expense 28 Payroll Taxes Expense 29 Depreciation Exp., Store Equip. 30 Depreciation Exp., Office Equip. 31 Advertising Expense 32 Supplies Expense 33 Interest Expense 34 35 Net income 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 28 3 8 6 00 5 0 0 00 4 8 0 00 (c) 1 6 0 00 3 0 0 00 (d) 1 4 0 00 15 0 0 0 00 (a) 13 0 0 0 00 (b) 15 0 0 0 00 25 0 0 0 00 3 0 0 0 00 (e) 3 0 0 0 00 5 0 0 0 00 1 5 0 0 00 (f) 1 2 5 0 00 20 0 0 0 00 2 7 0 5 00 (h) 5 0 0 00 (i) 3 1 00 7 25 6 0 0 0 00 (g) 4 0 0 0 00 (j) 1 0 0 00 32 7 0 0 00 14 1 1 0 00 (b) 15 0 0 0 00 (a) 13 0 0 0 00 153 9 7 0 00 2 0 0 00 (g) 4 0 0 0 00 91 0 0 0 00 1 0 0 0 00 2 2 5 00 13 2 0 0 00 24 0 0 0 00 (h) 5 0 0 00 3 3 2 4 00 (i) 3 8 25 (e) 3 0 0 0 00 (f) 1 2 5 0 00 (c) 1 6 0 00 (d) 1 4 0 00 1 5 0 00 (j) 1 0 0 00 220 8 7 5 00

220 8 7 5 00

37 1 8 8 25

37 1 8 8

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25


PROBLEM 12.6A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 28 3 8 6 00 5 0 0 00 3 2 0 00 1 6 0 00 13 0 0 0 00 25 0 0 0 00 6 0 0 0 00 5 0 0 0 00 2 7 5 0 00 20 0 0 0 00 2 7 0 5 00 5 0 0 00 3 1 00 7 25 2 0 0 0 00 1 0 0 00 32 7 0 0 00 14 1 1 0 00 15 0 0 0 00 13 0 0 0 00 153 9 7 0 00 2 0 0 00 4 0 0 0 00 91 0 0 0 00 1 0 0 0 00 2 2 5 00 13 2 0 0 00 24 5 0 0 00 3 3 6 2 25 3 0 0 0 00 1 2 5 0 00 1 6 0 00 1 4 0 00 2 5 0 00 238 7 6 3 25

238 7 6 3 25

INCOME STATEMENT DEBIT CREDIT

15 0 0 0 00

BALANCE SHEET DEBIT CREDIT 28 3 8 6 00 5 0 0 00 3 2 0 00 1 6 0 00 13 0 0 0 00 25 0 0 0 00 6 0 0 0 00 5 0 0 0 00 2 7 5 0 00 20 0 0 0 00 2 7 0 5 00 5 0 0 00 3 1 00 7 25 2 0 0 0 00 1 0 0 00 32 7 0 0 00 14 1 1 0 00

13 0 0 0 00 153 9 7 0 00

2 0 0 00 4 0 0 0 00 91 0 0 0 00 1 0 0 0 00 2 2 5 00 13 2 0 0 00 24 5 0 0 00 3 3 6 2 25 3 0 0 0 00 1 2 5 0 00 1 6 0 00 1 4 0 00 2 5 0 00 152 2 8 7 25 171 9 7 0 00

86 4 7

6 00

19 6 8 2 75 171 9 7 0 00 171 9 7 0 00

86 4 7

6 00

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

66 7 9 3 25

34

19 6 8 2 75

35

86 4 7 6 00

36

Analyze: The amount of revenue earned by conducting seinars seminars during during thethe year year ended ended December 31, 2016 was $4,000.

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PROBLEM 12.1B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 Dec 31 (Adjustment a) 3 Income Summary 4 Merchandise Inventory 5 6 31 (Adjustment b) 7 Merchandise Inventory 8 Income Summary 9 10 31 (Adjustment c) 11 Unearned Seminar Fees 12 Seminar Fees Income 13 14 31 (Adjustment d) 15 Insurance Expense 16 Prepaid Insurance 17 18 31 (Adjustment e) 19 Depreciation Expense - Store Equipment 20 Accumulated Depreciation - Store Equipment 21 22 31 (Adjustment f) 23 Wages Expense 24 Wages Payable 25 26 31 (Adjustment g) 27 Payroll Taxes Expense 28 State Unemployment Taxes Payable 29 Federal Unemployment Taxes Payable 30 Medicare Taxes Payable 31 Social Security Taxes Payable 32 33 31 (Adjustment h) 34 Uncollectible Accounts Expense 35 Allowance for Doubtful Accounts 36

POST. REF.

DEBIT

18

CREDIT

9 5 0 0 00 9 5 0 0 00

10 5 0 0 00 10 5 0 0 00

12 0 0 0 00 12 0 0 0 00

7 5 0 0 00 7 5 0 0 00

3 6 0 00 3 6 0 00

5 0 0 00 5 0 0 00

5 6 25 1 5 00 3 00 7 25 3 1 00

60 0 0 0 00 60 0 0 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36


PROBLEM 12.1B (continued) PAGE

GENERAL JOURNAL

37 38 39 40 41 42 43 44 45 46 47

DATE DESCRIPTION 31 (Adjustment i) Rent Expense Prepaid Rent

POST. REF.

DEBIT 6 0 0 0 00

31 (Adjustment j) Supplies Expense Supplies

3 7 5 00

31 (Adjustment k) Interest Expense Interest Payable

6 0 00

18

CREDIT 37 38 6 0 0 0 00 39 40 41 42 3 7 5 00 43 44 45 46 6 0 00 47

Notes on calculations: a.-b. Amounts given. c. $16,000 cash received /4 seminars = $4,000/seminar. $4,000/seminar × 3 seminars conducted = $12,000 earned. d. $15,000/6 months in policy = $2,500/month. $2,500/month × 3 months expired (October, November and December) = $7,500 insurance expense. e. f. g. h. i. j. k.

($6,000 cost - $600 salvage value) /60 months = $90/month depreciation. $90/month × 4 months of use (September, October, November and December) = $360. Amounts given. Amounts given. $4,000,000 × 1.5% = $60,000 $18,000/9 months prepaid = $2,000/month; $2,000 × 3 months expired = $6,000. $500 balance - $125 supplies on hand = $375 of supplies used. $12,000 principal × 6% interest rate × 1/12 time factor = $60

Analyze: The balance of the Unearned Seminar Fees account will be $4,000 ($16,000 - $12,000 earned).

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PROBLEM 12.2B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2016 2 June 1 Prepaid Rent 3 Cash 4 5 1 Cash 6 Prepaid Interest 7 Notes Payable 8 9 1 Cash 10 Unearned Advertising Fees 11 12 1 Office Equipment 13 Notes Payable 14 15 1 Prepaid Insurance 16 Cash 17 18 3 Office Furniture 19 Accounts Payable 20 Cash 21 22 5 Office Supplies 23 Cash 24

POST. REF.

DEBIT

1

CREDIT

18 0 0 0 00 18 0 0 0 00 17 5 5 0 00 4 5 0 00 18 0 0 0 00 54 6 0 0 00 54 6 0 0 00 15 4 0 0 00 15 4 0 0 00 1 9 4 4 00 1 9 4 4 00 17 4 0 0 00 9 0 0 0 00 8 4 0 0 00 2 8 1 0 00 2 8 1 0 00

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


PROBLEM 12.2B (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

POST. REF.

1 2 2016 3 June 30 Rent Expense 4 Prepaid Rent 5 6 30 Interest Expense 7 Prepaid Interest 8 9 30 Unearned Advertising Fees 10 Advertising Fees 11 12 30 Interest Expense 13 Interest Payable 14 15 30 Depreciation Expense—Office Equipment 16 Accumulated Depreciation—Office Equipment 17 18 30 Insurance Expense 19 Prepaid Insurance 20 21 30 Depreciation Expense—Office Furniture 22 Accumulated Depreciation—Office Furniture 23 24 30 Office Supplies Expense 25 Office Supplies 26

DEBIT

2

CREDIT

3 0 0 0 00 3 0 0 0 00 1 5 0 00 1 5 0 00 4 5 5 0 00 4 5 5 0 00 1 5 4 00 1 5 4 00 2 4 0 00 2 4 0 00 1 6 2 00 1 6 2 00 2 7 0 00 2 7 0 00 1 6 6 0 00 1 6 6 0 00

Analyze: Total Rent expense will be $18,000 at the end of the year.

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


PROBLEM 12.3B Cross Timbers Company Partial Worksheet Month Ended September 30, 2016 ACCOUNT NAME 1 Cash 2 Supplies 3 Prepaid Rent 4 Prepaid Advertising 5 Prepaid Interest 6 Furniture 7 Accumulated Depreciation—Office Furniture 8 Equipment 9 Accumulated Depreciation—Equipment 10 Notes Payable 11 Accounts Payable 12 Interest Payable 13 Unearned Course Fees 14 Scott Nelson, Capital 15 Scott Nelson, Drawing 16 Course Fees 17 Salaries Expense 18 Telephone Expense 19 Entertainment Expense 20 Supplies Expense 21 Rent Expense 22 Advertising Expense 23 Depreciation Expense—Furniture 24 Depreciation Expense—Equipment 25 Interest Expense 26 27 Totals 28

TRIAL BALANCE DEBIT CREDIT 26 4 6 0 00 7 4 0 00 4 2 0 0 00 3 7 5 0 00 4 5 0 00 4 8 4 0 00

ADJUSTMENTS DEBIT CREDIT (a) (b) (c ) (d)

3 5 00 7 0 0 00 6 2 5 00 1 5 0 00

(e)

7 5 00

(f)

1 3 0 00

(g)

3 5 00

9 0 0 0 00

20 2 5 0 00 4 4 0 0 00 22 0 0 0 00 (h) 7 0 0 0 00 6 7 3 0 00 2 0 0 0 00 (h) 7 0 0 0 00 1 6 0 0 00 1 2 0 00 2 2 0 00

53 3 8 0 00

53 3 8 0 00

(a) (b) (c) (e)

3 5 00 7 0 0 00 6 2 5 00 7 5 00

(f)

1 3 0 00

(d) (g)

1 5 0 00 3 5 00 8 7 5 0 00

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8 7 5 0 00


PROBLEM 12.3B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 26 4 6 0 00 7 0 5 00 3 5 0 0 00 3 1 2 5 00 3 0 0 00 4 8 4 0 00 7 5 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

9 0 0 0 00 1 3 0 00 20 2 5 0 00 4 4 0 0 00 3 5 00 15 0 0 0 00 6 7 3 0 00

1 2 3 4 5 6 7 8 9

1 6 0 0 00 1 2 0 00 2 2 0 00 3 5 00 7 0 0 00 6 2 5 00 7 5 00

10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 3 0 00

24

1 8 5 00

25 26

2 0 0 0 00 7 0 0 0 00

53 6 2 0 00

Analyze:

53 6 2 0 00

The net dollar effect of the adjustments is an increase of $5,250.00 in income.

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27 28


PROBLEM 12.4B Fun Depot Worksheet Year Ended December 31, 2016 TRIAL BALANCE ACCOUNT NAME 1 Cash

DEBIT 26 4 0 0 00

2 Accounts Receivable

22 7 0 0 00

3 Allowance for Doubtful Accounts

ADJUSTMENTS

CREDIT

DEBIT

3 2 0 00

CREDIT

(c ) 3

4 Merchandise Inventory

138 0 0 0 00

5 Supplies

11 6 0 0 00

(d) 8

6 4 0 00

6 Prepaid Advertising

5 2 8 0 00

(e) 3

5 2 0 00

7 Store Equipment

32 5 0 0 00 5 7 6 0 00

(f)

5

7 6 0 00

10 Accumulated Depr.—Office Equip.

1 4 4 0 00

(g) 1

4 4 0 00

11 Accounts Payable

8 6 0 0 00

12 Social Security Tax Payable

5 9 2 0 00

(i)

4 9 6 00

13 Medicare Tax Payable

1 3 6 8 00

(i)

1 1 6 00

14 Federal Unemployment Tax Payable

(j)

4 8 00

15 State Unemployment Tax Payable

(j)

4 3 2 00

16 Salaries Payable

(h) 8

0 0 0 00

8 Accumulated Depr.—Store Equip. 9 Office Equipment

112 2 5 0 00 100 0 0 0 00

19 Sales

1,043 6 6 2 00

20 Sales Returns and Allowances

17 2 0 0 00

21 Purchases

507 6 0 0 00

22 Purchases Returns and Allowances 23 Rent Expense

0 0 0 00 (a)138 0 0 0 00

8 4 0 0 00

17 Janie Fielder, Capital 18 Janie Fielder, Drawing

(b)148

0 8 0 00

5 0 4 0 00 125 0 0 0 00

24 Telephone Expense

4 2 8 0 00

25 Salaries Expense

164 2 0 0 00

(h) 8

0 0 0 00

26 Payroll Taxes Expense

15 2 0 0 00

(i)

6 1 2 00

27

(j)

4 8 0 00

28 Income Summary

(a)138

0 0 0 00 (b)148 0 0 0 00

(d) 8

6 4 0 00

(e) 3

5 2 0 00

31 Depreciation Expense—Store Equip.

(f)

5

7 6 0 00

32 Depreciation Expense—Office 33 Equipment Uncollectible Accounts Expense

(g) 1

4 4 0 00

(c) 3

0 8 0 00

29 Supplies Expense 30 Advertising Expense

34 Totals Carried Forward

6 0 0 0 00

1,184 3 6 0 00

1,184 3 6 0 00

317 5 3 2 00

317 5 3 2 00

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PROBLEM 12.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 26 4 0 0 00 22 7 0 0 00 3 4 0 0 00

INCOME STATEMENT DEBIT CREDIT

148 0 0 0 00 2 9 6 0 00 1 7 6 0 00 32 5 0 0 00

BALANCE SHEET DEBIT CREDIT 26 4 0 0 00 22 7 0 0 00 3 4 0 0 00 148 0 0 0 00 2 9 6 0 00 1 7 6 0 00 32 5 0 0 00

11 5 2 0 00

11 5 2 0 00

8 4 0 0 00

8 4 0 0 00 2 8 8 0 00 8 6 0 0 00 6 4 1 6 00 1 4 8 4 00 4 8 00 4 3 2 00 8 0 0 0 00 112 2 5 0 00

2 8 8 0 00 8 6 0 0 00 6 4 1 6 00 1 4 8 4 00 4 8 00 4 3 2 00 8 0 0 0 00 112 2 5 0 00

100 0 0 0 00

100 0 0 0 00 1043 6 6 2 00

17 2 0 0 00 507 6 0 0 00

1043 6 6 2 00 17 2 0 0 00 507 6 0 0 00

5 0 4 0 00 125 0 0 0 00 4 2 8 0 00 172 2 0 0 00 16 2 9 2 00 138 0 0 0 00 8 6 4 0 00 9 5 2 0 00 5 7 6 0 00 1 4 4 0 00 3 0 8 0 00 1,351 7 3 2 00

5 0 4 0 00 125 0 0 0 00 4 2 8 0 00 172 2 0 0 00 16 2 9 2 00

148 0 0 0 00

1,351 7 3 2 00

138 0 0 0 00 8 6 4 0 00 9 5 2 0 00 5 7 6 0 00 1 4 4 0 00 3 0 8 0 00 1,009 0 1 2 00

148 0 0 0 00

1,196 7 0 2 00

342 7 2 0 00 155 0 3 0 00

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


PROBLEM 12.4B (continued) Fun Depot Worksheet (Continued) Year Ended December 31, 2016 ACCOUNT NAME 1 Totals Brought Forward 2 Totals 3 Net Income 4 5

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 1,184 3 6 0 00 1,184 3 6 0 00 317 5 3 2 00 317 5 3 2 00 1,184 3 6 0 00 1,184 3 6 0 00 317 5 3 2 00 317 5 3 2 00

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PROBLEM 12.4B (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 1,351 7 3 2 00 1,351 7 3 2 00 1,009 0 1 2 00 1,196 7 0 2 00 342 7 2 0 00 155 0 3 0 00 1 187 6 9 0 00 187 6 9 0 00 2 1,196 7 0 2 00 1,196 7 0 2 00 342 7 2 0 00 342 7 2 0 00 3 4 5

Analyze: The resulting net income without the advertising adjustment would have been $191,210.

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PROBLEM 12.5B Whatnots Worksheet Year Ended December 31, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Store Equipment 8 Accumulated Depr.—Store Equipment 9 Store Fixtures 10 Accumulated Depr.—Store Fixtures 11 Notes Payable 12 Accounts Payable 13 Interest Payable 14 Social Security Tax Payable 15 Medicare Tax Payable 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Salaries Payable 19 Preston Allen, Capital 20 Preston Allen, Drawing 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Purchases Returns and Allowance 25 Rent Expenses 26 Telephone Expense 27 Salaries Expense 28 Payroll Taxes Expense 29 30 Income Summary 31 Supplies Expense 32 Insurance Expense 33 Totals Carried Forward

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 6 0 0 00 (c) 1 2 8 0 00 16 9 8 5 00 (b) 15 8 4 0 00 (a) 16 9 8 5 00 7 5 0 00 (d) 5 0 5 00 2 4 0 0 00 (e) 1 2 0 0 00 6 0 0 0 00 2 0 0 0 00 (f) 1 0 0 0 00 15 7 6 0 00 4 1 0 0 00 (g) 2 0 5 0 00 4 0 0 0 00 6 0 0 00 (h) 9 0 00 (j) 8 9 90 (j) 2 1 03 (k) 8 70 (k) 7 2 50 (i) 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00 236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 40 0 0 0 00 (i) 1 4 5 0 00 3 2 0 0 00 (j) 1 1 0 93 (k) 8 1 20 (a) 16 9 8 5 00 (b) 15 8 4 0 00 (d) 5 0 5 00 (e) 1 2 0 0 00 289 6 4 0 00 289 6 4 0 00 36 1 7 2 13 40 5 9 2 13

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PROBLEM 12.5B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 1 8 8 0 00 15 8 4 0 00 2 4 5 00 1 2 0 0 00 6 0 0 0 00 3 0 0 0 00 15 7 6 0 00 6 1 5 0 00 4 0 0 0 00 6 0 0 00 9 0 00 8 9 90 2 1 03 8 70 7 2 50 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00 236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 16 9 8 5 00 5 0 5 00 1 2 0 0 00 307 1 2 2 13

15 8 4 0 00

311 5 4 2 13

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 1 8 8 0 00 15 8 4 0 00 2 4 5 00 1 2 0 0 00 6 0 0 0 00 3 0 0 0 00 15 7 6 0 00 6 1 5 0 00 4 0 0 0 00 6 0 0 00 9 0 00 8 9 90 2 1 03 8 70 7 2 50 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00

236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 16 9 8 5 00 5 0 5 00 1 2 0 0 00 249 9 3 2 13

15 8 4 0 00

254 4 0 0 00

57 1 9 0 00

57 1 4 2 13

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


PROBLEM 12.5B (continued)

ACCOUNT NAME 1 Totals Brought Forward 2 Depr. Expense—Store Equipment 3 Depr. Expense—Store Fixtures 4 Interest Expense 5 Uncollectible Accounts Expense 6 Totals 7 Net Income 8 9

TRIAL BALANCE DEBIT CREDIT 289 6 4 0 00 289 6 4 0 00

ADJUSTMENTS DEBIT CREDIT 36 1 7 2 13 40 5 9 2 13 (f) 1 0 0 0 00 (g) 2 0 5 0 00 (h) 9 0 00 (c) 1 2 8 0 00 289 6 4 0 00 289 6 4 0 00 40 5 9 2 13 40 5 9 2 13

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PROBLEM 12.5B (continued)

1 2 3 4 5 6 7 8 9

ADJUSTED TRIAL BALANCE DEBIT CREDIT 307 1 2 2 13 311 5 4 2 13 1 0 0 0 00 2 0 5 0 00 9 0 00 1 2 8 0 00 311 5 4 2 13 311 5 4 2 13

INCOME STATEMENT DEBIT CREDIT 249 9 3 2 13 254 4 0 0 00 1 0 0 0 00 2 0 5 0 00 9 0 00 1 2 8 0 00 254 3 5 2 13 254 4 0 0 00 4 7 87 254 4 0 0 00 254 4 0 0 00

BALANCE SHEET DEBIT CREDIT 57 1 9 0 00 57 1 4 2 13 1 2 3 4 5 57 1 9 0 00 57 1 4 2 13 6 4 7 87 7 57 1 9 0 00 57 1 9 0 00 8 9

Analyze: The net book value of the company’s assets is $38,160. Add all the asset accounts in the "Balance Sheet" column of the worksheet, then deduct the accumulated depreciation and allowance for doubtful account amounts in the "Balance Sheet" column of the worksheet.

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PROBLEM 12.6B The Game Place Worksheet Year Ended December 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Prepaid Advertising 4 Supplies 5 Merchandise Inventory 6 Store Equipment 7 Accum. Depr., Store Equip. 8 Office Equipment 9 Accum. Depr., Office Equip. 10 Notes Payable, due 2017 11 Accounts Payable 12 Wages Payable 13 Social Security Tax Payable 14 Medicare Tax Payable 15 Unearned Seminar Fees 16 Interest Payable 17 Matt Huffman, Capital 18 Matt Huffman, Drawing 19 Income Summary 20 Sales 21 Sales Discounts 22 Seminar Fee Income 23 Purchases 24 Purchases Returns & Allow. 25 Freight In 26 Rent Expense 27 Wages Expense 28 Payroll Taxes Expense 29 Depreciation Exp., Store Equip. 30 Depreciation Exp., Office Equip. 31 Advertising Expense 32 Supplies Expense 33 Interest Expense 34 35 Net income 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 4 8 0 00 (c) 3 2 0 00 4 2 5 00 (d) 3 0 0 00 18 5 0 0 00 (a) 21 2 0 0 00 (b) 18 5 0 0 00 30 0 0 0 00 3 0 0 0 00 (e) 4 5 0 0 00 4 8 0 0 00 1 5 0 0 00 (f) 1 5 0 0 00 22 5 0 0 00 5 7 2 5 00 (h) 8 0 0 00 (i) 4 9 60 (i) 1 1 60 7 5 0 0 00 (g) 4 5 0 0 00 (j) 1 5 0 00 43 0 0 0 00 18 0 0 0 00 (b) 18 5 0 0 00 (a) 21 2 0 0 00 163 6 6 0 00 1 8 0 00 (g) 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 0 0 0 00 (h) 8 0 0 00 1 8 1 1 00 (i) 6 1 20 (e) 4 5 0 0 00 (f) 1 5 0 0 00 (c) 3 2 0 00 (d) 3 0 0 00 1 5 0 00 (j) 1 5 0 00 247 6 5 5 00 247 6 5 5 00 51 8 3 1 20 51 8 3 1 20

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PROBLEM 12.6B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 1 6 0 00 1 2 5 00 21 2 0 0 00 30 0 0 0 00 7 5 0 0 00 4 8 0 0 00 3 0 0 0 00 22 5 0 0 00 5 7 2 5 00 8 0 0 00 4 9 60 1 1 60 3 0 0 0 00 1 5 0 00 43 0 0 0 00 18 0 0 0 00 18 5 0 0 00 21 2 0 0 00 163 6 6 0 00 1 8 0 00 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 8 0 0 00 1 8 7 2 20 4 5 0 0 00 1 5 0 0 00 3 2 0 00 3 0 0 00 3 0 0 00 275 8 6 6 20

275 8 6 6 20

INCOME STATEMENT DEBIT CREDIT

18 5 0 0 00

BALANCE SHEET DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 1 6 0 00 1 2 5 00 21 2 0 0 00 30 0 0 0 00 7 5 0 0 00 4 8 0 0 00 3 0 0 0 00 22 5 0 0 00 5 7 2 5 00 8 0 0 00 4 9 60 1 1 60 3 0 0 0 00 1 5 0 00 43 0 0 0 00 18 0 0 0 00

21 2 0 0 00 163 6 6 0 00

1 8 0 00 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 8 0 0 00 1 8 7 2 20 4 5 0 0 00 1 5 0 0 00 3 2 0 00 3 0 0 00 3 0 0 00 165 4 4 7 20

190 1 3 0 00

110 4 1 9 00

24 6 8 2 80 190 1 3 0 00 Analyze:

190 1 3 0 00

110 4 1 9 00

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

85 7 3 6 20

34

24 6 8 2 80

35

110 4 1 9 00

36

The balance of merchandise inventory increased by $2,700 during 2016 ($21,200 $18,500).

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CRITICAL THINKING PROBLEM 12.1 Ben’s Jewelers Worksheet Year Ended December 31, 2016

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Store Supplies 6 Office Supplies 7 Store Equipment 8 Accumulated Depr.—Store Equip. 9 Office Equipment 10 Accumulated Depr.—Office Equip. 11 Accounts Payable 12 Salaries Payable 13 Social Security Tax Payable 14 Medicare Tax Payable 15 Federal Unemployment Tax Payable 16 State Unemployment Tax Payable 17 Ben Waites, Capital 18 Ben Waites, Drawing 19 Income Summary 20 Sales 21 Sales Returns and Allowances 22 Purchases 23 Purchases Returns and Allowances 24 Purchases Discounts 25 Freight In 26 Salaries Expense—Sales 27 Rent Expense 28 Advertising Expense 29 Store Supplies Expense 30 Depreciation Expense—Store Equip. 31 Salaries Expense—Office 32 Total Carried Forward 33

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 13 0 5 0 00 49 9 0 0 00 2 0 0 0 00 (c) 1 0 0 0 00 105 9 0 0 00 (b) 98 7 0 0 00 (a)105 9 0 0 00 4 2 3 0 00 (d) 3 6 0 5 00 2 9 5 0 00 (e) 2 6 4 5 00 113 5 9 0 00 13 0 1 0 00 (f) 11 3 6 0 00 27 6 4 0 00 4 9 3 0 00 (g) 3 3 0 0 00 4 3 9 0 00 (h) 5 0 0 0 00 (i) 3 2 6 00 (i) 7 6 00 (j) 5 6 00 (j) 2 7 0 00 166 3 1 0 00 30 0 0 0 00 (a)105 9 0 0 00 (b) 98 7 0 0 00 862 2 3 0 00 7 5 8 0 00 504 8 1 0 00 4 2 4 0 00 10 7 7 0 00 7 0 0 0 00 75 9 5 0 00 (h) 4 0 0 0 00 35 5 0 0 00 12 3 0 0 00 (d) 3 6 0 5 00 (f) 11 3 6 0 00 77 4 8 0 00 (h) 1 0 0 0 00 1,067 8 8 0 00 1,067 8 8 0 00

224 5 6 5 00

232 2 3 8 00

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CRITICAL THINKING PROBLEM 12.1 (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 13 0 5 0 00 13 0 5 0 00 49 9 0 0 00 49 9 0 0 00 3 0 0 0 00 3 0 0 0 00 98 7 0 0 00 98 7 0 0 00 6 2 5 00 6 2 5 00 3 0 5 00 3 0 5 00 113 5 9 0 00 113 5 9 0 00 24 3 7 0 00 24 3 7 0 00 27 6 4 0 00 27 6 4 0 00 8 2 3 0 00 8 2 3 0 00 4 3 9 0 00 4 3 9 0 00 5 0 0 0 00 5 0 0 0 00 3 2 6 00 3 2 6 00 7 6 00 7 6 00 5 6 00 5 6 00 2 7 0 00 2 7 0 00 166 3 1 0 00 166 3 1 0 00 30 0 0 0 00 30 0 0 0 00 105 9 0 0 00 98 7 0 0 00 105 9 0 0 00 98 7 0 0 00 862 2 3 0 00 862 2 3 0 00 7 5 8 0 00 7 5 8 0 00 504 8 1 0 00 504 8 1 0 00 4 2 4 0 00 4 2 4 0 00 10 7 7 0 00 10 7 7 0 00 7 0 0 0 00 7 0 0 0 00 79 9 5 0 00 79 9 5 0 00 35 5 0 0 00 35 5 0 0 00 12 3 0 0 00 12 3 0 0 00 3 6 0 5 00 3 6 0 5 00 11 3 6 0 00 11 3 6 0 00 78 4 8 0 00 78 4 8 0 00 1,180 2 9 5 00

1,187 9 6 8 00 846 4 8 5 00 975 9 4 0 00 333 8 1 0 00 212 0 2 8 00

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


CRITICAL THINKING PROBLEM 12.1 (continued) Ben’s Jewelers Worksheet (Continued) Year Ended December 31, 2016

ACCOUNT NAME 1 Totals Brought Forward 2 Office Supplies Expense 3 Depreciation Expense—Office Equipment 4 Uncollectible Accounts Expense 5 Payroll Taxes Expense 6 7 Totals 8 Net Income 9

TRIAL BALANCE DEBIT CREDIT 1,067 8 8 0 00 1,067 8 8 0 00

1,067 8 8 0 00

ADJUSTMENTS DEBIT CREDIT 224 5 6 5 00 232 2 3 8 00 (e) 2 6 4 5 00 (g) 3 3 0 0 00 (c) 1 0 0 0 00 (i) 4 0 2 00 (j) 3 2 6 00 1,067 8 8 0 00 232 2 3 8 00 232 2 3 8 00

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CRITICAL THINKING PROBLEM 12.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 1,180 2 9 5 00 1,187 9 6 8 00 2 6 4 5 00 3 3 0 0 00 1 0 0 0 00 7 2 8 00

INCOME STATEMENT DEBIT CREDIT 846 4 8 5 00 975 9 4 0 00 2 6 4 5 00 3 3 0 0 00 1 0 0 0 00 7 2 8 00

1,187 9 6 8 00

854 1 5 8 00 121 7 8 2 00 975 9 4 0 00

1,187 9 6 8 00

975 9 4 0 00 975 9 4 0 00

BALANCE SHEET DEBIT CREDIT 333 8 1 0 00 212 0 2 8 00 1 2 3 4 5 6 333 8 1 0 00 212 0 2 8 00 7 121 7 8 2 00 8 333 8 1 0 00 333 8 1 0 00 9

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CRITICAL THINKING PROBLEM 12.1 (continued) PAGE

GENERAL JOURNAL

DATE 1 2 2016 3 Dec. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

DESCRIPTION Adjusting Entries

Instruction 2 31 Income Summary Merchandise Inventory

POST. REF.

DEBIT

CREDIT

105 9 0 0 00 105 9 0 0

31 Merchandise Inventory Income Summary

98 7 0 0 00

31 Uncollectible Accounts Expense Allowance for Doubtful Accounts

1 0 0 0 00

31 Store Supplies Expense Store Supplies

3 6 0 5 00

31 Office Supplies Expense Office Supplies

2 6 4 5 00

31 Depreciation Expense—Store Equipment Accumulated Depreciation—Store Equipment

11 3 6 0 00

31 Depreciation Expense—Office Equipment Accumulated Depreciation—Office Equipment

3 3 0 0 00

31 Salaries Expense—Sales Salaries Expense—Office Salaries Payable

4 0 0 0 00 1 0 0 0 00

98 7 0 0

1 0 0 0

3 6 0 5

2 6 4 5

11 3 6 0

3 3 0 0

5 0 0 0

31 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable

4 0 2 00

31 Payroll Taxes Expenses Federal Unemployment Tax Payable State Unemployment Tax Payable

3 2 6 00

30

3 2 6 7 6

5 6 2 7 0

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1 2 3 00 4 5 6 00 7 8 9 00 10 11 12 00 13 14 15 00 16 17 18 00 19 20 21 00 22 23 24 25 00 26 27 28 00 29 00 30 31 32 00 33 00 34 35


CRITICAL THINKING PROBLEM 12.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION

1 2 2016 Instruction 3 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Purchases Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Salaries Expense—Sales 13 Rent Expense 14 Advertising Expense 15 Store Supplies Expense 16 Depreciation Expense—Store Equipment 17 Office Salaries Expense 18 Uncollectible Accounts Expense 19 Depreciation Expense—Office Equipment 20 Office Supplies Expense 21 Payroll Taxes Expense 22 23 31 Income Summary 24 Ben Waites, Capital 25 26 31 Ben Waites, Capital 27 Ben Waites, Drawing 28

POST. REF.

DEBIT

32

CREDIT

1 2 862 2 3 0 00 3 4 2 4 0 00 4 10 7 7 0 00 5 877 2 4 0 00 6 7 748 2 5 8 00 8 7 5 8 0 00 9 504 8 1 0 00 10 7 0 0 0 00 11 79 9 5 0 00 12 35 5 0 0 00 13 12 3 0 0 00 14 3 6 0 5 00 15 11 3 6 0 00 16 78 4 8 0 00 17 1 0 0 0 00 18 3 3 0 0 00 19 2 6 4 5 00 20 7 2 8 00 21 22 121 7 8 2 00 23 121 7 8 2 00 24 25 30 0 0 0 00 26 30 0 0 0 00 27 28

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CRITICAL THINKING PROBLEM 12.1 (continued) a. Net Sales

Sales Less Sales Returns and Allowances Net Sales

$862,230 7,580 $854,650

b. Net Delivered Cost of Purchases

Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases

$504,810 7,000 $511,810

c. Cost of Goods Sold

$4,240 10,770

Merchandise Inventory, January 1, 2016 Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2016 Cost of Goods Sold

$105,900 496,800 602,700 98,700 $504,000

d. Net Income (from worksheet) e. Capital, December 31

Analyze:

15,010 496,800

$121,782

Ben Waites, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Ben Waites, Capital, December 31, 2016

$166,310 $121,782 30,000

The changes shown in Ben Waites, Capital in the statement of owner’s equity will be the net income, $121,782, and the withdrawal of $30,000.

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91,782 $258,092


CRITICAL THINKING PROBLEM 12.2 1. Under the accrual basis of accounting, expenses are recorded when incurred and not necessarily when paid. Thus, when a business reports expenses on the income statement that did not require the use of cash during the accounting period, the increase in the cash account will be greater than the net income.

2.

Increase in cash account Net Income from income statement Difference Expense not requiring the use of cash: Increase in Salaries Payable Decrease in Prepaid Insurance Decrease in Supplies Depreciation Expense Difference

$38,228 21,100 $17,128 $1,560 300 2,268 13,000 $17,128

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SOLUTIONS TO BUSINESS CONNECTIONS Ethical Dilemma: You should count the row only once. Counting a row twice will misrepresent the amount of inventory and create false financial statements.

Financial Statement Analysis: 1. The Allowance for doubtful accounts, prepaid expenses and accumulated depreciation. 2. The Allowance for Doubtful Accounts: debit Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts. Prepaid expenses: debit the appropriate expense account and credit Prepaid Expenses. Accumulated depreciation: debit Depreciation Expense and credit Accumulated Depreciation. 3. Cash and cash equivalents increased by 46.6 percent (($79.0 - $53.9) ÷ $53.9). Teamwork: Since service companies will not have inventory, the inventory adjustment would not be needed. Both types of companies would require an insurance and depreciation adjustment. Service companies that deal only with cash customers would not require an uncollectible account adjustment. A service company would need the accrued wages since the employee will be directly producing the service income but paid weekly instead of daily.

Internet Connection: The student’s answer will depend on the search engine used. In general, several Excel spreadsheets should be available to download.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. TRUE 4. FALSE 5. FALSE 6. FALSE 7. FALSE 8. TRUE 9. TRUE 10. TRUE 11. TRUE 12. FALSE 13. TRUE

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

TRUE FALSE FALSE FALSE TRUE TRUE FALSE TRUE TRUE FALSE TRUE TRUE

Part B Exercises PAGE

GENERAL JOURNAL

DATE 1 2 3 4 2016 5 Dec. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DESCRIPTION Adjusting Entries

POST. REF.

DEBIT

(Adjustment 1) 31 Supplies Expense Store Supplies

1 4 0 0 00

(Adjustment 2) 31 Interest Expense Interest Payable

2 5 00

(Adjustment 3) 31 Interest Receivable Interest Income

7 0 00

(Adjustment 4) 31 Insurance Expense Prepaid Insurance (Adjustment 5) 31 Unearned Season Tickets Income Season Tickets Income

CREDIT

1 4 0 0 00

2 5 00

7 0 00

1 4 0 0 00 1 4 0 0 00

480 0 0 0 00 480 0 0 0 00

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


CHAPTER 13 FINANCIAL STATEMENTS AND CLOSING PROCEDURES Chapter Opener: Thinking Critically A grocery store chain is going to have many of the same revenue and expense items that you would see on income statements of companies in other industries. For example, the Sales account is a common revenue account but Whole Foods also reports Bakery Sales, Meat Sales, Non-Perishable Food Sales, etc. The company also has very similar expense accounts. For example: Wages Expense, Rent Expense, Depreciation Expense, Advertising Expense and Insurance Expense. However, they may also report some unique expenses like Perishable-Food Waste and Grocery Cart Repairs.

Fast Facts Whole Foods operates 340 stores with an average store size of 38,000 square feet. • The stores feature over 30,000 natural and organic items. • To underscore the company’s focus on health, it recently created a new Core Company Value – • Promoting the health of our stakeholders through healthy eating education. Whole Foods employs 52,000 people in North America and the United Kingdom. • Managerial Implications: Thinking Critically Managers can use financial statements to learn about a company’s operating efficiency by using ratios and measurements to analyze the financial statement results and compare them to those measurements of prior periods and to similar businesses in the same industry. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Other Revenue and Expense consists of items that are routine and recurring, but not properly included in Operating Expenses. To be an Extraordinary Gain and Loss, the item must be one that seldom occurs and is not a part of the normal business operation. 2.

The Cost of Goods Sold section contains this information.

3.

Operating expenses arise from the normal operating activities of the business. Financing expenses are generally excluded from operating expenses and included in Other Revenues and Expenses. It shows the firm’s financial position on a specific date through a presentation of the assets, liabilities and owner’s equity.

4. 5.

Cash, items that will be converted into cash within one year, and items that will be used up within one year are considered to be current assets. These include cash, accounts receivable, merchandise inventory, and prepaid expenses.

6.

Current liabilities are debts that must be paid within one year; long-term liabilities are debts that are due more than a year in the future.

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Discussion Questions (continued) It reports the beginning and ending owner’s equity and the changes that occurred in owner’s equity during the year. 8. a. Ending merchandise inventory is shown in both the income statement and the balance sheet. 7.

b. The owner’s ending capital is shown in both the balance sheet and the statement of owner’s equity. 9.

It assures that the general ledger is in balance after the adjusting and closing entries have been posted.

10.

The permanent accounts—assets, liabilities, and owner’s equity—appear on the post-closing trial balance. The likely problem is that the posting of either a debit amount or a credit amount of a closing entrytypes was entered as anentries incorrect to an asset account. The of adjusting thatfigure are reversed are:or (a)liability all accruals, (b) prepaid items such as prepaid insurance initially charged to the Insurance Expense account and (c) unearned income items initially credited to income accounts. A reversing entry with a debit to Interest Income and a credit to Interest Receivable would be recorded. Entries for (a) accrued payroll taxes and (e) accrued interest income would be reversed.

11. 12.

13. 14. 15. 16.

The additional investment would be shown in the Statement of Owner’s Equity as an addition to Beginning Capital. The steps in the accounting cycle are:

a. Analyze transactions b. Journalize the data about transactions c. Post the data about transactions to the accounts d. Prepare a worksheet e. Prepare financial statements f. Journalize and post adjusting entries g. Journalize and post closing entries h. Prepare a post closing trial balance i. Interpret the financial information j. A final step for some companies is to journalize and post reversing entries. 17. Kagan Company's inventory turnover decreased from 9 times in 2015 to 8 times in 2016. This indicates Kagan Company sold their inventory more slowly in 2016 than in 2015.

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EXERCISE 13.1 1. Purchase returns and Allowances 2. Telephone Expense 3. Sales Returns and Allowances 4. Purchases 5. Interest income

b c a b d

6. 7. 8. 9.

Merchandise Inventory Interest Expense Sales Depreciation expense – Store Equipment 10. Rent Expense

b e a c c

EXERCISE 13.2 1. Accounts Receivable 2. Delivery Van 3. Prepaid Insurance 4. Notes Payable, due 2017 5. Store Supplies

a b a c a

6. 7. 8. 9. 10.

Accounts Payable Merchandise Inventory Ray Lynch, Capital Cash Unearned Subscription Income

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c a e a c


EXERCISE 13.3 Bridget's Office Supplies Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowance Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowance Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Selling Expenses Salaries Expense—Sales Store Supplies Expense Depreciation Expense—Store Equip. Total Selling Expense General and Administrative Expenses Rent Expense Utilities Expense Salaries Expense—Office Payroll Taxes Expense Depreciation Expense—Office Equip. Uncollectible Accounts Expense Total General and Admin. Expenses Total Operating Expenses Income from Operations Other Income Miscellaneous Income Other Expense Interest Expense Net Nonoperating Expenses Net Income for Year

248 9 0 0 00 4 3 5 0 00 244 5 5 0 00 59 7 7 5 00 103 6 0 0 00 1 9 7 5 00 105 5 7 5 00 3 6 0 0 00 1 8 0 0 00

5 4 0 0 00 100 1 7 5 00 159 9 5 0 00 52 7 2 5 00 107 2 2 5 00 137 3 2 5 00

45 3 0 0 00 2 3 1 0 00 1 5 1 0 00 49 1 2 0 00 13 5 0 0 00 3 0 0 0 00 21 1 0 0 00 6 0 0 0 00 5 7 0 00 7 2 0 00 44 8 9 0 00 94 0 1 0 00 43 3 1 5 00 4 0 0 00 7 4 0 00 3 4 0 00 42 9 7 5 00

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EXERCISE 13.4 Bridget's Office Supplies Statement of Owner's Equity Year Ended December 31, 2016 Bridget Swanson, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Increase in Capital Bridget Swanson, Capital, December 31, 2016

63 7 6 0 00 42 9 7 5 00 40 7 0 0 00 2 2 7 5 00 66 0 3 5 00

EXERCISE 13.5 Bridget's Office Supplies Balance Sheet December 31, 2016 Assets Current Assets Cash Change Fund Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Store Supplies Prepaid Interest Total Current Assets Plant and Equipment Store Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liabilities and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Sales Tax Payable Total Current Liabilities Owner’s Equity Bridget Swanson, Capital Total Liabilities and Owner’s Equity

5 6 0 5 00 5 0 0 00 5 1 4 0 00 8 6 0 00

1 1 0 0 00 1 3 0 00

11 2 0 0 00 1 1 8 0 00 3 4 0 0 00 5 0 0 00

4 2 8 0 00 52 7 2 5 00

1 2 3 0 00 64 3 4 0 00

10 0 2 0 00 2 9 0 0 00 12 9 2 0 00 77 2 6 0 00

5 5 0 0 00 3 7 2 5 00 1 1 0 00 1 8 9 0 00 11 2 2 5 00 66 0 3 5 00 77 2 6 0 00

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EXERCISE 13.6 GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2016 3 Dec. 31 Sales 4 Interest Income 5 Purchases Returns and Allowances 6 Purchases Discounts 7 Income Summary 8 9 31 Income Summary 10 Sales Returns and Allowances 11 Sales Discounts 12 Purchases 13 Freight In 14 Rent Expense 15 Utilities Expense 16 Telephone Expense 17 Salaries Expense 18 Payroll Taxes Expense 19 Supplies Expense 20 Depreciation Expense 21 Interest Expense 22 23 31 Income Summary 24 Armando Soto, Capital 25 26 31 Armando Soto, Capital 27 Armando Soto, Drawing 28 29 30 31 32 33 34 35 36 37

PAGE POST. REF.

DEBIT

259 5 0 0 00 2 2 0 00 2 5 0 0 00 1 6 3 0 00

237 2 8 0 00

29 8 7 0 00

26 7 0 0 00

16

CREDIT 1 2 3 4 5 6 263 8 5 0 00 7 8 9 4 4 0 0 00 10 3 4 0 0 00 11 135 4 0 0 00 12 2 7 0 0 00 13 9 0 0 0 00 14 3 0 3 0 00 15 1 6 4 0 00 16 67 1 0 0 00 17 5 3 7 0 00 18 1 8 0 0 00 19 3 0 0 0 00 20 4 4 0 00 21 22 23 29 8 7 0 00 24 25 26 26 7 0 0 00 27 28 29 30 31 32 33 34 35 36 37

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EXERCISE 13.7 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

1 2 2017 3 Jan. 1 Salaries Payable 4 Salaries Expense—Office 5 To reverse adjustment (e) made on Dec. 31, 2016 6 7 1 Social Security Tax Payable 8 Medicare Tax Payable 9 Payroll Taxes Expense 10 To reverse adjustment (f) made on Dec. 31, 2016 11 12 1 Interest Payable 13 Interest Expense 14 To reverse adjustment (g) made on Dec. 31, 2016 15 16 1 Interest Income 17 Interest Receivable 18 To reverse adjustment (h) made on Dec. 31, 2016 19 20 21 22 23 24 25 26 27 28 29 30

POST. REF.

DEBIT

3 8 0 0 00

2 3 5 60 5 5 10

3 0 0 00

1 8 8 00

21

CREDIT 1 2 3 3 8 0 0 00 4 5 6 7 8 2 9 0 70 9 10 11 12 3 0 0 00 13 14 15 16 1 8 8 00 17 18 19 20 21 22 23 24 25 26 27 28 29 30

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EXERCISE 13.8 Vandermeer Farm Supply Post-closing Trial Balance December 31, 2016 ACCOUNT NAME Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Notes Payable Accounts Payable Social Security Tax Payable Medicare Tax Payable Ken Vandermeer, Capital Totals

DEBIT 19 6 0 0 00 60 8 0 0 00

CREDIT

2 2 0 00 187 2 0 0 00 7 2 4 0 00 3 1 6 0 00 52 0 0 0 00

330 0 0 0 00

18 8 0 0 00 10 5 0 0 00 9 7 0 0 00 1 4 9 0 00 4 1 0 00 288 8 8 0 00 330 0 0 0 00

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EXERCISE 13.9 a. Net Sales

Sales Less Sales Discounts Net Sales

$530,000 3,200 $526,800

Gross profit

Net sales Less cost of goods sold Gross profit

$526,800 348,540 $178,260

The gross profit percentage

Gross profit Net sales

b. Current assets

=

$178,260 = $526,800

33.8%

Cash Accounts receivable Note receivable, due 2017 Merchandise inventory Prepaid insurance Supplies

$26,760 47,700 9,500 35,700 2,350 1,410 $123,420

Current liabilities

Note payable to bank, due 2017 Accounts payable Interest payable

$35,000 13,050 350 $48,400

Working capital

$123,420 - $48,400 =

$75,020

c. Current ratio

$123,420 $48,400

d. Inventory turnover

Cost of goods sold Average inventory

Average inventory

=

$35,700 + $58,500 = 2

2.55

=

$348,540 $47,100

=

7.40 times

$47,100

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Exercise 13.10 a.

The accounts receivable turnover is 10.0 times, calculated as follows: Net sales Average accounts receivable

b.

=

$1,000,000 ($90,000 + $110,000) ÷

=

$1,000,000 $100,000

=

10.0

2

The inventory turnover is 9.5 times, calculated as follows: Cost of goods sold Average inventory

=

$570,000 ($55,000 + $65,000) ÷

=

$570,000 $60,000

=

9.5

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2


PROBLEM 13.1A Quality Hardwoods Company Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel and Entertainment Expense Delivery Wages Expense Depreciation Expense—Delivery Equipment Total Selling Expenses

13-11

1,685 0 0 0 00 18 2 0 0 00 1,666 8 0 0 00 244 0 0 0 00 767 0 0 0 00 13 8 0 0 00 780 8 0 0 00 8 4 4 0 00 11 1 6 0 00

19 6 0 0 00 761 2 0 0 00 1,005 2 0 0 00 234 0 0 0 00 771 2 0 0 00 895 6 0 0 00

199 6 0 0 00 7 1 0 0 00 5 8 0 0 00 212 5 0 0 00 269 2 0 0 00 21 5 0 0 00 60 3 3 0 00 9 8 0 0 00 360 8 3 0 00


PROBLEM 13.1A (continued) Quality Hardwoods Company Income Statement (continued) Year Ended December 31, 2016 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Exp. Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

13-12

70 6 0 0 00 4 0 0 0 00 6 2 0 0 00 9 2 9 0 00 6 5 2 0 00 59 0 0 0 00 5 6 0 0 00 5 8 0 0 00 9 0 0 0 00 4 0 0 0 00 180 0 1 0 00 753 3 4 0 00 142 2 6 0 00 1 5 8 0 00 8 2 0 0 00 6 6 2 0 00 135 6 4 0 00


PROBLEM 13.1A (continued) Quality Hardwoods Company Statement of Owner's Equity Year Ended December 31, 2016 Chuck Kirby, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Increase in Capital Chuck Kirby, Capital, December 31, 2016

462 4 6 0 00 135 6 4 0 00 127 0 0 0 00 8 6 4 0 00 471 1 0 0 00

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PROBLEM 13.1A (continued) Quality Hardwoods Company Balance Sheet December 31, 2016 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Delivery Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

24 1 0 0 00 5 0 0 00 11 8 0 0 00 96 0 0 0 00 6 0 0 0 00

2 8 6 0 00 1 4 2 0 00 10 2 0 0 00

90 0 0 0 00 234 0 0 0 00

14 4 8 0 00 374 8 8 0 00

46 0 0 0 00 178 0 0 0 00 54 0 0 0 00 37 0 0 0 00 17 4 0 0 00 51 0 0 0 00 19 6 0 0 00 25 0 0 0 00 12 0 0 0 00

124 0 0 0 00 19 6 0 0 00 31 4 0 0 00 13 0 0 0 00 234 0 0 0 00 608 8 8 0 00

20 2 0 0 00 39 0 0 0 00 5 8 0 00 59 7 8 0 00

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PROBLEM 13.1A (continued) Quality Hardwoods Company Balance Sheet (continued) December 31, 2016 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities Owner’s Equity Chuck Kirby, Capital Total Liabilities and Owner’s Equity

61 0 0 0 00 17 0 0 0 00 78 0 0 0 00 137 7 8 0 00 471 1 0 0 00 608 8 8 0 00

Analyze: The company’s current ratio is 6.27 to 1 ($374,880 ÷ $59,780).

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PROBLEM 13.2A Good to Go Auto Products Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Exp.—Warehouse Equip. Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel Expense Delivery Expense Total Selling Expenses

13-16

1,110 3 0 0 00 8 4 0 0 00 1,101 9 0 0 00 131 4 0 0 00 463 0 0 0 00 9 8 0 0 00 472 8 0 0 00 13 6 5 0 00 9 2 4 0 00

22 8 9 0 00 449 9 1 0 00 581 3 1 0 00 128 5 0 0 00 452 8 1 0 00 649 0 9 0 00

108 6 0 0 00 5 8 0 0 00 3 4 0 0 00 117 8 0 0 00 151 7 0 0 00 24 0 0 0 00 37 4 2 5 00 213 1 2 5 00


PROBLEM 13.2A (continued) Good to Go Auto Products Income Statement (continued) Year Ended December 31, 2016 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Building Repair Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equip. Total General and Administrative Exp. Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

13-17

85 0 0 0 00 1 2 2 0 00 9 8 7 5 00 8 0 0 0 00 3 2 8 0 00 31 6 0 0 00 3 7 0 0 00 16 4 0 0 00 3 5 8 0 00 5 6 0 0 00 1 6 2 0 00 169 8 7 5 00 500 8 0 0 00 148 2 9 0 00 5 8 0 00 4 0 0 0 00 3 4 2 0 00 144 8 7 0 00


PROBLEM 13.2A (continued) Good to Go Auto Products Statement of Owner's Equity Year Ended December 31, 2016 Colin O’Brien, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Increase in Capital Colin O’Brien, Capital, December 31, 2016

326 8 7 0 00 144 8 7 0 00 70 6 5 0 00 74 2 2 0 00 401 0 9 0 00

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PROBLEM 13.2A (continued) Good to Go Auto Products Balance Sheet December 31, 2016 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Interest Receivable Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

99 0 0 0 00 6 0 0 00 15 0 0 0 00 140 2 0 0 00 3 8 0 0 00 136 4 0 0 00 128 5 0 0 00 1 5 0 00 3 3 0 0 00 7 0 0 00 4 6 4 0 00

8 6 4 0 00 388 2 9 0 00

16 0 0 0 00 107 0 0 0 00 16 7 0 0 00 19 8 0 0 00 9 5 0 0 00 9 4 0 0 00 3 9 0 0 00

90 3 0 0 00 10 3 0 0 00 5 5 0 0 00 122 1 0 0 00 510 3 9 0 00

15 0 0 0 00 56 9 0 0 00 4 0 0 00 72 3 0 0 00

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PROBLEM 13.2A (continued) Good to Go Auto Products Balance Sheet (continued) December 31, 2016 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities Owner’s Equity Colin O'Brien, Capital Total Liabilities and Owner’s Equity

20 0 0 0 00 17 0 0 0 00 37 0 0 0 00 109 3 0 0 00

401 0 9 0 00 510 3 9 0 00

Analyze: The percentage of total operating expenses attributable to warehouse expense is 23.52% ($117,800 ÷ $500,800).

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PROBLEM 13.3A Artisan Wines Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Discount Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Net Delivered Cost of Purchases Goods Available for Sale Less Merchandise Inventory, December 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Wages Expense Payroll Taxes Expense Depreciation Expense, Store Equipment Depreciation Expense, Office Equipment Advertising Expense Supplies Expense Total Operating Expenses Income From Operations Other Income Seminar Fee Income Other Expenses Interest Expense Net Nonoperating Income Net Income for Year

153,970.00 200.00 153,770.00 15,000.00 91,000.00 225.00 91,225.00 1,000.00 90,225.00 105,225.00 13,000.00 92,225.00 61,545.00 13,200.00 24,500.00 3,362.25 3,000.00 1,250.00 160.00 140.00 45,612.25 15,932.75 4,000.00 250.00 3,750.00 19,682.75

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PROBLEM 13.3A (continued) Artisan Wines Statement of Owner's Equity Year Ended December 31, 2016 Vincent Arroyo, Capital, January 1, 2016 Net Income for the Year Less Withdrawals for the Year Increase in Capital Vincent Arroyo, Capital, December 31, 2016

32,700.00 19,682.75 14,110.00 5,572.75 38,272.75

The Wine Shop Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts Receivable Prepaid Advertising Supplies Merchandise Inventory Total Current Assets Plant and Equipment: Store Equipment 25,000.00 Less Accumulated Depreciation 6,000.00 Office Equipment 5,000.00 Less Accumulated Depreciation 2,750.00 Total Plant and Equipment Total Assets Liabilities and Owner's Equity Current Liabilities: Notes Payable, due 2017 Accounts Payable Wages Payable Social Security Tax Payable Medicare Tax Payable Unearned Seminar Fees Interest Payable Total Current Liabilities Owner's Equity Vincent Arroyo, Capital Total Liabilities and Owner's Equity

28,386.00 500.00 320.00 160.00 13,000.00 42,366.00

19,000.00 2,250.00 21,250.00 63,616.00

20,000.00 2,705.00 500.00 31.00 7.25 2,000.00 100.00 25,343.25 38,272.75 63,616.00

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PROBLEM 13.3A (continued) Analyze:

The inventory turnover for Artisan Wines is 6.59 times, calculated as follows: Cost of Goods Sold 92,225 = 6.59 Average Inventory 14,000 Average Inventory =

13,000 + 15,000 2

=

14,000

PROBLEM 13.4A PAGE

GENERAL JOURNAL

DATE

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

DESCRIPTION Adjusting Entries 2016 (Adjustment a) Dec. 31 Income Summary Merchandise Inventory To transfer beginning inventory (Adjustment b) 31 Merchandise Inventory Income Summary To record ending inventory (Adjustment c) 31 Uncollectible Accounts Expense Allowance for Doubtful Accounts To record estimated loss for 2016, based on 0.5% of net credit sales $560,000 (Adjustment d) 31 Supplies Expense Supplies To record supplies used during 2016 (Adjustment e) 31 Insurance Expense Prepaid Insurance To record expired insurance (Adjustment f) 31 Depreciation Expense—Office Equipment Accumulated Depreciation—Office Equipment To record depreciation for 2016 (schedule on file)

POST. REF.

DEBIT

25

CREDIT

86 0 0 0 00 86 0 0 0 00

78 0 0 0 00 78 0 0 0 00

2 8 0 0 00 2 8 0 0 00

9 2 2 0 00 9 2 2 0 00

3 6 0 0 00 3 6 0 0 00

1 3 2 5 00 1 3 2 5 00

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


PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2016 (Adjustment g) 3 Dec. 31 Depreciation Expense—Warehouse Equipment 4 Accumulated Depreciation—Warehouse Equipment 5 To record depreciation for 2016 (schedule on file) 6 7 (Adjustment h) 8 31 Interest Expense 9 Interest Payable 10 To record accrued interest on 4-month, 12% trade 11 note payable dated November 1, 2016 12 $32,000 × 0.12 × 2/12 = $640 13 14 (Adjustment i) 15 31 Salaries Expense 16 Salaries Payable 17 To record accrued salaries 18 19 (Adjustment j) 20 31 Payroll Taxes Expense 21 Social Security Tax Payable 22 Medicare Tax Payable 23 To record accrued payroll taxes on accrued 24 salaries for December: social security tax = 25 6.2% × $5000; Medicare tax = 1.45% × $5,000 26 27 (Adjustment k) 28 31 Payroll Taxes Expense 29 Federal Unemployment Tax Payable 30 State Unemployment Tax Payable 31 To record payroll taxes (state = 0.054 × $5,000, 32 federal = 0.006 × $5,000) 33 34 35

POST. REF.

DEBIT

26

CREDIT

1 2 4 8 0 0 00 3 4 8 0 0 00 4 5 6 7 6 4 0 00 8 6 4 0 00 9 10 11 12 13 14 5 0 0 0 00 15 5 0 0 0 00 16 17 18 19 3 8 2 50 20 3 1 0 00 21 7 2 50 22 23 24 25 26 27 3 0 0 00 28 3 0 00 29 2 7 0 00 30 31 32 33 34 35

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PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Income Summary 6 7 31 Income Summary 8 Sales Returns and Allowances 9 Purchases 10 Rent Expenses 11 Telephone Expense 12 Salaries Expense 13 Payroll Taxes Expense 14 Supplies Expense 15 Insurance Expense 16 Depreciation Expense—Office Equipment 17 Depreciation Expense—Warehouse Equipment 18 Uncollectible Accounts Expense 19 Interest Expense 20 21 31 Income Summary 22 Phillip Tucker, Capital 23 24 31 Phillip Tucker, Capital 25 Phillip Tucker, Drawing 26 27 28 29 30 31 32 33 34 35 36 37

POST. REF.

DEBIT

27

CREDIT

653 7 7 8 00 9 2 0 0 00 662 9 7 8 00 599 2 6 7 50 10 0 0 0 00 350 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50 9 2 2 0 00 3 6 0 0 00 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 55 7 1 0 50 55 7 1 0 50 56 0 0 0 00 56 0 0 0 00

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37


PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Reversing Entries 2 2017 3 Jan. 1 Interest Payable 4 Interest Expense 5 To reverse adjusting entry (h) made Dec. 31, 2016 6 7 1 Salaries Payable 8 Salaries Expense 9 To reverse adjusting entry (i) made Dec. 31, 2016 10 11 1 Social Security Tax Payable 12 Medicare Tax Payable 13 Payroll Taxes Expense 14 To reverse adjusting entry (j) made Dec. 31, 2016 15 16 1 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Payroll Taxes Expense 19 To reverse adjusting entry (k) made Dec. 31, 2016 20 21 22 23

POST. REF.

DEBIT

28

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

6 4 0 00 6 4 0 00

5 0 0 0 00 5 0 0 0 00

3 1 0 00 7 2 50 3 8 2 50

3 0 00 2 7 0 00 3 0 0 00

Analyze: The following entry would be required: PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2017 Jan. 3 Salaries Payable Salaries Expense Cash To record the payment of salaries

POST. REF.

DEBIT

29

CREDIT

5 0 0 0 00 1 0 0 0 00 6 0 0 0 00

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1 2 3 4 5 6


PROBLEM 13.5A GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2016 (Adjustment a) 3 Dec. 31 Rent Expense 4 Prepaid Rent 5 To record expired rent on 6-month lease of 6 $20,700 paid October 1, 2016 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used in 2016 12 13 (Adjustment c) 14 31 Depreciation Expense—Equipment 15 Accumulated Depreciation—Equipment 16 To record depreciation for 2016 17 18 (Adjustment d) 19 31 Salaries Expense 20 Salaries Payable 21 To record accrued salaries 22 23 31 (Adjustment e) 24 Payroll Taxes Expense 25 Social Security Tax Payable 26 Medicare Tax Payable 27 To record accrued payroll taxes on accrued 28 salaries 29 30 (Adjustment f) 31 31 Interest Receivable 32 Interest Income 33 To record accrued interest on 5-month, 34 6%, $5,500 note receivable dated 35 September 1, 2016 36

PAGE POST. REF.

DEBIT

10 3 5 0 00

9 6 8 0 00

9 2 0 0 00

5 4 0 0 00

4 1 3 10

1 1 0 00

25

CREDIT 1 2 3 10 3 5 0 00 4 5 6 7 8 9 9 6 8 0 00 10 11 12 13 14 9 2 0 0 00 15 16 17 18 19 5 4 0 0 00 20 21 22 23 24 3 3 4 80 25 7 8 30 26 27 28 29 30 31 1 1 0 00 32 33 34 35 36

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PROBLEM 13.5A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Reversing Entries 2 2017 3 Jan. 1 Salaries Payable 4 Salaries Expense 5 To reverse adjusting entry (d) made Dec. 31, 2016 6 7 1 Social Security Tax Payable 8 Medicare Tax Payable 9 Payroll Taxes Expense 10 To reverse adjusting entry (e) made Dec. 31, 2016 11 12 1 Interest Income 13 Interest Receivable 14 To reverse adjusting entry (f) made Dec. 31, 2016 15 16

POST. REF.

DEBIT

26

CREDIT

1 2 5 4 0 0 00 3 5 4 0 0 00 4 5 6 3 3 4 80 7 7 8 30 8 4 1 3 10 9 10 11 1 1 0 00 12 1 1 0 00 13 14 15 16

Analyze: The balance of the Prepaid Rent Account on January 1, 2017, is $10,350.

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PROBLEM 13.1B Lite Speed Electronics Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel and Entertainment Expense Delivery Wages Expense Depreciation Expense—Delivery Equipment Total Selling Expenses

13-29

429 8 0 0 00 3 1 5 0 00 426 6 5 0 00 33 1 2 5 00 179 6 0 0 00 2 2 0 0 00 181 8 0 0 00 2 5 2 0 00 2 3 5 0 00

4 8 7 0 00 176 9 3 0 00 210 0 5 5 00 35 4 0 0 00 174 6 5 5 00 251 9 9 5 00

38 9 0 0 00 1 7 9 0 00 1 4 0 0 00 42 0 9 0 00 67 2 0 0 00 6 3 0 0 00 26 9 0 0 00 2 4 4 0 00 102 8 4 0 00


PROBLEM 13.1B (continued) Lite Speed Electronics Income Statement (continued) Year Ended December 31, 2016 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Expenses Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

13-30

15 9 0 0 00 1 1 5 0 00 1 5 0 0 00 2 4 0 0 00 1 3 8 0 00 15 2 5 0 00 1 7 5 0 00 1 0 5 0 00 3 0 0 0 00 1 0 2 0 00 44 4 0 0 00 189 3 3 0 00 62 6 6 5 00 4 6 2 00 1 6 0 0 00 1 1 3 8 00 61 5 2 7 00


PROBLEM 13.1B (continued) Lite Speed Electronics Statement of Owner's Equity Year Ended December 31, 2016 Toshi Takahashi, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Increase in Capital Toshi Takahashi, Capital, December 31, 2016

60 9 4 0 00 61 5 2 7 00 24 0 0 0 00 37 5 2 7 00 98 4 6 7 00

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PROBLEM 13.1B (continued) Lite Speed Electronics Balance Sheet December 31, 2016 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Delivery Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

10 2 0 0 00 1 0 0 00 3 2 0 0 00 21 2 5 0 00 2 2 5 0 00

7 7 5 00 7 8 0 00 2 2 0 0 00

19 0 0 0 00 35 4 0 0 00

3 7 5 5 00 71 6 5 5 00

7 6 4 2 00 48 5 0 0 00 13 0 0 0 00 8 0 0 0 00 2 3 0 0 00 16 4 0 0 00 3 6 0 0 00 6 0 0 0 00 2 5 0 0 00

35 5 0 0 00 5 7 0 0 00 12 8 0 0 00 3 5 0 0 00 65 1 4 2 00 136 7 9 7 00

5 0 0 0 00 13 1 4 0 00 2 4 0 00 18 3 8 0 00

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PROBLEM 13.1B (continued) Lite Speed Electronics Balance Sheet (continued) December 31, 2016 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities

15 9 5 0 00 4 0 0 0 00

Owner’s Equity Toshi Takahashi, Capital Total Liabilities and Owner’s Equity

Analyze:

19 9 5 0 00 38 3 3 0 00

98 4 6 7 00 136 7 9 7 00

The gross profit percentage for the period is 59.06% ($251,995/$426,650).

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PROBLEM 13.2B Hog Wild Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel Expense Delivery Expense Total Selling Expenses

13-34

608 4 1 7 00 9 4 0 0 00 599 0 1 7 00 88 9 8 0 00 230 0 5 0 00 9 6 0 0 00 239 6 5 0 00 6 4 2 0 00 5 7 6 0 00

12 1 8 0 00 227 4 7 0 00 316 4 5 0 00 87 9 1 5 00 228 5 3 5 00 370 4 8 2 00

64 3 0 0 00 4 3 0 0 00 2 4 0 0 00 71 0 0 0 00 78 9 0 0 00 21 0 0 0 00 35 4 0 0 00 135 3 0 0 00


PROBLEM 13.2B (continued) Hog Wild Income Statement (continued) Year Ended December 31, 2016 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Building Repair Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Expenses Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

13-35

57 5 0 0 00 1 3 6 0 00 9 5 0 0 00 6 9 1 2 00 4 3 7 0 00 19 2 0 0 00 11 7 0 0 00 3 1 0 0 00 2 9 0 0 00 3 2 0 0 00 1 6 8 0 00 121 4 2 2 00 327 7 2 2 00 42 7 6 0 00 7 2 0 00 3 6 0 0 00 2 8 8 0 00 39 8 8 0 00


PROBLEM 13.2B (continued) Hog Wild Statement of Owner's Equity Year Ended December 31, 2016 Nick Henry, Capital, January 1, 2016 Net Income for Year Less Withdrawals for Year Decrease in Capital Nick Henry, Capital, December 31, 2016

198 7 1 0 00 39 8 8 0 00 56 0 0 0 00 16 1 2 0 00 182 5 9 0 00

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PROBLEM 13.2B (continued) Hog Wild Balance Sheet December 31, 2016 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Interest Receivable Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

14 3 5 0 00 2 0 0 00 6 0 0 0 00 54 6 0 0 00 5 0 0 0 00

3 7 0 0 00 1 8 0 0 00 6 9 0 0 00

49 6 0 0 00 87 9 1 5 00 2 0 0 00

12 4 0 0 00 170 6 6 5 00

20 4 0 0 00 53 1 0 0 00 8 4 0 0 00 24 0 0 0 00 4 0 0 0 00 12 8 0 0 00 1 8 0 0 00

44 7 0 0 00 20 0 0 0 00 11 0 0 0 00 96 1 0 0 00 266 7 6 5 00

8 0 0 0 00 32 5 0 0 00 1 8 0 0 00 42 3 0 0 00

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PROBLEM 13.2B (continued) Hog Wild Balance Sheet (continued) December 31, 2016 Long-Term Liabilities Mortgage Payable Notes Payable-Long Term Total Long-Term Liabilities Total Liabilities Owner’s Equity Nick Henry, Capital Total Liabilities and Owner’s Equity

35 8 7 5 00 6 0 0 0 00 41 8 7 5 00 84 1 7 5 00

182 5 9 0 00 266 7 6 5 00

Analyze: The inventory turnover is 2.58 times ($228,535 COGS ÷ $88,448 Avg. Inventory). Average inventory is ($88,980 + $87,915) ÷ 2 = $88,448.

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PROBLEM 13.3B The Game Place Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Discount Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Wages Expense Payroll Taxes Expense Depreciation Expense, Store Equipment Depreciation Expense, Office Equipment Advertising Expense Supplies Expense Total Operating Expenses Net Income From Operations Other Income Seminar Fee Income Other Expenses Interest Expense Net Nonoperating Income Net Income for Year

163,660.00 180.00 163,480.00 18,500.00 92,500.00 275.00 92,775.00 770.00 92,005.00 110,505.00 21,200.00 89,305.00 74,175.00 26,400.00 18,800.00 1,872.20 4,500.00 1,500.00 320.00 300.00 53,692.20 20,482.80 4,500.00 300.00

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4,200.00 24,682.80


PROBLEM 13.3B (continued) The Game Place Statement of Owner's Equity Year Ended December 31, 2016 Matt Huffman, Capital, January 1, 2016 Net Income for the Year Less Withdrawals for the Year Increase in Capital Matt Huffman, Capital, December 31, 2016

43,000.00 24,682.80 18,000.00 6,682.80 49,682.80

The Game Place Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts Receivable Prepaid Advertising Supplies Merchandise Inventory Total Current Assets Plant and Equipment Store Equipment 30,000.00 Less Accumulated Depreciation 7,500.00 Office Equipment 4,800.00 Less Accumulated Depreciation 3,000.00 Total Plant and Equipment Total Assets Liabilities and Owner's Equity Current Liabilities Notes Payable, due 2017 Accounts Payable Wages Payable Social Security Tax Payable Medicare Tax Payable Unearned Seminar Fees Interest Payable Total Current Liabilities Owner's Equity Matt Huffman, Capital Total Liabilities and Owner's Equity

34,465.00 1,669.00 160.00 125.00 21,200.00 57,619.00

22,500.00 1,800.00 24,300.00 81,919.00

22,500.00 5,725.00 800.00 49.60 11.60 3,000.00 150.00 32,236.20 49,682.80 81,919.00

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PROBLEM 13.3B (continued) Analyze: The amount of working capital is $25,382.80, calculated as follows: Current assets 57,619.00 Less current liabilities 32,236.20 Working capital 25,382.80 PROBLEM 13.4B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 (Adjustment a) 3 Dec. 31 Income Summary 4 Merchandise Inventory 5 To transfer beginning inventory 6 7 (Adjustment b) 8 31 Merchandise Inventory 9 Income Summary 10 To record ending inventory 11 12 (Adjustment c) 13 31 Uncollectible Accounts Expense 14 Allowance for Doubtful Accounts 15 To record estimated loss for 2016, based 16 on 0.8% of net credit sales $160,000 17 18 (Adjustment d) 19 31 Supplies Expense 20 Supplies 21 To record supplies used during 2016 22 23 (Adjustment e) 24 31 Insurance Expense 25 Prepaid Insurance 26 To record expired insurance on one-year policy 27 28 (Adjustment f) 29 31 Depreciation Expense—Store Equipment 30 Accumulated Depreciation—Store Equipment 31 To record depreciation for 2016 (schedule on file) 32

POST. REF.

DEBIT

29

CREDIT

1 2 16 9 8 5 00 3 16 9 8 5 00 4 5 6 7 15 8 4 0 00 8 15 8 4 0 00 9 10 11 12 1 2 8 0 00 13 1 2 8 0 00 14 15 16 17 18 5 0 5 00 19 5 0 5 00 20 21 22 23 1 2 0 0 00 24 1 2 0 0 00 25 26 27 28 1 0 0 0 00 29 1 0 0 0 00 30 31 32

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PROBLEM 13.4B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2016 (Adjustment g) 3 Dec. 31 Depreciation Expense—Store Fixtures 4 Accumulated Depreciation—Store Fixtures 5 To record depreciation for 2016 (schedule on file) 6 7 (Adjustment h) 8 31 Interest Expense 9 Interest Payable 10 To record accrued interest on six-month, $4,000, 11 9% trade note payable, dated October 1, 2016 12 $4,000 × 0.09 × 3/12 = $90 13 14 (Adjustment i) 15 31 Salaries Expense 16 Salaries Payable 17 To record accrued salaries 18 19 (Adjustment j) 20 31 Payroll Taxes Expense 21 Social Security Tax Payable 22 Medicare Tax Payable 23 To record accrued payroll taxes on accrued 24 salaries (Social Security = 0.062 × $1,450; 25 Medicare = 0.0145 × $1450) 26 27 (Adjustment k) 28 31 Payroll Taxes Expense 29 Federal Unemployment Tax Payable 30 State Unemployment Tax Payable 31 To record unemployment taxes on accrued 32 salaries (federal = .006 × $1,450; 33 state = .05 × $1,450) 34 35 36 37

POST. REF.

DEBIT

30

CREDIT

1 2 2 0 5 0 00 3 2 0 5 0 00 4 5 6 7 9 0 00 8 9 0 00 9 10 11 12 13 14 1 4 5 0 00 15 1 4 5 0 00 16 17 18 19 1 1 0 93 20 8 9 90 21 2 1 03 22 23 24 25 26 27 8 1 20 28 8 70 29 7 2 50 30 31 32 33 34 35 36 37

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PROBLEM 13.4B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Income Summary 6 7 31 Income Summary 8 Sales Returns and Allowances 9 Purchases 10 Rent Expenses 11 Telephone Expense 12 Salaries Expense 13 Payroll Taxes Expense 14 Supplies Expense 15 Insurance Expense 16 Depreciation Expense—Office Equipment 17 Depreciation Expense—Store Equipment 18 Uncollectible Accounts Expense 19 Interest Expense 20 21 31 Income Summary 22 Preston Allen, Capital 23 24 31 Preston Allen, Capital 25 Preston Allen, Drawing 26 27 28 29

POST. REF.

DEBIT

31

CREDIT

236 5 6 0 00 2 0 0 0 00 238 5 6 0 00 237 3 6 7 13 6 0 0 0 00 160 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 5 0 5 00 1 2 0 0 00 1 0 0 0 00 2 0 5 0 00 1 2 8 0 00 9 0 00 4 7 87 4 7 87 8 0 0 0 00 8 0 0 0 00

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


PROBLEM 13.4B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Reversing Entries 2 2017 3 Jan. 1 Interest Payable 4 Interest Expense 5 To reverse adjusting entry (h) made Dec. 31, 2016 6 7 1 Salaries Payable 8 Salaries Expense 9 To reverse adjusting entry (i) made Dec. 31, 2016 10 11 1 Social Security Tax Payable 12 Medicare Tax Payable 13 Payroll Taxes Expense 14 To reverse adjusting entry (j) made Dec. 31, 2016 15 16 1 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Payroll Taxes Expense 19 To reverse adjusting entry (k) made Dec. 31, 2016 20 21 22 23

POST. REF.

DEBIT

9 0 00

1 4 5 0 00

8 9 90 2 1 03

1 4 50 7 2 50

32

CREDIT 1 2 3 9 0 00 4 5 6 7 1 4 5 0 00 8 9 10 11 12 1 1 0 93 13 14 15 16 17 8 7 00 18 19 20 21 22 23

Analyze: The following entry would be required: PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2017 Jan. 4 Salaries Payable Salaries Expense Cash To record the payment of salaries (ignoring payroll taxes)

POST. REF.

DEBIT

33

CREDIT

1 4 5 0 00 1 1 5 0 00 2 6 0 0 00

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1 2 3 4 5 6


PROBLEM 13.5B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2016 (Adjustment a) 3 Dec. 31 Advertising Expense 4 Prepaid Advertising 5 To record expired advertising on $17,700, 6 6 month contract paid August 1, 2016 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used in 2016 12 13 (Adjustment c) 14 31 Depreciation Expense—Store Equipment 15 Accumulated Depreciation—Equipment 16 To record depreciation for 2016 17 18 (Adjustment d) 19 31 Salaries Expense 20 Salaries Payable 21 To record accrued salaries 22 23 31 (Adjustment e) 24 Payroll Taxes Expense 25 Social Security Tax Payable 26 Medicare Tax Payable 27 To record accrued payroll taxes on accrued 28 salaries 29 30 (Adjustment f) 31 31 Interest Receivable 32 Interest Income 33 To record accrued interest on 5-month, 34 6%, $5,500 note receivable dated 35 December 1, 2016 36

POST. REF.

DEBIT

25

CREDIT

14 7 5 0 00 14 7 5 0 00

8 0 8 0 00 8 0 8 0 00

9 8 0 0 00 9 8 0 0 00

4 4 0 0 00 4 4 0 0 00

3 3 6 60 2 7 2 80 6 3 80

2 7 50

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2 7 50

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36


PROBLEM 13.5B (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

1 2 2017 3 Jan. 1 Salaries Payable 4 Salaries Expense 5 To reverse adjusting entry (d) made Dec. 31, 2016 6 7 1 Social Security Tax Payable 8 Medicare Tax Payable 9 Payroll Taxes Expense 10 To reverse adjusting entry (e) made Dec. 31, 2016 11 12 1 Interest Income 13 Interest Receivable 14 To reverse adjusting entry (f) made Dec. 31, 2016 15 16

POST. REF.

DEBIT

4 4 0 0 00

2 7 2 80 6 3 80

2 7 50

26

CREDIT 1 2 3 4 4 0 0 00 4 5 6 7 8 3 3 6 60 9 10 11 12 2 7 50 13 14 15 16

Analyze: The balance of the Prepaid Advertising Account on December 31 is $2,950.

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CRITICAL THINKING PROBLEM 13.1 Programs Plus Worksheet Year Ending December 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Equipment 8 Accumulated Depreciation—Equip. 9 Notes Payable 10 Accounts Payable 11 Social Security Tax Payable 12 Medicare Tax Payable 13 Salaries Payable 14 Interest Payable 15 Yasser Tousson, Capital 16 Yasser Tousson, Drawing 17 Income Summary 18 Sales 19 Sales Returns and Allowances 20 Purchases 21 Freight In 22 Purchases Returns and Allowances 23 Purchases Discounts 24 Rent Expense 25 Telephone Expense 26 Salaries Expense 27 Payroll Taxes Expense 28 Interest Expense 29 Supplies Expense 30 Insurance Expense 31 Depreciation Expense—Equipment 32 Uncollectible Accounts Expense 33 Totals 34 Net Income 35 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 15 2 8 0 00 26 6 0 0 00 9 5 00 (c) 1 2 2 5 00 62 3 7 5 00 (b) 67 8 5 0 00 (a) 62 3 7 5 00 6 7 4 0 00 (d) 5 7 2 0 00 2 3 8 0 00 (e) 1 1 9 0 00 34 0 0 0 00 10 1 0 0 00 (f) 5 6 0 0 00 7 2 6 4 00 6 5 0 0 00 5 6 0 00 (i) 1 3 0 20 1 3 0 00 (i) 3 0 45 (h) 2 1 0 0 00 (g) 3 2 5 00 93 6 2 0 00 50 0 0 0 00 (a) 62 3 7 5 00 (b) 67 8 5 0 00 514 9 8 0 00 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 7 1 4 5 00 5 7 6 0 00 14 5 0 0 00 2 1 6 4 00 92 0 0 0 00 (h) 2 1 0 0 00 7 3 0 0 00 (i) 1 6 0 65 1 8 5 00 (g) 3 2 5 00 (d) 5 7 2 0 00 (e) 1 1 9 0 00 (f) 5 6 0 0 00 (c) 1 2 2 5 00 646 1 5 4 00 646 1 5 4 00 146 5 4 5 65 146 5 4 5 65

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CRITICAL THINKING PROBLEM 13.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 15 2 8 0 00 26 6 0 0 00 1 3 2 0 00 67 8 5 0 00 1 0 2 0 00 1 1 9 0 00 34 0 0 0 00 15 7 0 0 00 7 2 6 4 00 6 5 0 0 00 6 9 0 20 1 6 0 45 2 1 0 0 00 3 2 5 00 93 6 2 0 00 50 0 0 0 00 62 3 7 5 00 67 8 5 0 00 514 9 8 0 00 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 7 1 4 5 00 5 7 6 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 1 0 00 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 723 4 1 4 65 723 4 1 4 65

INCOME STATEMENT DEBIT CREDIT

62 3 7 5 00 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00

14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 1 0 00 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 527 4 7 4 65 68 2 6 0 35 595 7 3 5 00

BALANCE SHEET DEBIT CREDIT 15 2 8 0 00 1 26 6 0 0 00 2 1 3 2 0 00 3 67 8 5 0 00 4 1 0 2 0 00 5 1 1 9 0 00 6 34 0 0 0 00 7 15 7 0 0 00 8 7 2 6 4 00 9 6 5 0 0 00 10 6 9 0 20 11 1 6 0 45 12 2 1 0 0 00 13 3 2 5 00 14 93 6 2 0 00 15 50 0 0 0 00 16 67 8 5 0 00 17 514 9 8 0 00 18 19 20 21 7 1 4 5 00 22 5 7 6 0 00 23 24 25 26 27 28 29 30 31 32 595 7 3 5 00 195 9 4 0 00 127 6 7 9 65 33 68 2 6 0 35 34 595 7 3 5 00 195 9 4 0 00 195 9 4 0 00 35

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CRITICAL THINKING PROBLEM 13.1 (continued) Programs Plus Income Statement Year Ended December 31, 2016 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2016 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2016 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Telephone Expense Salaries Expense Payroll Taxes Expense Supplies Expense Insurance Expense Depreciation Expense—Equipment Uncollectible Accounts Expense Total Operating Expenses Income from Operations Other Expenses Interest Expense Net Income for Year

13-49

514 9 8 0 00 9 6 0 0 00 505 3 8 0 00 62 3 7 5 00 319 4 3 0 00 3 6 0 0 00 323 0 3 0 00 7 1 4 5 00 5 7 6 0 00

12 9 0 5 00 310 1 2 5 00 372 5 0 0 00 67 8 5 0 00 304 6 5 0 00 200 7 3 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 131 9 5 9 65 68 7 7 0 35 5 1 0 00 68 2 6 0 35


CRITICAL THINKING PROBLEM 13.1 (continued) Programs Plus Statement of Owner's Equity Year Ended December 31, 2016 Yasser Tousson, January 1, 2016 Net Income for Year Less Withdrawals for Year Increase in Capital Yasser Tousson, Capital, December 31, 2016

93 6 2 0 00 68 2 6 0 35 50 0 0 0 00 18 2 6 0 35 111 8 8 0 35

Programs Plus Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Supplies Prepaid Insurance Total Current Assets Plant and Equipment Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Social Security Tax Payable Medicare Tax Payable Salaries Payable Total Current Liabilities Owner’s Equity Yasser Tousson, Capital Total Liabilities and Owner’s Equity

15 2 8 0 00 26 6 0 0 00 1 3 2 0 00

1 0 2 0 00 1 1 9 0 00

34 0 0 0 00 15 7 0 0 00

25 2 8 0 00 67 8 5 0 00

2 2 1 0 00 110 6 2 0 00

18 3 0 0 00 18 3 0 0 00 128 9 2 0 00

7 2 6 4 00 6 5 0 0 00 3 2 5 00 6 9 0 20 1 6 0 45 2 1 0 0 00 17 0 3 9 65 111 8 8 0 35 128 9 2 0 00

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CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 (Adjustment a) 3 Dec. 31 Income Summary 4 Merchandise Inventory 5 To transfer beginning inventory 6 7 (Adjustment b) 8 31 Merchandise Inventory 9 Income Summary 10 To record ending inventory 11 12 (Adjustment c) 13 31 Uncollectible Accounts Expense 14 Allowance for Doubtful Accounts 15 To record estimated loss for 2016, based on 0.5% 16 of net credit sales of $245,000 17 18 (Adjustment d) 19 31 Supplies Expense 20 Supplies 21 To record supplies used during 2016 22 23 (Adjustment e) 24 31 Insurance Expense 25 Prepaid Insurance 26 To record expired insurance 27 28 (Adjustment f) 29 31 Depreciation Expense—Equipment 30 Accumulated Depreciation—Equipment 31 To record depreciation for 2016 (schedule on file) 32

POST. REF.

DEBIT

25

CREDIT

1 2 62 3 7 5 00 3 62 3 7 5 00 4 5 6 7 67 8 5 0 00 8 67 8 5 0 00 9 10 11 12 1 2 2 5 00 13 1 2 2 5 00 14 15 16 17 18 5 7 2 0 00 19 5 7 2 0 00 20 21 22 23 1 1 9 0 00 24 1 1 9 0 00 25 26 27 28 5 6 0 0 00 29 5 6 0 0 00 30 31 32

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CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2016 (Adjustment g) 3 Dec. 31 Interest Expense 4 Interest Payable 5 To record accrued interest on notes payable 6 7 (Adjustment h) 8 31 Salaries Expense 9 Salaries Payable 10 To record accrued salaries 11 12 (Adjustment i) 13 31 Payroll Taxes Expense 14 Social Security Tax Payable 15 Medicare Tax Payable 16 To record accrued payroll taxes on accrued 17 salaries for December: 18 Social Security tax = 6.2% × $2,100; 19 Medicare = 1.45% × $2,100 20 21 22 23

POST. REF.

DEBIT

26

CREDIT

3 2 5 00 3 2 5 00

2 1 0 0 00 2 1 0 0 00

1 6 0 65 1 3 0 20 3 0 45

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


CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2016 3 Dec. 31 Sales 4 Purchase Returns and Allowances 5 Purchase Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Rent Expenses 13 Telephone Expense 14 Salaries Expense 15 Payroll Taxes Expense 16 Supplies Expense 17 Insurance Expense 18 Depreciation Expense—Equipment 19 Uncollectible Accounts Expense 20 Interest Expense 21 22 31 Income Summary 23 Yasser Tousson, Capital 24 25 31 Yasser Tousson, Capital 26 Yasser Tousson, Drawing 27 28 29

POST. REF.

DEBIT

27

CREDIT

514 9 8 0 00 7 1 4 5 00 5 7 6 0 00 527 8 8 5 00 465 0 9 9 65 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 5 1 0 00 68 2 6 0 35 68 2 6 0 35 50 0 0 0 00 50 0 0 0 00

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


CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Reversing Entries 2 2017 3 Jan. 1 Interest Payable 4 Interest Expense 5 To reverse adjusting entry (g) made Dec. 31, 2016 6 7 1 Salaries Payable 8 Salaries Expense 9 To reverse adjusting entry (h) made Dec. 31, 2016 10 11 1 Social Security Tax Payable 12 Medicare Tax Payable 13 Payroll Taxes Expense 14 To reverse adjusting entry (i) made Dec. 31, 2016 15 16 17 18 19 20 21 22 23 24 25

POST. REF.

DEBIT

3 2 5 00

2 1 0 0 00

1 3 0 20 3 0 45

28

CREDIT 1 2 3 3 2 5 00 4 5 6 7 2 1 0 0 00 8 9 10 11 12 1 6 0 65 13 14 15 16 17 18 19 20 21 22 23 24 25

Analyze: The owner’s capital account increased by 19.5% ($111,880.35 - $93,620.00) ÷ $93,620 = 19.5%.

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CRITICAL THINKING PROBLEM 13.2 Newport Jewelery Balance Sheet December 31, 2015 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment Store Fixtures and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Salaries Payable Total Current Liabilities Long-Term Liabilities Notes Payable Total Liabilities Owner’s Equity Teagan Fitzgerald, Capital Total Liabilities and Owner’s Equity

150 0 0 0 00 45 0 0 0 00 105 0 0 0 00 6 0 0 0 00 306 0 0 0 00 180 0 0 0 00 486 0 0 0 00

132 0 0 0 00 18 0 0 0 00 150 0 0 0 00 90 0 0 0 00 240 0 0 0 00

246 0 0 0 00 486 0 0 0 00

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CRITICAL THINKING PROBLEM 13.2 (continued) Newport Jewelry Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment Store Fixtures and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Salaries Payable Total Current Liabilities Long-Term Liabilities Notes Payable Total Liabilities Owner’s Equity Teagan Fitzgerald, Capital Total Liabilities and Owner’s Equity

30 0 0 0 00 91 5 0 0 00 234 0 0 0 00 9 0 0 0 00 364 5 0 0 00 390 0 0 0 00 754 5 0 0 00

171 0 0 0 00 19 5 0 0 00 190 5 0 0 00 240 0 0 0 00 430 5 0 0 00

324 0 0 0 00 754 5 0 0 00

NOTE TO INSTRUCTOR: While detailed financial statement analysis is not presented in this chapter, we have included this problem to show students how classified statements provide more useful financial information than non-classified statements. 2. From 2015 to 2016, Newport Jewelry’s cash decreased by $120,000. At the same time, current liabilities increased from $150,000 to $190,500, or by $40,500. In spite of these changes, the ratio of current assets to current liabilities is still close to 2:1, a widely-used rule of thumb for this ratio as satisfactory. One strong factor is the growth in owner’s equity, resulting from profits. Newport Jewelry should be able to meet its obligations. However one development to be examined further is the large growth in inventory. 3. A classified balance sheet permits the reader to make more meaningful comparisons of balance sheet accounts. This allows the reader to make better decisions regarding the company's financial strength and financial future.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Timely receipt of financial data facilitates effective management and planning. 2. Increase in accounts receivable resulting from slow collections from customers or an unwarranted growth in inventories; payment of long-term debt or purchase of property. 3. May reflect that excess inventory has become obsolete or soiled. Growth in inventory ties up funds. 4. Reveal trends or changes in specific items that need to be investigated. 5. Yes. This indicates a strong possibility that there will be inadequate funds to cover the liabilities as they come due. 6. Yes, compare increase in selling expenses to the increase in sales. Investigate levels of sales returns and allowances. Review each selling expense account for accuracy. 7. Reveals variances out-of-line with industry averages; areas where costs should be controlled. Ethical Dilemma: You should follow the generally accepted accounting principles (GAAP) and do the proper adjusting entry. You might suggest the owner seek different forms of financing that would not require maintenance of a 1.5 current ratio. Additionally, you can offer to meet with the banker and try to obtain a waiver of the current ratio current ratio requirement for the current period. Financial Statement Analysis: 1. 2012: 1.1 ($1,285.4 ÷ $1,187.6) 2011: 1.2 ($1,222.9 ÷ $993.3) 2. The current ratio declined from 1.2 in 2011 to 1.1 in 2012. 3. 40.3% gross profit percentage ($1,617.8 ÷ $4,014.2) Teamwork: Answers will vary depending on the year. Internet Connection: Answers will vary depending on the corporation.

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. FALSE 2. TRUE 3. FALSE 4. FALSE 5. TRUE 6. TRUE 7. FALSE 8. FALSE 9. TRUE 10. FALSE 11. FALSE 12. TRUE 13. FALSE

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

FALSE FALSE TRUE TRUE TRUE TRUE TRUE FALSE FALSE TRUE TRUE FALSE

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MINI-PRACTICE SET 2 MERCHANDISING BUSINESS ACCOUNTING CYCLE PAGE 16

GENERAL JOURNAL DATE 1 2016 2 Oct. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

DESCRIPTION

Post Ref.

DEBIT

1 Rent Expense Cash Issued Check 601 to pay for monthly rent

629 101

4 2 0 0 00

1 Prepaid Advertising Cash Issued Check 602 for a three-month radio contract

135 101

4 8 0 0 00

101

5 2 0 00

2 Cash Accounts Receivable / Megan Greening Received payment from credit customer 2 Sales Tax Payable Cash Issued Check 603 for sales tax owed July – Sept.

111

17 8 2 0 00 231 101

2 Accounts Payable / A Fashion Statement Purchases Discounts Cash Issued Check 604 for payment of Invoice 9387

203

3 Accounts Receivable / Dimitri Sayegh Sales Tax Payable Sales Sold merchandise on credit; issued Sales Slip 241

111

4 Supplies Cash Issued Check 605 for supplies

131 101

7 8 3 0 00

504 101

2 6 0 4 00

231 401

1 0 5 0 00

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CREDIT 1 2 4 2 0 0 00 3 4 5 6 4 8 0 0 00 7 8 9 10 5 2 0 00 11 12 13 14 17 8 2 0 00 15 16 17 18 1 5 6 60 20 7 6 7 3 40 19 21 22 23 1 2 4 00 24 2 4 8 0 00 25 26 27 28 1 0 5 0 00 29 30 31


MINI-PRACTICE SET 2 (continued) PAGE 17

GENERAL JOURNAL DATE 1 2016 2 Oct. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

DESCRIPTION

4 Accounts Payable / Today’s Woman Purchases Discounts Cash Issued Check 606 for payment of Invoice 5671 5 Cash Accounts Receivable / Emily Tran Received payment on account 5 Sales Returns and Allowances Sales Tax Payable Accounts Receivable / Dimitri Sayegh Issued Credit Memo 18 for damaged merchandise originally sold on Sales Slip 241, Oct. 3

Post Ref. 203

DEBIT

8 7 7 0 00

504 101

101 111

402 231 111

1 7 0 0 00

6 0 0 00 3 0 00

5 Accounts Payable / Classy Threads Purchases Discounts Cash Issued Check 607 for payment of Invoice 3292

203

6 Cash Sales Sales Tax Payable Cash sales during Oct. 1 – 6

101 401 231

19 5 3 0 00

101

8 3 2 00

8 Cash Accounts Receivable / James Helmer Received payment from credit customer 8 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Issued Check 608 for September payroll taxes

1 7 0 0 00

504 101

111

221 222 223 101

7 0 2 00 1 6 2 00 1 0 2 0 00

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CREDIT 1 2 1 7 5 40 3 8 5 9 4 60 4 5 6 7 1 7 0 0 00 8 9 10 11 12 6 3 0 00 13 14 15 16 17 3 4 00 18 1 6 6 6 00 19 20 21 22 18 6 0 0 00 23 9 3 0 00 24 25 26 27 8 3 2 00 28 29 30 31 32 33 1 8 8 4 00 34 35 36


MINI-PRACTICE SET 2 (continued) PAGE 18

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 9 Accounts Receivable / Emma Maldonado 3 Sales 4 Sales Tax Payable 5 Sold merchandise on credit; issued Sales Slip 242 6 7 10 Advertising Expense 8 Cash 9 Issued Check 609 for advertisement 10 11 11 Purchases 12 Accounts Payable / A Fashion Statement 13 Purchased merchandise on account; 14 Invoice 9422, terms 2/10, n/30 15 16 12 Freight In 17 Cash 18 Issued Check 610 for freight charges 19 20 13 Cash 21 Sales 22 Sales Tax Payable 23 Cash sales during Oct. 8 – 13 24 25 15 Accounts Receivable / James Helmer 26 Sales 27 Sales Tax Payable 28 Sold merchandise on credit; issued Sales Slip 243 29 30 16 Purchases 31 Cash 32 Purchased discontinued merchandise, Check 611 33 34 16 Cash 35 Accounts Receivable / Dimitri Sayegh 36 Received payment from credit customer 37

Post Ref.

DEBIT

111

2 1 5 2 50

401 231

611 101

1 4 4 5 00

501

4 8 2 0 00

203

502 101

3 7 5 00

101 401 231

12 9 1 5 00

111

2 0 3 7 00

401 231

501 101

6 4 2 0 00

101

5 1 0 00

111

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CREDIT 1 2 2 0 5 0 00 3 1 0 2 50 4 5 6 7 1 4 4 5 00 8 9 10 11 4 8 2 0 00 12 13 14 15 16 3 7 5 00 17 18 19 20 12 3 0 0 00 21 6 1 5 00 22 23 24 25 1 9 4 0 00 26 9 7 00 27 28 29 30 6 4 2 0 00 31 32 33 34 5 1 0 00 35 36 37


MINI-PRACTICE SET 2 (continued) PAGE 19

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 16 Accounts Payable / A Fashion Statement 3 Purchases Discounts 4 Cash 5 Issued Check 612 for payment of Invoice 9422 6 7 18 Teresa Lojay, Drawing 8 Cash 9 Issued Check 613 for personal use 10 11 20 Cash 12 Sales 13 Sales Tax Payable 14 Cash sales during Oct. 15 – 20 15 16 22 Utilities Expense 17 Cash 18 Issued Check 614 for monthly electric bill 19 20 24 Accounts Receivable / Megan Greening 21 Sales 22 Sales Tax Payable 23 Sold merchandise on credit; issued Sales Slip 244 24 25 25 Purchases 26 Accounts Payable / Classy Threads 27 Purchased merchandise on account; 28 Invoice 3418, terms 2/10, n/30 29 30 26 Telephone Expense 31 Cash 32 Issued Check 615 for monthly telephone bill 33 34 27 Cash 35 Sales 36 Sales Tax Payable 37 Cash sales during Oct. 22 – 27 38

Post Ref.

DEBIT

203

4 8 2 0 00

504 101

302 101

7 2 0 0 00

101 401 231

13 5 0 0 00

644 101

1 1 1 2 00

111

8 6 1 00

401 231

501 203

3 3 8 0 00

638 101

7 8 0 00

101 401 231

14 9 5 2 00

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CREDIT 1 2 9 6 40 3 4 7 2 3 60 4 5 6 7 7 2 0 0 00 8 9 10 11 12 8 2 5 00 12 6 7 5 00 13 14 15 16 1 1 1 2 00 17 18 19 20 8 2 0 00 21 4 1 00 22 23 24 25 3 3 8 0 00 26 27 28 29 30 7 8 0 00 31 32 33 34 14 2 4 0 00 35 7 1 2 00 36 37 38


MINI-PRACTICE SET 2 (continued) PAGE 20

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 29 Accounts Payable / Classy Threads 3 Purchases Returns and Allowances 4 Received Credit Memo 175 for defective 5 goods returned; original purchase made on 6 Invoice 3418 7 8 29 Accounts Receivable / Emily Tran 9 Sales 10 Sales Tax Payable 11 Sold merchandise on credit; issued Sales Slip 245 12 13 29 Salaries Expense 14 Salaries Payable 15 Social Security Tax Payable 16 Medicare Tax Payable 17 Employee Income Tax Payable 18 To record October payroll 19 20 29 Payroll Taxes Expense 21 Social Security Tax Payable 22 Medicare Tax Payable 23 Federal Unemployment Tax Payable 24 State Unemployment Tax Payable 25 To record October payroll taxes 26 27 30 Purchases 28 Accounts Payable / Today’s Woman 29 Purchased merchandise on account; 30 Invoice 5821, terms 1/10, n/30 31 32 31 Salaries Payable 33 Cash 34 Issued Checks 616 – 619 for October payroll 35

Post Ref. 203

DEBIT

4 3 0 00

503

111

3 2 7 6 00

401 231

632 229 221 222 223

10 8 0 0 00

626 221 222 225 227

1 5 6 6 00

501

4 0 2 0 00

203

229 101

8 9 1 6 00

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CREDIT 1 2 4 3 0 00 3 4 5 6 7 8 3 1 2 0 00 9 1 5 6 00 10 11 12 13 8 9 1 6 00 14 7 0 2 00 15 1 6 2 00 16 1 0 2 0 00 17 18 19 20 7 0 2 00 21 1 6 2 00 22 1 1 8 00 23 5 8 4 00 24 25 26 27 4 0 2 0 00 28 29 30 31 32 8 9 1 6 00 33 34 35


MINI-PRACTICE SET 2 (continued) PAGE 21

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 Oct. 31 Janitorial Services Expense 3 Cash 4 Issued Check 620 for janitorial services 5 6 31 Cash 7 Sales 8 Sales Tax Payable 9 Cash sales during Oct. 29 – 31 10

Post Ref.

DEBIT

623 101

4 7 5 00

101 401 231

1 7 8 5 00

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CREDIT 1 2 4 7 5 00 3 4 5 6 1 7 0 0 00 7 8 5 00 8 9 10


MINI-PRACTICE SET 2 (continued) PAGE 22

GENERAL JOURNAL DATE

DESCRIPTION

Adjusting Entries 1 2 2016 (Adjustment a) 3 Oct. 31 Uncollectible Accounts Expense 4 Allowance for Doubtful Accounts 5 To record estimated loss from uncollectible 6 accounts, based on 1.0% of net credit sales 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used 12 13 (Adjustment c) 14 31 Insurance Expense 15 Prepaid Insurance 16 To record expired insurance 17 18 (Adjustment d) 19 31 Advertising Expense 20 Prepaid Advertising 21 To record expired advertising 22 23 (Adjustment e) 24 31 Depreciation Expense – Equipment 25 Accumulated Depreciation – Equipment 26 To record depreciation for month 27 28 (Adjustment f) 29 31 Income Summary 30 Merchandise Inventory 31 To transfer beginning inventory 32 33 (Adjustment g) 34 31 Merchandise Inventory 35 Income Summary 36 To record ending inventory 37

Post Ref.

DEBIT

620 112

9 8 10

635 131

1 9 1 0 00

617 133

1 4 0 0 00

611 135

1 6 0 0 00

614 142

1 1 7 5 00

399 121

88 9 9 6 00

121 399

81 2 6 0 00

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CREDIT 1 2 3 9 8 10 4 5 6 7 8 9 1 9 1 0 00 10 11 12 13 14 1 4 0 0 00 15 16 17 18 19 1 6 0 0 00 20 21 22 23 24 1 1 7 5 00 25 26 27 28 29 88 9 9 6 00 30 31 32 33 34 81 2 6 0 00 35 36 37


MINI-PRACTICE SET 2 (continued) PAGE 23

GENERAL JOURNAL DATE

DESCRIPTION

1 Closing Entries 2 2016 3 Oct. 31 Sales 4 Purchases Returns and Allowances 5 Purchases Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Advertising Expense 13 Depreciation Expense – Equipment 14 Insurance Expense 15 Uncollectible Accounts Expense 16 Janitorial Services Expense 17 Payroll Taxes Expense 18 Rent Expense 19 Salaries Expense 20 Supplies Expense 21 Telephone Expense 22 Utilities Expense 23 24 31 Income Summary 25 Teresa Lojay, Capital 26 27 31 Teresa Lojay, Capital 28 Teresa Lojay, Drawing 29

Post Ref.

DEBIT

401 503 504 399

70 7 5 0 00 4 3 0 00 4 6 2 40

399 402 501 502 611 614 617 620 623 626 629 632 635 638 644

46 1 7 6 10

399 301

17 7 3 0 30

301 302

7 2 0 0 00

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CREDIT 1 2 3 4 5 71 6 4 2 40 6 7 8 6 0 0 00 9 18 6 4 0 00 10 3 7 5 00 11 3 0 4 5 00 12 1 1 7 5 00 13 1 4 0 0 00 14 9 8 10 15 4 7 5 00 16 1 5 6 6 00 17 4 2 0 0 00 18 10 8 0 0 00 19 1 9 1 0 00 20 7 8 0 00 21 1 1 1 2 00 22 23 24 17 7 3 0 30 25 26 27 7 2 0 0 00 28 29


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2016 Oct. 1 Balance 1 1 2 2 2 4 4 5 5 6 8 8 10 12 13 16 16 16 18 20 22 26 27 31 31 31

Post Ref.  J16 J16 J16 J16 J16 J16 J17 J17 J17 J17 J17 J17 J18 J18 J18 J18 J18 J19 J19 J19 J19 J19 J19 J20 J21 J21

DEBIT

CREDIT

4 2 0 0 00 4 8 0 0 00 5 2 0 00 17 8 2 0 00 7 6 7 3 40 1 0 5 0 00 8 5 9 4 60 1 7 0 0 00 1 6 6 6 00 19 5 3 0 00 8 3 2 00 1 8 8 4 00 1 4 4 5 00 3 7 5 00 12 9 1 5 00 6 4 2 0 00 5 1 0 00 4 7 2 3 60 7 2 0 0 00 14 1 7 5 00 1 1 1 2 00 7 8 0 00 14 9 5 2 00 8 9 1 6 00 4 7 5 00 1 7 8 5 00

BALANCE DEBIT CREDIT 59 8 0 0 00 55 6 0 0 00 50 0 8 0 00 51 3 2 0 00 33 5 0 0 00 25 8 2 6 60 24 7 7 6 60 16 1 8 2 00 17 8 8 2 00 16 2 1 6 00 35 7 4 6 00 36 5 7 8 00 34 6 9 4 00 33 2 4 9 00 32 8 7 4 00 45 7 8 9 00 39 3 6 9 00 39 8 7 9 00 35 1 5 5 40 27 9 5 5 40 42 1 3 0 40 41 0 1 8 40 40 2 3 8 40 55 1 9 0 40 46 2 7 4 40 45 7 9 9 40 47 5 8 4 40

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MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2016 Oct. 1 Balance 2 3 5 5 Credit Memo 18 8 9 15 16 24 29

Post Ref.  J16 J16 J17 J17 J17 J18 J18 J18 J19 J20

DEBIT

CREDIT

5 2 0 00 2 6 0 4 00 1 7 0 0 00 6 3 0 00 8 3 2 00 2 1 5 2 50 2 0 3 7 00 5 1 0 00 8 6 1 00 3 2 7 6 00

DESCRIPTION

2016 Oct. 1 Balance 31 Adjusting

Post Ref.

DEBIT

 J22

CREDIT

DESCRIPTION

2016 Oct. 1 Balance 31 Adjusting 31 Adjusting

Post Ref.  J22 J22

BALANCE DEBIT CREDIT 4 2 0 00 5 1 8 10

9 8 10

ACCOUNT NO. 121

ACCOUNT Merchandise Inventory DATE

6 2 1 0 00 5 6 9 0 00 8 2 9 4 00 6 5 9 4 00 5 9 6 4 00 5 1 3 2 00 7 2 8 4 50 9 3 2 1 50 8 8 1 1 50 9 6 7 2 50 12 9 4 8 50

ACCOUNT NO. 112

ACCOUNT Allowance for Doubtful Accounts DATE

BALANCE DEBIT CREDIT

DEBIT

CREDIT

88 9 9 6 00 81 2 6 0 00

BALANCE DEBIT CREDIT 88 9 9 6 00 - 0 81 2 6 0 00

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MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 131

ACCOUNT Supplies DATE

DESCRIPTION

2016 Oct. 1 Balance 4 31 Adjusting

Post Ref.  J16 J22

DEBIT

CREDIT

1 0 5 0 00 1 9 1 0 00

DESCRIPTION

2016 Oct. 1 Balance 31 Adjusting

Post Ref.

DEBIT

 J22

CREDIT

1 4 0 0 00

DESCRIPTION

2016 Oct. 1 31 Adjusting

Post Ref.

DEBIT

J16 J22

4 8 0 0 00

CREDIT

1 6 0 0 00

DESCRIPTION

2016 Oct. 1 Balance

8 4 0 0 00 7 0 0 0 00

BALANCE DEBIT CREDIT 4 8 0 0 00 3 2 0 0 00

ACCOUNT NO. 141

ACCOUNT Equipment DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 135

ACCOUNT Prepaid Advertising DATE

4 1 0 0 00 5 1 5 0 00 3 2 4 0 00

ACCOUNT NO. 133

ACCOUNT Prepaid Insurance DATE

BALANCE DEBIT CREDIT

Post Ref. 

DEBIT

CREDIT

BALANCE DEBIT CREDIT 83 0 0 0 00

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MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT Accumulated Depreciation–Equipment DATE

DESCRIPTION

2016 Oct. 1 Balance 31 Adjusting

Post Ref.

DEBIT

 J22

CREDIT

DESCRIPTION

2016 Oct. 1 Balance 2 4 5 11 16 25 29 30

DESCRIPTION

2016 Oct. 1 Balance 8 29 29

7 0 5 0 00 8 2 2 5 00

ACCOUNT NO. 203 Post Ref.  J16 J17 J17 J18 J19 J19 J20 J20

DEBIT

CREDIT

Post Ref.  J17 J20 J20

BALANCE DEBIT CREDIT 18 3 0 0 00 10 4 7 0 00 1 7 0 0 00 - 0 4 8 2 0 00 - 0 3 3 8 0 00 2 9 5 0 00 6 9 7 0 00

7 8 3 0 00 8 7 7 0 00 1 7 0 0 00 4 8 2 0 00 4 8 2 0 00 3 3 8 0 00 4 3 0 00 4 0 2 0 00

ACCOUNT NO. 221

ACCOUNT Social Security Tax Payable DATE

BALANCE DEBIT CREDIT

1 1 7 5 00

ACCOUNT Accounts Payable DATE

ACCOUNT NO. 142

DEBIT

CREDIT

BALANCE DEBIT CREDIT

7 0 2 00 7 0 2 00 7 0 2 00

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7 0 2 00 - 0 7 0 2 00 1 4 0 4 00


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 222

ACCOUNT Medicare Tax Payable DATE

DESCRIPTION

2016 Oct. 1 Balance 8 29 29

Post Ref.

DEBIT

 J17 J20 J20

CREDIT

DESCRIPTION

2016 Oct. 1 Balance 8 29

Post Ref.  J17 J20

1 6 2 00 1 6 2 00

ACCOUNT NO. 223

DEBIT

CREDIT

DESCRIPTION

2016 Oct. 1 Balance 29

Post Ref.

DESCRIPTION

DEBIT

 J20

2016 Oct. 1 Balance 29

Post Ref.  J20

1 0 2 0 00 - 0 1 0 2 0 00

1 0 2 0 00

ACCOUNT NO. 225 CREDIT

BALANCE DEBIT CREDIT 5 1 2 00 6 3 0 00

1 1 8 00

ACCOUNT NO. 227

ACCOUNT State Unemployment Tax Payable DATE

BALANCE DEBIT CREDIT

1 0 2 0 00

ACCOUNT Federal Unemployment Tax Payable DATE

1 6 2 00 - 0 1 6 2 00 3 2 4 00

1 6 2 00

ACCOUNT Employee Income Tax Payable DATE

BALANCE DEBIT CREDIT

DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 8 4 00

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1 2 6 8 00 1 8 5 2 00


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 229

ACCOUNT Salaries Payable DATE

DESCRIPTION

2016 Oct. 29 31

Post Ref. J20 J20

DEBIT

CREDIT

8 9 1 6 00

DESCRIPTION

2016 Oct. 1 Balance 2 3 5 6 9 13 15 20 24 27 29 31

ACCOUNT NO. 231 Post Ref.  J16 J16 J17 J17 J18 J18 J18 J19 J19 J19 J20 J21

DEBIT

CREDIT

DESCRIPTION

2016 Oct. 1 Balance 31 Closing 31 Closing

Post Ref.  J23 J23

BALANCE DEBIT CREDIT 17 8 2 0 00 - 0 1 2 4 00 9 4 00 1 0 2 4 00 1 1 2 6 50 1 7 4 1 50 1 8 3 8 50 2 5 1 3 50 2 5 5 4 50 3 2 6 6 50 3 4 2 2 50 3 5 0 7 50

17 8 2 0 00 1 2 4 00 3 0 00 9 3 0 00 1 0 2 50 6 1 5 00 9 7 00 6 7 5 00 4 1 00 7 1 2 00 1 5 6 00 8 5 00

ACCOUNT NO. 301

ACCOUNT Teresa Lojay, Capital DATE

8 9 1 6 00 - 0 -

8 9 1 6 00

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

DEBIT

CREDIT

BALANCE DEBIT CREDIT

17 7 3 0 30 7 2 0 0 00

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203 2 5 2 00 220 9 8 2 30 213 7 8 2 30


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 302

ACCOUNT Teresa Lojay, Drawing DATE

DESCRIPTION

2016 Oct. 18 31 Closing

Post Ref.

DEBIT

J19 J23

7 2 0 0 00

CREDIT

7 2 0 0 00

DESCRIPTION

2016 Oct. 31 Adjusting 31 Adjusting 31 Closing 31 Closing 31 Closing

Post Ref.

DEBIT

J22 J22 J23 J23 J23

88 9 9 6 00

CREDIT

81 2 6 0 00 71 6 4 2 40

DESCRIPTION

2016 Oct. 3 6 9 13 15 20 24 27 29 31 31 Closing

BALANCE DEBIT CREDIT 88 9 9 6 00 7 7 3 6 00 63 9 0 6 40 17 7 3 0 30 - 0 -

46 1 7 6 10 17 7 3 0 30

ACCOUNT NO. 401

ACCOUNT Sales DATE

7 2 0 0 00 - 0 -

ACCOUNT NO. 399

ACCOUNT Income Summary DATE

BALANCE DEBIT CREDIT

Post Ref. J16 J17 J18 J18 J18 J19 J19 J19 J20 J21 J23

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 4 8 0 00 18 6 0 0 00 2 0 5 0 00 12 3 0 0 00 1 9 4 0 00 13 5 0 0 00 8 2 0 00 14 2 4 0 00 3 1 2 0 00 1 7 0 0 00 70 7 5 0 00

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2 4 8 0 00 21 0 8 0 00 23 1 3 0 00 35 4 3 0 00 37 3 7 0 00 50 8 7 0 00 51 6 9 0 00 65 9 3 0 00 69 0 5 0 00 70 7 5 0 00 - 0 -


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT Sales Returns and Allowances DATE

DESCRIPTION

2016 Oct. 5 31 Closing

ACCOUNT

Purchases

DATE

DESCRIPTION

2016 Oct. 11 16 25 30 31 Closing

ACCOUNT

Freight In

DATE

DESCRIPTION

2016 Oct. 12 31 Closing

Post Ref.

DEBIT

J17 J23

6 0 0 00

CREDIT

6 0 0 00

DESCRIPTION

2016 Oct. 29 31 Closing

BALANCE DEBIT CREDIT 6 0 0 00 - 0 -

ACCOUNT NO. 501 Post Ref.

DEBIT

J18 J18 J19 J20 J23

4 8 2 0 00 6 4 2 0 00 3 3 8 0 00 4 0 2 0 00

CREDIT

18 6 4 0 00

BALANCE DEBIT CREDIT 4 8 2 0 00 11 2 4 0 00 14 6 2 0 00 18 6 4 0 00 - 0 -

ACCOUNT NO. 502 Post Ref.

DEBIT

J18 J23

3 7 5 00

CREDIT

3 7 5 00

Post Ref. J20 J23

DEBIT

BALANCE DEBIT CREDIT 3 7 5 00 - 0 -

ACCOUNT NO. 503

ACCOUNT Purchases Returns and Allowances DATE

ACCOUNT NO. 402

CREDIT

BALANCE DEBIT CREDIT

4 3 0 00 4 3 0 00

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4 3 0 00 - 0 -


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 504

ACCOUNT Purchases Discounts DATE

DESCRIPTION

Post Ref.

2016 Oct. 2 4 5 16 31 Closing

J16 J17 J17 J19 J23

DEBIT

CREDIT

1 5 6 60 1 7 5 40 3 4 00 9 6 40

DESCRIPTION

2016 Oct. 10 31 Adjusting 31 Closing

ACCOUNT NO. 611

Post Ref.

DEBIT

J18 J22 J23

1 4 4 5 00 1 6 0 0 00

CREDIT

3 0 4 5 00

ACCOUNT Depreciation Expense – Equipment DATE

DESCRIPTION

2016 Oct. 31 Adjusting 31 Closing

Post Ref.

DEBIT

J22 J23

1 1 7 5 00

DESCRIPTION

2016 Oct. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT 1 4 4 5 00 3 0 4 5 00 - 0 -

ACCOUNT NO. 614 CREDIT

1 1 7 5 00

BALANCE DEBIT CREDIT 1 1 7 5 00 - 0 -

ACCOUNT NO. 617

ACCOUNT Insurance Expense DATE

1 5 6 60 3 3 2 00 3 6 6 00 4 6 2 40 - 0 -

4 6 2 40

ACCOUNT Advertising Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J22 J23

1 4 0 0 00

CREDIT

1 4 0 0 00

BALANCE DEBIT CREDIT 1 4 0 0 00 - 0 -

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-75


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT Uncollectible Accounts Expense DATE

DESCRIPTION

2016 Oct. 31 Adjusting 31 Closing

Post Ref. J22 J23

DEBIT

ACCOUNT NO. 620

CREDIT

9 8 10 9 8 10

DESCRIPTION

2016 Oct. 31 31 Closing

Post Ref.

DEBIT

J21 J23

4 7 5 00

CREDIT

4 7 5 00

DESCRIPTION

2016 Oct. 29 31 Closing

Post Ref.

DEBIT

J20 J23

1 5 6 6 00

CREDIT

1 5 6 6 00

DESCRIPTION

2016 Oct. 1 31 Closing

4 7 5 00 - 0 -

BALANCE DEBIT CREDIT 1 5 6 6 00 - 0 -

ACCOUNT NO. 629

ACCOUNT Rent Expense DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 626

ACCOUNT Payroll Taxes Expense DATE

9 8 10 - 0 -

ACCOUNT NO. 623

ACCOUNT Janitorial Services Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J16 J23

4 2 0 0 00

CREDIT

4 2 0 0 00

BALANCE DEBIT CREDIT 4 2 0 0 00 - 0 -

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-76


MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT NO. 632

ACCOUNT Salaries Expense DATE

DESCRIPTION

2016 Oct. 29 31 Closing

Post Ref.

DEBIT

J20 J23

10 8 0 0 00

CREDIT

10 8 0 0 00

DESCRIPTION

2016 Oct. 31 Adjusting 31 Closing

Post Ref.

DEBIT

J22 J23

1 9 1 0 00

CREDIT

1 9 1 0 00

DESCRIPTION

2016 Oct. 26 31 Closing

Post Ref.

DEBIT

J19 J23

7 8 0 00

CREDIT

7 8 0 00

DESCRIPTION

2016 Oct. 22 31 Closing

1 9 1 0 00 - 0 -

BALANCE DEBIT CREDIT 7 8 0 00 - 0 -

ACCOUNT NO. 644

ACCOUNT Utilities Expense DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 638

ACCOUNT Telephone Expense DATE

10 8 0 0 00 - 0 -

ACCOUNT NO. 635

ACCOUNT Supplies Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J19 J23

1 1 1 2 00

CREDIT

1 1 1 2 00

BALANCE DEBIT CREDIT 1 1 1 2 00 - 0 -

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MINI-PRACTICE SET 2 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Jennifer Brown DATE

DESCRIPTION

2016 Oct. 1 Balance

TERMS Post Ref.

DEBIT

DESCRIPTION

2016 Oct. 1 Balance 2 24 Sales Slip 244

TERMS Post Ref.  J16 J19

DEBIT

DESCRIPTION

2016 Oct. 1 Balance 8 15 Sales Slip 243

CREDIT

5 2 0 00 8 6 1 00

NAME James Helmer DATE

TERMS Post Ref.  J17 J18

BALANCE

7 9 5 00

NAME Megan Greening DATE

CREDIT

n/30

DEBIT

CREDIT

8 3 2 00 2 0 3 7 00

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-78

n/30 BALANCE

5 2 0 00 - 0 8 6 1 00

n/30 BALANCE

8 3 2 00 - 0 2 0 3 7 00


MINI-PRACTICE SET 2 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Emma Maldonado DATE

DESCRIPTION

2016 Oct. 1 Balance 9 Sales Slip 242

Post Ref.  J18

DEBIT

DESCRIPTION

Post Ref.

DEBIT

2016 Oct. 1 Balance 3 Sales Slip 241 5 Credit Memo 18 16

TERMS Post Ref.  J16 J17 J18

DEBIT

CREDIT

2 6 0 4 00 6 3 0 00 5 1 0 00

NAME Emily Tran

TERMS DESCRIPTION

2016 Oct. 1 Balance 5 29 Sales Slip 245

Post Ref.  J17 J20

BALANCE

n/30 BALANCE

1 6 2 1 00

NAME Dimitri Sayegh

DATE

CREDIT

DESCRIPTION

n/30

2 3 2 00 2 3 8 4 50

TERMS

2016 Oct. 1 Balance

DATE

CREDIT

2 1 5 0 50

NAME Jim Price DATE

TERMS

DEBIT

n/30 BALANCE

5 1 0 00 3 1 1 4 00 2 4 8 4 00 1 9 7 4 00

n/30

CREDIT

BALANCE

1 7 0 0 00

1 7 0 0 00 - 0 3 2 7 6 00

3 2 7 6 00

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-79


MINI-PRACTICE SET 2 (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME A Fashion Statement DATE

DESCRIPTION

2016 Oct. 1 Balance 2 11 Invoice 9422 16

Post Ref.  J16 J18 J19

DEBIT

DESCRIPTION

2016 Oct. 1 Balance 5 25 Invoice 3418 29 Credit Memo 175

4 8 2 0 00 4 8 2 0 00

TERMS Post Ref.  J17 J19 J20

DEBIT

2016 Oct. 1 Balance 4 30 Invoice 5821

DESCRIPTION

CREDIT

1 7 0 0 00 3 3 8 0 00 4 3 0 00

NAME Today’s Woman DATE

CREDIT

7 8 3 0 00

NAME Classy Threads DATE

TERMS

TERMS Post Ref.  J17 J20

DEBIT

2/10, n/30 BALANCE

7 8 3 0 00 - 0 4 8 2 0 00 - 0 -

2/10, n/30 BALANCE 1 7 0 0 00 - 0 3 3 8 0 00 2 9 5 0 00

1/10, n/30

CREDIT

BALANCE

4 0 2 0 00

8 7 7 0 00 - 0 4 0 2 0 00

8 7 7 0 00

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-80


MINI-PRACTICE SET 2 (continued) The Fashion Rack Schedule of Accounts Payable October 31, 2016 A Fashion Statement Classy Threads Today’s Woman Total

0 00 2 9 5 0 00 4 0 2 0 00 6 9 7 0 00

The Fashion Rack Schedule of Accounts Receivable October 31, 2016 Jennifer Brown Megan Greening James Helmer Emma Maldonado Jim Price Dimitri Sayegh Emily Tran Total

7 9 5 00 8 6 1 00 2 0 3 7 00 2 3 8 4 50 1 6 2 1 00 1 9 7 4 00 3 2 7 6 00 12 9 4 8 50

© 2015 McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. 13-81


MINI-PRACTICE SET 2 (continued) The Fashion Rack Worksheet For Month Ended October 31, 2016 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Prepaid Advertising 8 Equipment 9 Accumulated Depreciation—Equipment 10 Accounts Payable 11 Social Security Tax Payable 12 Medicare Tax Payable 13 Employee Income Tax Payable 14 Federal Unemployment Tax Payable 15 State Unemployment Tax Payable 16 Salaries Payable 17 Sales Tax Payable 18 Teresa Lojay, Capital 19 Teresa Lojay, Drawing 20 Income Summary 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Freight In 25 Purchases Returns and Allowances 26 Purchases Discounts 27 Advertising Expense 28 Depreciation Expense—Equipment 29 Insurance Expense 30 Uncollectible Accounts Expense 31 Janitorial Services Expense 32 Payroll Taxes Expense 33 Rent Expense 34 Salaries Expense 35 Supplies Expense 36 Telephone Expense 37 Utilities Expense 38 Totals 39 Net Income 40

TRIAL BALANCE DEBIT CREDIT 47 5 8 4 40 12 9 4 8 50 4 2 0 00 88 9 9 6 00 5 1 5 0 00 8 4 0 0 00 4 8 0 0 00 83 0 0 0 00 7 0 5 0 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 0 00 3 5 0 7 50 203 2 5 2 00 7 2 0 0 00

ADJUSTMENTS DEBIT CREDIT

81 2 6 0 00

9 8 10 88 9 9 6 00 1 9 1 0 00 1 4 0 0 00 1 6 0 0 00 1 1 7 5 00

88 9 9 6 00

81 2 6 0 00

70 7 5 0 00 6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 1 4 4 5 00 1 6 0 0 00 0 00 1 1 7 5 00 0 00 1 4 0 0 00 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 298 0 7 1 90 298 0 7 1 90 176 4 3 9 10 176 4 3 9 10

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MINI-PRACTICE SET 2 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 47 5 8 4 40 12 9 4 8 50 5 1 8 10 81 2 6 0 00 3 2 4 0 00 7 0 0 0 00 3 2 0 0 00 83 0 0 0 00 8 2 2 5 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 0 00 3 5 0 7 50 203 2 5 2 00 7 2 0 0 00 88 9 9 6 00 81 2 6 0 00 70 7 5 0 00 6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 3 0 4 5 00 1 1 7 5 00 1 4 0 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 380 6 0 5 00 380 6 0 5 00

INCOME STATEMENT DEBIT CREDIT

88 9 9 6 00

BALANCE SHEET DEBIT CREDIT 47 5 8 4 40 12 9 4 8 50 5 1 8 10 81 2 6 0 00 3 2 4 0 00 7 0 0 0 00 3 2 0 0 00 83 0 0 0 00 8 2 2 5 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 0 00 3 5 0 7 50 203 2 5 2 00 7 2 0 0 00

81 2 6 0 00 70 7 5 0 00

6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 3 0 4 5 00 1 1 7 5 00 1 4 0 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 135 1 7 2 10 17 7 3 0 30 152 9 0 2 40

152 9 0 2 40 0 00 152 9 0 2 40

245 4 3 2 90 0 00 245 4 3 2 90

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 227 7 0 2 60 38 17 7 3 0 30 39 245 4 3 2 90 40

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MINI-PRACTICE SET 2 (continued) The Fashion Rack Income Statement For Month Ended October 31, 2016 Operating Revenue Sales

70 7 5 0 00

Less Sales Returns and Allowances

6 0 0 00

Net Sales

70 1 5 0 00

Cost of Goods Sold Merchandise Inventory, October 1, 2016

88 9 9 6 00

Purchases

18 6 4 0 00

Freight In

3 7 5 00

Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts

19 0 1 5 00 4 3 0 00 4 6 2 40

8 9 2 40

Net Delivered Cost of Purchases

18 1 2 2 60

Total Merchandise Available for Sale

107 1 1 8 60

Less Merchandise Inventory, October 31, 2016

81 2 6 0 00

Cost of Goods Sold

25 8 5 8 60

Gross Profit on Sales

44 2 9 1 40

Operating Expenses Advertising Expense

3 0 4 5 00

Depreciation Expense—Equipment

1 1 7 5 00

Insurance Expense

1 4 0 0 00

Uncollectible Accounts Expense Janitorial Services Expense

9 8 10 4 7 5 00

Payroll Tax Expense

1 5 6 6 00

Rent Expense

4 2 0 0 00

Salaries Expense

10 8 0 0 00

Supplies Expense

1 9 1 0 00

Telephone Expense

7 8 0 00

Utilities Expense

1 1 1 2 00

Total Operating Expenses Income from Operations/Net Income for the Month

13-84

26 5 6 1 10 17 7 3 0 30


MINI-PRACTICE SET 2 (continued) The Fashion Rack Statement of Owner's Equity For Month Ended October 31, 2016 Teresa Lojay, Capital, October 1, 2016 Net Income for Month Less Withdrawals for Month Increase in Capital Teresa Lojay, Capital, October 31, 2016

203 2 5 2 00 17 7 3 0 30 7 2 0 0 00 10 5 3 0 30 213 7 8 2 30 The Fashion Rack Balance Sheet October 31, 2016

Assets Current Assets Cash Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Expenses Prepaid Insurance Prepaid Advertising Total Current Assets Plant and Equipment Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Sales Tax Payable Total Liabilities Owner’s Equity Teresa Lojay, Capital Total Liabilities and Owner’s Equity

47 5 8 4 40 12 9 4 8 50 5 1 8 10

7 0 0 0 00 3 2 0 0 00

12 4 3 0 40 81 2 6 0 00 3 2 4 0 00

10 2 0 0 00 154 7 1 4 80

83 0 0 0 00 8 2 2 5 00 74 7 7 5 00 229 4 8 9 80

6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 3 5 0 7 50 15 7 0 7 50 213 7 8 2 30 229 4 8 9 80

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MINI-PRACTICE SET 2 (continued) The Fashion Rack Post-closing Trial Balance October 31, 2016 ACCOUNT NAME Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Insurance Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Sales Tax Payable Teresa Lojay, Capital Totals

DEBIT 47 5 8 4 40 12 9 4 8 50

CREDIT

5 1 8 10 81 2 6 0 00 3 2 4 0 00 7 0 0 0 00 3 2 0 0 00 83 0 0 0 00

238 2 3 2 90

8 2 2 5 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 3 5 0 7 50 213 7 8 2 30 238 2 3 2 90

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