Beechy - Intermediate Accounting Volume 1 - 6ce, solutions manual and test bank 0071339477
| INTERMEDIATE ACCOUNTING | ||||||||
| by Beechy, Conrod, Farrell, and McLeod-Dick | ||||||||
| SPATS A10-11 | ||||||||
| Student Name: | ||||||||
| Class: | ||||||||
| Lee Company | ||||||||
| Required 1 - declining balance: | ||||||||
| 50% | ||||||||
| Depr. | Accum. | Balance | ||||||
| Calendar | Expense | Depr. | Accum. | Book | ||||
| Year | (Debit) | (Credit) | Depr. | Cost | Value | |||
| 2,000,000 | 2,000,000 | |||||||
| 20x5 | 1,000,000 | 1,000,000 | 1,000,000 | 2,000,000 | 1,000,000 | |||
| 20x6 | 500,000 | 500,000 | 1,500,000 | 2,000,000 | 500,000 | |||
| 20x7 | 250,000 | 250,000 | 1,750,000 | 2,000,000 | 250,000 | |||
| 20x8 | 30,000 | 30,000 | 1,780,000 | 2,000,000 | 220,000 | |||
| 1,780,000 | ||||||||
| Required 2 - Straight line: | ||||||||
| Depr. | Accum. | Balance | ||||||
| Calendar | Expense | Depr. | Accum. | Book | ||||
| Year | (Debit) | (Credit) | Depr. | Cost | Value | |||
| 2,000,000 | 2,000,000 | |||||||
| 20x5 | * | 445,000 | 445,000 | 445,000 | 2,000,000 | 1,555,000 | ||
| 20x6 | 445,000 | 445,000 | 890,000 | 2,000,000 | 1,110,000 | |||
| 20x7 | 445,000 | 445,000 | 1,335,000 | 2,000,000 | 665,000 | |||
| 20x8 | 445,000 | 445,000 | 1,780,000 | 2,000,000 | 220,000 | |||
| 1,780,000 | ||||||||
| * ($2,000,000 - $220,000) x 1/4 = $445,000 | ||||||||
| Required 3 - Units of Output: | ||||||||
| ($2,000,000 - $220,000) | = | 26.18$ unit | ||||||
| (20,000 + 18,000 + 16,000 + 14,000) | ||||||||
| Units | Depr. | Accum. | Balance | 1,780,000 | 26.176471 | |||
| Calendar | of | Expense | Depr. | Accum. | 68,000 | |||
| Year | Output | (Debit) | (Credit) | Depr. | ||||
| 20x5 | 20,000 | 523,529 | 523,529 | 523,529 | ||||
| 20x6 | 18,000 | 471,176 | 471,176 | 994,706 | ||||
| 20x7 | 16,000 | 418,824 | 418,824 | 1,413,529 | ||||
| 20x8 | 14,000 | 366,471 | 366,471 | 1,780,000 | ||||
| 1,780,000 | ||||||||
| The straight-line method results in maximum income for financial statement reporting | ||||||||
| for the three-year period ending December 31, 20X7, because cumulative amortization | ||||||||
| expense is smallest for the straight-line method. (See schedules above.) |
Appendix: Fundamentals: The Accounting Information Processing System
Suggested Time
Technical Review
TRApp1-1 Deferred Expenses…………........................... 5
TRApp1-2 Accrued Expenses and Reversing Journal Entries 5
TRApp1-3 Adjusting Journal Entries................................ 5
TRApp1-4 Closing Entries................................................. 5
TRApp1-5 Adjusted Trial Balance.................................... 5
Assignments
AApp1-1 Journalize Transactions...................................... 20
AApp1-2 Journalize Transactions and Adjustments—
Valuation (*W)..................................................... 30
AApp1-3 Journalize and Post—Unadjusted Trial Balance 30
AApp1-4 Adjusting Entries................................................ 30
AApp1-5 Adjusting Entries................................................ 20
AApp1-6 Adjusting Entries (*W)....................................... 30
AApp1-7 Adjusting Entries................................................ 15
AApp1-8 Adjusting Entries................................................ 25
AApp1-9 ASPE—Adjusting Entries................................... 25
AApp1-10 Adjusting Entries................................................ 30
AApp1-11 Adjusting Entries................................................ 25
AApp1-12 Entries and Financial Statements....................... 30
AApp1-13 Adjustments and Financial Statements (*W)..... 30
AApp1-14 Adjustments and Statement of Financial Position 30
AApp1-15 Adjustments and Financial Statements.............. 30
AApp1-16 Preparing a Statement of Financial Position...... 30
AApp1-17 ASPE—Preparing Financial Statements (*W)... 30
AApp1-18 Entries and Worksheet........................................ 45
AApp1-19 Entries and Worksheet........................................ 45
AApp1-20 ASPE—The Accounting Cycle........................... 75
AApp1-21 The Accounting Cycle......................................... 90
AApp1-22 Worksheet, Adjusting and Closing Entries,
Statements..................................................... 60
AApp1-23 Perform All Accounting Cycle Steps................. 90
AApp1-24 Special Journals.................................................. 20
AApp1-25 Special Journals.................................................. 10
AApp1-26 Special Journals.................................................. 20
AApp1-27 Special Journals.................................................. 20
AApp1-28 Transactions and Financial Statements.............. 40
AApp1-29 Transactions and Financial Statements.............. 40
AApp1-30 Transactions and Financial Statements.............. 25
*W The solution to this assignment is on the text website, Connect.
This solution is marked WEB.
Technical Review
Technical Review App1-1
Dr. Prepaid insurance 600
Cr. Cash 600
To record payment of insurance.
Dr. Insurance expense 200
Cr. Prepaid insurance 200
To record insurance expense for two months to Nov 1 to Dec 31
(600 x 2/6)
Technical Review App1-2
Dr. Wages expense 5,000
Cr. Accrued Wages 5,000
To accrue wages for 5 days (14,000 x 5/14) on April 30.
Dr. Accrued wages 5,000
Cr. Wages expense 5,000
To reverse the accrual on May 1.
Dr. Wages expense 14,000
Cr. Cash 14,000
To record payment of wages for pay period ending May 9
Total wages expense on May 9 = 14,000-5,000 = 9,000. This represents the wages from May 1 to May 9.
Technical Review App1-3
Dr. Depreciation 35,000
Cr. Accumulated depreciation - machinery 35,000
To record depreciation for the year ( 250,000 - 5,000) / 7 = 35,000
Dr. Bad debts expense 11,000
Cr. Allowance for doubtful accounts 11,000
To adjust the allowance to estimate at the year end (56,000-45,000)
Technical Review App1-4
Dr. Revenues 1,082,000
Cr. Income Summary 1,082,000
Dr. Income summary 915,000
Cr. Cost of goods sold 350,000
Rent expense 50,000
Selling expense 75,000
Insurance expense 15,000
Wages expense 295,000
General and administrative expenses 130,000
Dr. Income Summary 167,000
Cr. Retained earnings 167,000
Technical Review App1-5
Marketing expenses = 1,567,000 - 115,000 + 92,000 = 1,544,000
Sales = 3,670,000+92,000-69,000 = 3,693,000
Assignments
Assignment App1-1
Requirement 1
a) Rent expense........................................................................... 6,000
Cash................................................................................. 6,000
b) Supplies expense.................................................................... 4,000
Accounts payable............................................................ 4,000
c) Wages expense....................................................................... 56,000
Cash (to employees)........................................................ 43,500
Payroll deductions payable............................................. 12,500
Payroll deductions payable.................................................... 12,500
Cash................................................................................. 12,500
Note: this could be one entry, with no liability set up for the payroll deductions. In one entry, there might be two credits to cash, because there are two payees.
d) Accounts receivable............................................................... 87,800
Sales................................................................................ 87,800
e) Utilities expense..................................................................... 2,600
Cash................................................................................. 2,600
f) Preferred dividends (or retained earnings)............................ 100,000
Preferred dividends payable........................................... 100,000
Common dividends (or retained earnings)............................ 80,000
Common dividends payable............................................ 80,000
The dividends are to different groups, and must be reported separately.
g) Cash........................................................................................ 15,000
Accumulated depreciation, computer equipment.................. 23,600
Computer equipment....................................................... 35,900
Gain on sale ($15,000 – $12,300)................................... 2,700
h) Accounts payable.................................................................... 3,000
Cash................................................................................. 3,000
i) Cash........................................................................................ 65,800
Accounts receivable........................................................ 65,800
Requirement 2
Using the standard method, entries a, b and possibly e (see below) would be recorded as debits to assets, rather than expenses:
a) Prepaid rent ........................................................................... 6,000
Cash................................................................................. 6,000
b) Supplies inventory.................................................................. 4,000
Accounts payable............................................................ 4,000
e) Prepaid utilities .................................................................... 2,600
Cash................................................................................. 2,600
In e, the entry shown in requirement 2 assumes that the utilities are paid in advance. If they are paid after the utilities have been consumed, both the standard and expedient methods would involve a debit to the expense.
In terms of AJEs, if the expedient method is used, and all the goods and services are used, no adjusting entry is needed. If goods and services are not completely used up, the expedient method requires an entry to reduce an expense and increase an asset at the end of the reporting period. Under the standard method, an adjusting entry is always needed, unless the item is completely unused during the period. The AJE under the standard method would decrease an asset and increase an expense.
Requirement 3
a) Cash disbursements
b) General journal (not purchases because not a merchandise inventory purchase)
c) Cash disbursements
d) Sales
e) Cash disbursements
f) General journal
g) Cash receipts
h) Cash disbursements
i) Cash receipts
Students have to make some assumptions regarding the columns available in the journals.
Assignment App1-2 (WEB)
Requirement 1
a) Cash................................................................. | 68,000 | |
| Common shares........................................... | 68,000 | |
| b) Equipment....................................................... | 52,000 | |
| Common shares........................................... | 52,000 | |
| Appraised value is used; transactions should be valued at fair value. | ||
| c) Land................................................................. | 70,000 | |
| Cash............................................................. | 20,000 | |
| Notes payable, three-year, 8%.................... | 50,000 | |
| d) Office supplies inventory............................... | 1,200 | |
| Accounts payable........................................ | 1,200 | |
| e) No entry; this is the beginning of the month. | ||
| f) Prepaid rent..................................................... | 3,000 | |
| Cash............................................................. | 3,000 | |
| g) Inventory......................................................... | 120,000 | |
| Cash ($120,000 x 20%)............................... | 24,000 | |
| Accounts payable........................................ | 96,000 | |
| Goods are recorded at cost, not market value. | ||
| h) No entry; orders are not recorded. | ||
| i) Operating expenses.......................................... | 14,400 | |
| Cash............................................................. | 14,400 | |
| j) Accounts receivable........................................ | 245,000 | |
| Sales............................................................ | 245,000 | |
| Cost of goods sold........................................... | 110,000 | |
| Inventory..................................................... | 110,000 | |
| k) Rent expense................................................... | 1,000 | |
| Prepaid rent................................................. | 1,000 | |
| l) Salaries expense.............................................. | 8,000 | |
| Cash ($3,000 x 2) + ($2,000 x 1)................ | 8,000 | |
| m) Dividends (or retained earnings)................... | 13,600 | |
| Dividends payable....................................... | 13,600 | |
| n) Office supplies expense.................................. | 800 | |
| Office supplies inventory ($1,200 - $400). | 800 | |
| o) Accounts payable............................................ | 96,000 | |
| Cash............................................................. | 96,000 | |
| p) Cash................................................................. | 196,000 | |
| Accounts receivable ($245,000 x .8).......... | 196,000 |
Requirement 2
Adjusting entries: k and n.
All the remainder of recorded items are transactions.
Assignment App1-3 (WEB)
Requirement 1
General Journal—page J1
Post Ref.
a) Cash (25,000 shares x $7.00).......................................... 101 175,000
Common shares, no-par (25,000 shares)................. 108 175,000
b) Cash................................................................................. 101 500,000
Notes payable (6% for one year)............................. 107 500,000
c) Leasehold improvements................................................ 105 350,000
Cash.......................................................................... 101 350,000
Prepaid rent..................................................................... 103 100,000
Cash.......................................................................... 101 100,000
d) Inventory......................................................................... 102 260,000
Cash.......................................................................... 101 260,000
e) Inventory......................................................................... 102 58,800
Accounts payable ................................................... 106 58,800
f) Cash................................................................................. 101 198,000
Sales revenue........................................................... 109 198,000
Cost of goods sold........................................................... 110 96,000
Inventory.................................................................. 102 96,000
g) Operating expenses......................................................... 111 87,000
Cash.......................................................................... 101 87,000
h) Accounts payable (per e above)...................................... 106 39,200
Cash ($58,800 x 2/3)................................................ 101 39,200
i) Prepaid insurance............................................................ 104 3,600
Cash.......................................................................... 101 3,600
j) Cost of goods sold ($260,000 + $58,800 - $96,000
versus $219,000)............................................ 110 3,800
Inventory.................................................................. 102 3,800
k) Loss, damages................................................................. 112 4,000
Cash.......................................................................... 101 4,000
Requirement 2
General Ledger
Cash #101
a. J1 175,000 c. J1 350,000
b. J1 500,000 c. J1 100,000
f. J1 198,000 d. J1 260,000
g. J1 87,000
h. J1 39,200
i. J1 3,600
k. J1 4,000
Inventory #102 Common Shares, no-par #108
d. J1 260,000 f. J1 96,000 a. J1 175,000
e. J1 58,800 j. J1 3,800
Prepaid Rent #103
c. J1 100,000
Prepaid Insurance #104 Sales Revenue #109
i. J1 3,600 f. J1 198,000
Leasehold Improvements #105 Cost of Goods Sold #110
c. J1 350,000 f. J1 96,000
j. J1 3,800
Accounts Payable #106 Operating Expenses #111
h. J1 39,200 e. J1 58,800 g. J1 87,000
Notes Payable #107 Loss, Damages #112
b. J1 500,000 k. J1 4,000
Note: any logical account number sequence is acceptable.
Requirement 3
HUP INCORPORATION
Unadjusted Trial Balance
As at 31 December 20x5
Balance
Debit Credit
101 Cash................................................................................. $ 29,200
102 Inventory......................................................................... 219,000
103 Prepaid rent..................................................................... 100,000
104 Prepaid insurance............................................................ 3,600
105 Leasehold improvements................................................ 350,000
106 Accounts payable............................................................ $ 19,600
107 Notes payable.................................................................. 500,000
108 Common shares, no-par.................................................. 175,000
109 Sales revenue................................................................... 198,000
110 Cost of goods sold........................................................... 99,800
111 Operating expenses......................................................... 87,000
112 Loss, damages................................................................. 4,000 ______
Totals........................................................................... $892,600 $892,600
Assignment App1-4 (WEB)
Requirement 1
a) Insurance expense.................................................................... 1,480
Prepaid insurance.............................................................. 1,480
$960 + ($1,560 x 4/12)
b) Supplies inventory................................................................... 400
Supplies expense............................................................... 400
($1,700 - $1,300)
c) Accounts receivable................................................................. 56,000
Sales revenue.................................................................... 56,000
Cost of goods sold.................................................................... 43,100
Merchandise inventory..................................................... 43,100
d) Service charge expense............................................................ 135
Interest expense........................................................................ 560
Cash................................................................................... 695
e) Revenue.................................................................................... 10,000
Unearned revenue............................................................. 10,000
f) Revenue ($5,160 x 10/12)........................................................ 4,300
Unearned revenue............................................................. 4,300
g) Unearned revenue ($6,000 x 5/12)........................................... 2,500
Revenue............................................................................. 2,500
h) Accounts receivable................................................................. 1,000
Revenue............................................................................. 1,000
Requirement 2
| Current earnings | $24,600 |
| a. | (1,480) |
| b. | 400 |
| c. ($56,000 - $43,100) | 12,900 |
| d. | (695) |
| e. | (10,000) |
| f. | (4,300) |
| g. | 2,500 |
| h. | 1,000 |
| Revised earnings | $24,925 |
Assignment App1-5
a) Fuel expense............................................................................. 3,400
Fuel inventory................................................................... 3,400
$6,500 – $3,100 = $3,400
b) Cash.......................................................................................... 65,200
Revenue............................................................................. 65,200
c) Depreciation expense, machine............................................... 45,000
Accumulated depreciation, machine................................ 45,000
($820,000 – $10,000) ÷ 9 years x ½ = $124,800
d) Allowance for doubtful accounts............................................. 11,900
Bad debts expense............................................................. 11,900
($87,500- $75,600) Assuming the percentage of receivables method is used.
e) Maintenance expense............................................................... 15,000
Prepaid maintenance expense........................................... 15,000
(120,000/ 24) x 3 months (June to Aug)
f) Other income............................................................................ 2,500
Unearned revenue............................................................. 2,500
g) No entry required since this is not payable until Sept 2 and it is not an accrual at Aug 31.
Assignment App1-6 (WEB)
Requirement 1
| a. | Insurance expense................................................................ | 22,400 | ||
| Prepaid insurance........................................................ | 22,400 | |||
| Current balance: $18,200 + $50,400 = $68,600 | ||||
| Correct balance: ($18,200 x 2/14) + ($50,400 x 21/30) + ($9,360 x 16/18) = $2,600 + $35,280 + $8,320 = $46,200 | ||||
| Adjustment = $22,400 | ||||
| b. | Utilities expense (etc.) ($7,400 + $920)............................. | 8,320 | ||
| Repairs expense................................................................... | 1,350 | |||
| Accrued accounts payable ......................................... | 9,670 | |||
| c. | Salaries payable................................................................... | 1,100 | ||
| Salaries expense.......................................................... | 1,100 | |||
| Current balance: $3,700 | ||||
| Correct balance: (($600 x 2/5) x 3) + (($500 x 2/5) x 3) + | ||||
| (($400 x 2/5) x 8) = $2,600 | ||||
| Adjustment = $1,100 | ||||
| d. | Interest expense................................................................... | 17,992 | ||
| Interest payable........................................................... | 17,992 | |||
| (($890,000 x .04) x 4/12) + (($700,000 x .035) x 3/12) $11,867 + $6,125 = $17,992 | ||||
| e. | Unearned revenue................................................................ | 35,000 | ||
| Rent revenue................................................................ | 25,000 | |||
| Security deposit liability............................................. | 10,000 | |||
| $150,000 / 6 = $25,000 | ||||
| The security deposit has a different nature than unearned revenue, and should be reclassified. | ||||
| f. | Supplies inventory............................................................... | 1,150 | ||
| Supplies expense......................................................... | 1,150 | |||
| $24,750 - $23,600 = $1,150 | ||||
| g. | Prepaid advertising.............................................................. | 6,300 | ||
| Advertising expense.................................................... | 6,300 | |||
| Requirement 2 | |||
| | | | |
| Reversing entries: | |||
| b. | Accrued accounts payable ......................................... | 9,670 | |
| Utilities expense (etc.)......................................... | 8,320 | ||
| Repairs expense................................................... | 1,350 | ||
| d. | Interest payable............................................................ | 17,992 | |
| Interest expense.................................................... | 17,992 | ||
| g. | Advertising expense..................................................... | 6,300 | |
| Prepaid advertising.............................................. | 6,300 |
Assignment App1-7
1. Case A
Rent revenue..................................................................... 10,755
Rent collected in advance........................................... 10,755
$21,510 x 6/12 = $10,755 unearned at end of current year.
Case B
Rent collected in advance................................................. 10,755
Rent revenue............................................................... 10,755
$21,510 x 6/12 = $10,755 earned during current year.
2. Case A
Maintenance supplies expense......................................... 14,100
Maintenance supplies inventory................................. 14,100
$8,700 + $11,000 – $5,600 = $14,100 used.
Case B
Maintenance supplies expense......................................... 3,100
Maintenance supplies inventory................................. 3,100
$8,700 – $5,600 = $3,100 decrease in inventory.
3. Case A
Insurance expense............................................................. 30,600
Prepaid insurance........................................................ 30,600
Balance in prepaid should be $62,400 x 15/24 =39,000
7,200+62,400- 39,000=30,600...................................
Case B
Prepaid insurance.............................................................. 31,800
Insurance expense....................................................... 31,800
Balance in the prepaid should be $39,000, as above.
$7,200 - 39,000 = 31,800
Assignment App1-8
Requirement 1
An accrued revenue is present when work has been done, but cash is received after revenue recognition is appropriate. Transaction 2 is an example. A deferred revenue is present when cash is received before revenue recognition is appropriate, as in Transaction 1. A deferred expense is present when a cash transaction takes place, but the expense relates to a future period. Transaction 3 is an example. An accrued expense is present when an expense is incurred, but is paid for in a later period, as in Transaction 4.
Requirement 2
Transaction 1
a) Standard method
Original transaction:
Cash........................................................................................ 15,000
Unearned revenue............................................................ 15,000
Adjusting entry at the end of July:
None
Reversing entry, beginning of August:
None (cash transaction not reversed)
Entry for work done in August:
Unearned revenue................................................................... 15,000
Revenue........................................................................... 15,000
b) Expedient method
Original transaction:
Cash........................................................................................ 15,000
Revenue........................................................................... 15,000
Adjusting entry at the end of July:
Revenue.................................................................................. 15,000
Unearned revenue............................................................ 15,000
Reversing entry, beginning of August:
Unearned revenue................................................................... 15,000
Revenue........................................................................... 15,000
Entry for work done in August:
None (revenue recorded in reversing entry)
Transaction 2
Original transaction:
Accounts receivable............................................................... 17,000
Revenue........................................................................... 17,000
Reversing entry, beginning of August:
Revenue.................................................................................. 17,000
Accounts receivable........................................................ 17,000
Entry for cash collected in August:
Cash........................................................................................ 17,000
Revenue........................................................................... 17,000
Note: if the reversing entry is not recorded, this last entry will involve a credit to accounts receivable, which accomplishes the same thing. Thus, it is also acceptable to state that a reversing entry is not required and provide the alternate second entry. However, the question does state that the company uses reversing entries.
Transaction 3
a) Standard method
Original transaction:
Supplies inventory.................................................................. 6,700
Cash................................................................................. 6,700
Adjusting entry at the end of July:
Supplies expense ($4,200 + $6,700 - $1,200)........................ 9,700
Supplies inventory ........................................................ 9,700
Reversing entry, beginning of August:
None (The AJE changes inventory to the correct balance.)
b) Expedient method
Original transaction:
Supplies expense.................................................................... 6,700
Cash................................................................................. 6,700
Adjusting entry at the end of July:
Supplies expense ($4,200 - $1,200)....................................... 3,000
Supplies inventory ........................................................ 3,000
Reversing entry, beginning of August:
None (The AJE changes inventory to the correct balance.)
Transaction 4
a) July entry:
Consulting expense................................................................. 5,900
Accounts payable............................................................ 5,900
Reversing entry, beginning of August:
Accounts payable.................................................................... 5,900
Consulting expense......................................................... 5,900
August entry:
Consulting expense................................................................. 5,900
Cash................................................................................. 5,900
Note: if the reversing entry is not recorded, this last entry will involve a debit to accounts payable, which accomplishes the same thing. Thus, it is also acceptable to state that a reversing entry is not required and provide the alternate second entry. However, the question does state that the company uses reversing entries.
Assignment App1-9
a) See end
b) Interest expense........................................................................ 3,000
Interest payable.................................................................... 3,000
$200,000 x 6% x 3/12 = $3,000.
c) Prepaid property tax ($19,200 x 8/12)..................................... 12,800
Property tax expense............................................................ 12,800
d) Bad debt expense...................................................................... 5,000
Allowance for doubtful accounts........................................ 5,000
$8,000 - $3,000
e) Cost of goods sold (or pilferage expense)............................... 8,000
Merchandise inventory........................................................ 8,000
f) Sales......................................................................................... 30,000
Accounts receivable............................................................. 30,000
g) Depreciation expense............................................................... 16,400
Accumulated amortization.................................................. 16,400
h) Accounting fees expense.......................................................... 7,600
Dividends............................................................................. 7,600
i) Unearned revenue..................................................................... 50,000
Revenue................................................................................ 50,000
j) Insurance expense ($2,240 x 12/14)........................................ 1,920
Prepaid insurance................................................................. 1,920
Prepaid insurance ($4,770 x 11/18)......................................... 2,915
Insurance expense................................................................ 2,915
The two entries may be combined
Income tax:
Income tax expense.................................................................. 60,949
Income tax payable.............................................................. 60,949
Revised earnings:
$250,000 -$3,000 + $12,800 -$5,000 - $8,000 -$30,000 - $16,400 - $7,600
+$50,000 - $1,920 + $2,915 = $243,795;
$243,795 x .25 = $60,949
Assignment App1-10 (WEB)
a) Interest receivable ($75,000 x 4% x 2/12)............................... 500
Interest revenue.................................................................... 500
b) Interest expense ($200,000 x 6% x 1/12)................................ 1,000
Interest payable.................................................................... 1,000
Principal already recorded as a liability and is not reclassified as
current through a journal entry.
c) Supplies expense ($600 + $8,800 - $750)................................ 8,650
Supplies inventory............................................................... 8,650
d) Insurance expense.................................................................... 13,460
Prepaid insurance................................................................. 13,460
($4,960/16 x 12) + ($1,500) + ($4,800) + ($5,160/6 x 4)
e) Sales returns............................................................................. 6,700
Cost of goods sold............................................................... 1,700
Accounts receivable ($6,700 - $1,700)............................... 5,000
f) No entry – bank error
g) Advertising expense................................................................. 3,600
Communications expense........................................................ 650
Utilities expense....................................................................... 1,200
Heating expense....................................................................... 3,200
Accrued accounts payable................................................... 8,650
h) Accrued accounts receivable................................................... 153,300
Sales..................................................................................... 153,300
Cost of goods sold.................................................................... 101,600
Inventory.............................................................................. 101,600
i) Wages expense ($45,600 x 2/5)............................................... 18,240
Accrued wages payable....................................................... 18,240
j) Rental revenue ($1,350 x 2)..................................................... 2,700
Unearned rent revenue......................................................... 2,700
Assignment App1-11 (WEB)
Requirement 1
Cash.................................................................................................. 85,900
Sales........................................................................................... 85,900
Accounts receivable......................................................................... 78,500
Sales........................................................................................... 78,500
Note payable.................................................................................... 10,000
Cash............................................................................................ 10,000
Operating expenses.......................................................................... 25,000
Cash............................................................................................ 25,000
Cash.................................................................................................. 41,000
Accounts receivable................................................................... 41,000
Bad debt expense............................................................................. 2,000
Accounts receivable................................................................... 2,000
An allowance may be set up and then used to absorb the write-off; the end result is identical. No others are considered doubtful, so no additional allowance is needed.
Cash.................................................................................................. 20,000
Common shares......................................................................... 20,000
Inventory.......................................................................................... 82,000
Accounts payable....................................................................... 82,000
Cost of goods sold........................................................................... 114,600
Inventory ($86,000 + $82,000 - $53,400).................................. 114,600
It is also acceptable to record inventory acquisitions in a purchases account, and then eliminate purchases, set up cost of goods sold, and adjust inventory balances in an adjusting journal entry.
Accounts payable............................................................................. 37,000
Cash............................................................................................ 37,000
Prepaid advertising.......................................................................... 5,000
Cash............................................................................................ 5,000
Wages expense................................................................................. 16,800
Cash............................................................................................ 14,300
Wages payable........................................................................... 2,500
Rent expense ($8,000 x 1/4)............................................................ 2,000
Prepaid rent................................................................................ 2,000
Depreciation expense ($35,200- $4,000) x 1/10 x 1/12.................. 260
Accumulated depreciation......................................................... 260
Interest expense............................................................................... 150
Accrued interest payable ($40,000 - $10,000) x .06 x 1/12).... 150
Requirement 2
Trough Corporation
Statement of Comprehensive Income
for the month ended 30 April 20x2
Sales................................................................................................. $164,400
Cost of goods sold........................................................................... 114,600
Gross profit.............................................................................. 49,800
Expenses:
Operating.................................................................................. $25,000
Wages....................................................................................... 16,800
Bad debts.................................................................................. 2,000
Rent.......................................................................................... 2,000
Depreciation............................................................................. 260
Interest...................................................................................... 150
46,210
Earnings and comprehensive income............................................ $3,590
Trough Corporation
Statement of Financial Position
As at 30 April 20x2
Assets Liabilities
Cash $80,000 Accounts payable $85,100
Accounts receivable 106,500 Wages payable 2,500
Inventory 53,400 Notes payable 30,000
Prepaid advertising 5,000 Interest payable 950
Prepaid rent 6,000 118,550
Equipment $35,200
Acc’d depreciation ( 6,760)
28,440 Owners’ equity
Capital stock 30,000
Retained earnings 130,790
160,790
Total assets $279,340 Total liabilities and
owners’ equity $279,340
Assignment App1-12 (WEB)
Requirement 1
a. Interest expense ($50,000 x .06 x 11/12) +
($44,000 x .06 x 7/12)...................... 4,290
Interest payable.................................................................... 4,290
b. Cost of goods sold.................................................................... 4,940
Inventory ($94,140 - $89,200)............................................. 4,940
c. Prepaid insurance ($5,400 x 2/3)........................................ 3,600
Operating expenses.............................................................. 3,600
d. Accounts payable ($6,300 - $3,600)........................................ 2,700
Operating expenses.............................................................. 2,700
Heating oil is assumed to be used up; otherwise, this affects the
balance in some prepaid account. Since there is no prepaid account,
expense correction is more logical.
e. Unearned revenue..................................................................... 3,000
Accounts payable to customer............................................. 3,000
The $9,000 deposit is not yet earned (assuming revenue is recognized
on delivery) and is not changed. The $3,000 deposit is an obligation
to pay money, rather than goods or services, and should be removed
from unearned revenue.
f. Depreciation expense ($24,200/2 years recorded
to the beginning of 20X2)........................................ 12,100
Accumulated depreciation................................................... 12,100
g. Accounts receivable................................................................. 41,200
Sales..................................................................................... 41,200
h. Operating expense.................................................................... 5,675
Sales salaries expense.............................................................. 4,200
Accrued accounts payable................................................... 9,875
i. Operating expenses.................................................................. 12,500
Dividends............................................................................. 12,500
j. Bad debt expense ($6,500 - $650)........................................... 5,850
Allowance for doubtful accounts........................................ 5,850
Requirement 2
| Revised earnings: | |
| Sales ($850,000 + $41,200) | $891,200 |
| Cost of goods sold ($580,000 + $4,940) | 584,940 |
| Wages ($196,000) | 196,000 |
| Operating expenses ($69,800 -$3,600 -$2,700 + $5,675 + $12,500) | 81,675 |
| Sales salaries ($46,510 + $4,200) | 50,710 |
| Interest expense | 4,290 |
| Bad debt expense | 5,850 |
| Depreciation expense | 12,100 |
| Net loss | (44,365) |
Note: The question only asks for revised earnings, so any schedule or reconciliation is acceptable. A formal statement is not required.
Requirement 3
Reversing entries:
a. Interest payable........................................................................ 4,290
Interest expense................................................................... 4,290
g. Sales......................................................................................... 41,200
Accounts receivable............................................................. 41,200
h. Accounts payable..................................................................... 9,875
Operating expense............................................................... 5,675
Sales salaries expense.......................................................... 4,200
Note: entry c could be reversed, but then the prepaid insurance would have to be set up again at the end of 20X3 (one years’ worth) so the reversing entry does not save any effort.
Assignment App1-13 (WEB)
Requirement 1
Dan Richards’ Repair Shop
Statement of Comprehensive Income
For the year ended 31 December 20x2
Revenues:
Repair revenue ($49,000 + $7,560)............................ $56,560
Rent revenue ($6,000 x 9/12)...................................... 4,500
Total revenues..................................................... $61,060
Expenses:
Wages expense ($18,000 + $1,200)............................ 19,200
Parts and supplies ($9,000 - $1,200 - $2,760 + $1,490) 6,530
Insurance ($2,000 x 5/8)............................................. 1,250
Rent ($12,500 + (1% x $56,560)................................. 13,066
Other operating expenses ($2,000)............................. 2,000
Depreciation expense ($9,500 x .2)............................ 1,900
Interest expense ($18,000 x 12% x 10/12)................. 1,800
Bad debt expense (4% x $56,560).............................. 2,262
Total expenses..................................................... 48,008
Earnings and comprehensive income......................... $13,052
Requirement 2
Dan Richards’ Repair Shop
Statement of Financial Position
As at 31 December 20x2
Assets:
Current assets:
Cash ($77,200 - $56,400).......................... $20,800
Accounts receivable.................................. $7,560
Less: allowance for doubtful accts ......... (2,262) 5,298
Inventory................................................... 2,760
Prepaid insurance ($2,000 x 3/8).............. 750
Total current assets................................... $29,608
Capital assets
Equipment................................................. 9,500
Less: accumulated depreciation .............. (1,900)
Total capital assets.................................... 7,600
Total assets................................................ $37,208
Liabilities:
Current liabilities:
Accounts payable...................................... $1,490
Wages payable.......................................... 1,200
Unearned revenue ($6,000 x 3/12)............ 1,500
Interest payable......................................... 1,800
Rent payable.............................................. 566
Total current liabilities............................. $6,556
Long-term liabilities
Bank loan (assumed long-term)................ 18,000
Total liabilities.......................................... 24,556
Shareholders’ Equity
Contributed capital:
Common shares......................................... 3,000
Retained earnings ($13,052 - $3,400)....... 9,652
Total shareholders’ equity................ 12,652
Total liabilities and shareholders’ equity. $37,208
Assignment App1-14
Requirement 1
a) Cost of goods sold.................................................................. 3,300
Inventory ....................................................................... 3,300
b) Bad debt expense.................................................................... 1,100
Allowance for doubtful accounts.................................... 1,100
c) Depreciation expense............................................................. 5,760
Accumulated depreciation.............................................. 5,760
d) Supplies inventory.................................................................. 800
Supplies expense ........................................................... 800
e) Prepaid insurance (1,800x 3/12)............................................ 450
Insurance expense........................................................... 450
f) Accounts receivable............................................................... 54,000
Sales................................................................................ 54,000
g) Income tax expense (NI x .4)............................................... 136,544
Income tax payable......................................................... 136,544
NI = ($1,276,000 + $840) – ($12,800 + $663,300 + $1,350 + $2,640 + $13,100 + $3,400 + $15,430 + $144,600 + $72,000 + $1,100 + $5,760) = $341,360
Requirement 2
Hearth and Stove Corp.
Statement of Changes in Equity
For the Year Ended 31 December 20X4
| Common shares | Retained earnings | |
| Opening balance, 1 January 20X4 | $ 45,000 | $ 45,820 |
| Earnings and comprehensive income ($341,360 – $136,544) | 204,816 | |
| Dividends | ______ | ( 10,400) |
| Closing balance, 31 December 20X4 | $ 45,000 | $ 240,236 |
Requirement 3
Hearth and Stove Corp.
Statement of Financial Position
31 December 20X4
Assets
Current assets:
Cash.................................................................... $16,800
Accounts receivable........................................... $265,090
Allowance for doubtful accounts...................... ( 5,600) 259,490
Inventory............................................................ 46,700
Supplies inventory............................................. 1,200
Prepaid insurance............................................... 450 $324,640
Long-term investments
Long-term investments...................................... 312,600
Capital assets:
Land................................................................... 145,000
Office equipment............................................... 72,000
Accumulated depreciation................................. ( 45,560) 26,440 171,440
Total assets.................................................. $808,680
Liabilities
Current liabilities:
Accounts payable............................................... $ 44,300
Note payable...................................................... 10,800
Income tax payable............................................ 136,544
Revenue received in advance............................ 34,800
Total current liabilities...................................... $226,444
Long-term liability:
Mortgage payable.............................................. 297,000
Total liabilities............................................ 523,444
Owner’s Equity
Common shares................................................. 45,000
Retained earnings.............................................. 240,236
Total owners’ equity.................................... 285,236
Total liabilities and owners’ equity............ $808,680
Assignment App1-15 (WEB)
Requirement 1
a) Inventory................................................................................. 76,500
Cost of goods sold.................................................................. 573,200
Purchases......................................................................... 560,300
Inventory ....................................................................... 89,400
b) Supplies inventory ($1,300 - $600)........................................ 700
Supplies expense ........................................................... 700
c) Prepaid insurance ($38,400 x 16/24)..................................... 25,600
Insurance expense........................................................... 25,600
d) Accounts receivable............................................................... 53,000
Sales................................................................................ 53,000
e) Unearned revenue ($32,000 x .4)........................................... 12,800
Sales................................................................................ 12,800
f) Bad debt expense ($1,876,000 + $53,000 + 12,800) x 1%.... 19,400
Allowance for doubtful accounts.................................... 19,400
g) Interest expense ($500,000 x 6% x 2/12)............................... 5,000
Interest payable............................................................... 5,000
h) Utilities expense..................................................................... 3,200
Accrued accounts payable............................................... 3,200
i) Interest receivable ($75,000 x 8%)........................................ 6,000
Interest revenue............................................................... 6,000
j) Income tax expense (NI x .3)............................................... 221,500
Income tax payable......................................................... 221,500
NI = $738,300 (see requirement 2) x .3
Requirement 2
Toronado Ltd.
Statement of Comprehensive Income
For Year Ended 31 December 20X4
Sales revenue ($1,876,000 + $53,000 + $12,800)..................... $1,941,800
Less: sales returns and allowances................................................ (42,100)$ 1,899,700
Gain on sale of auto....................................................................... 1,400
Interest revenue.............................................................................. 6,000
Total revenue............................................................................ 1,907,100
Expenses:
Cost of goods sold.................................................................... $573,200
Administrative expenses.......................................................... 235,700
Freight out................................................................................ 26,900
Insurance ($38,400 - $25,600)................................................. 12,800
Salaries and benefits................................................................ 120,900
Selling expenses....................................................................... 34,000
Supplies ($45,900 - $700)........................................................ 45,200
Utilities expense ($65,400 + $3,200)....................................... 68,600
Bad debts.................................................................................. 19,400
Interest expense ($27,100 + $5,000)........................................ 32,100 1,168,800
Earnings before income tax........................................................... 738,300
Income tax .................................................................................... 221,500
Earnings and comprehensive income............................................ $ 516,800
Requirement 3
Toronado Ltd.
Statement of Changes in Equity (Retained Earnings Only)
For the Year Ended 31 December 20X4
Retained earnings, 1 January 20X4......................................... $ 568,300
Earnings and comprehensive income .................................... 516,800
Dividends................................................................................. 31,000
Retained earnings, 31 December 20X4................................ $ 1,054,100
Assignment App1-16
Green Solutions Cleaning Products Corporation
Statement of Financial Position
As at 31 December 20x8
Assets Liabilities
Current assets Current liabilities
Cash $ 96,000 Accounts payable $ 288,000
Accounts receivable 537,600 Notes payable, short-term 120,000
Interest receivable 2,400 Dividends payable 50,000
Inventory 484,800 Unearned revenue 12,400
Supplies on hand 6,500 Total current liabilities 470,400
Prepaid insurance 6,000
Total current assets 1,133,300 Long-term liabilities
Bonds payable 1,320,000
Other Premium on bonds payable 10,000
Long-term investments 436,800 1,330,000
Capital assets Mortgage payable _384,000
Equipment 434,240 Total long-term liabilities 1,714,000
Acc’d dep’n, equip. ( 80,000)
354,240
Buildings 576,000 Shareholders’ Equity
Acc’d dep’n, bldg. ( 158,400) Capital stock 428,000
417,600 Retained earnings1 286,340
Land 556,800 Total shareholders’ equity 714,340
Total capital assets 1,328,640
Total liabilities and
Total assets $2,898,740 shareholders’ equity $2,898,740
1 To balance; $2,898,740 – $470,400 – $1,714,000 – $428,000
Assignment App1-17 (WEB)
Requirement 1
Falcon Corp.
Income Statement
For the year ended 31 December 20x7
Revenues:
Sales revenue ........................................................... $1,822,200
Rent revenue ............................................................ 24,700
Total revenues............................................... $1,846,900
Expenses
Cost of goods sold..................................................... $933,100
Operating expenses................................................... 458,000
Selling expenses........................................................ 107,800
Interest expense......................................................... __52,100
Total expenses............................................... $1,551,000
Earnings before income tax...................................... 295,900
Income tax expense................................................... __116,000
Net earnings ............................................................ $ 179,900
Requirement 2
Falcon Corp.
Statement of Retained Earnings
For year ended 31 December 20x7
| Retained earnings | |
| Opening balance, 1 January | $ 44,300 |
| Plus: Earnings and comprehensive income | 179,900 |
| Less: dividends | (24,000) |
| Closing balance, 31 December | $ 200,200 |
Falcon Corp.
Balance Sheet
As at 31 December 20X7
Assets:
Current assets:
Cash ............................................................. $26,500
Accounts receivable...................................... $344,000
Less: allowance for doubtful accts........... _(46,200) 297,800
Notes receivable............................................ 100,000
Inventory....................................................... 291,700
Office supplies.............................................. 3,600
Prepaid insurance ........................................ 1,500
Total current assets....................................... $721,100
Long-term investments................................. 230,000
Capital assets
Land............................................................... 36,000
Building......................................................... 456,000
Less: accumulated amortization ............. (200,700) 255,300
Total capital assets........................................ 291,300
Total assets.................................................... $1,242,400
Liabilities:
Current liabilities:
Accounts payable.......................................... $235,900
Bank loan payable......................................... 460,000
Operating expenses payable.......................... 48,900
Unearned revenue ........................................ 4,000
Wages payable.............................................. ___3,400
Total current liabilities................................. 752,200
Long-term liabilities
Long-term bond payable............................... 120,000
Total liabilities.............................................. 872,200
Shareholders’ Equity
Contributed capital:
Common shares............................................. $170,000
Retained earnings ........................................ 200,200
Total shareholders’ equity................ 370,200
Total liabilities and shareholders’ equity..... $1,242,400
Assignment App1-18
Requirement 1
a) Selling expense....................................................................... 3,000
Allowance for doubtful accounts.................................... 3,000
b) Cost of goods sold.................................................................. 16,000
Inventory ($305,000 - $289,000).................................... 16,000
c) Selling expense....................................................................... 20,000
Accumulated depreciation.............................................. 20,000
d) Administrative expense.......................................................... 5,360
Interest payable ($134,000 x 6% x 8/12)........................ 5,360
e) Income tax expense (NI x .4)............................................... 27,456
Income tax payable......................................................... 27,456
NI = $1,560,000 – $35,000 – ($987,000 + $16,000) - ($345,000 + $3,000 + $20,000) – ($80,000 + $5,360) = $68,640
Requirement 2
Pinehill Ltd.
Worksheet for Year Ended 31 December 20X8
| | Trial Balance | Adjusting Entries | SCI | SCFP | ||||
| | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit |
| Cash | 50,000 | 50,000 | ||||||
| Accounts receivable | 150,000 | 150,000 | ||||||
| Allowance for doubtful accounts | 12,000 | 3,000 | 15,000 | |||||
| Merchandise inventory | 305,000 | 16,000 | 289,000 | |||||
| Store equipment | 160,000 | 160,000 | ||||||
| Accumulated depreciation | 20,000 | 20,000 | 40,000 | |||||
| Accounts payable | 200,000 | 200,000 | ||||||
| Interest payable | 5,360 | 5,360 | ||||||
| Income tax payable | 27,456 | 27,456 | ||||||
| Loan payable, long-term | 134,000 | 134,000 | ||||||
| Common shares | 120,000 | 120,000 | ||||||
| Retained earnings | 66,000 | 66,000 | ||||||
| Sales revenue | 1,560,000 | 1,560,000 | ||||||
| Sales returns and allowances | 35,000 | 35,000 | ||||||
| Cost of goods sold | 987,000 | 16,000 | 1,003,000 | |||||
| Selling expenses | 345,000 | 3,000 20,000 | 368,000 | |||||
| Administrative expenses | 80,000 | _______ | 5,360 | 85,360 | ||||
| Income tax expense | 27,456 | ______ | 27,456 | _______ | ||||
| 1,518,816 | 1,560,000 | |||||||
| Earnings and comprehensive income | 41,184 | ______ | 41,184 | |||||
| 2,112,000 | 2,112,000 | 71,816 | 71,816 | 1,560,000 | 1,560,000 | 649,000 | 649,000 |
Assignment App1-19
Requirement 1
a) Prepaid rent ($1,500 x 2)........................................................ 3,000
Rent expense................................................................... 3,000
This leaves $9,000 ($1,500 x 6) in the rent expense account.
b) Interest expense...................................................................... 175
Interest payable ($30,000 x 14% x 1/12 x ½)................. 175
Note that monthly interest is $350 and there is now $2,100/$350 = 6 months’ interest
in the expense account.
c) Leasehold improvements....................................................... 8,000
Miscellaneous expense................................................... 8,000
d) No adjustment. Assets are recorded at cost, not market value.
e) Accounts receivable............................................................... 10,000
Sales................................................................................ 10,000
f) Bad debt expense.................................................................... 350
Allowance for doubtful accounts.................................... 350
g) Accounting expense................................................................ 1,800
Accounts payable .......................................................... 1,800
h) Vehicle.................................................................................... 7,600
Loan payable to shareholder........................................... 7,600
i) Depreciation expense............................................................. 5,010
Leasehold improvements ($8,000/5).............................. 1,600
Acc’d depreciation, office equipment ($6,900/5).......... 1,380
Acc’d depreciation, computer equipment ($5,400/5).... 1,080
Acc’d depreciation, vehicle ($7,600/8).......................... 950
j) Supplies expense.................................................................... 15,100
Supplies inventory ($18,100 - $3,000)........................... 15,100
k) Income tax expense................................................................ 2,036
Income tax payable......................................................... 2,036
NI = $46,300 – ($9,000 + $15,100+ 2,275+ $1,320+ 3,300 + $350 + 5,010 + $1,800)
(see worksheet) = $8,145 x .25
Requirement 2 Carmen Corp.
Worksheet for Year Ended 31 December 20X6
| | Trial Balance | Adjusting Entries | SCI | SCFP | ||||
| | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit |
| Cash | 5,100 | 5,100 | ||||||
| Accounts receivable | 11,700 | 10,000 | 21,700 | |||||
| Allowance for doubtful accounts | 350 | 350 | ||||||
| Prepaid rent | 3,000 | 3,000 | ||||||
| Office equipment | 6,900 | 6,900 | ||||||
| Accumulated depreciation | 1,380 | 1,380 | ||||||
| Computer equipment | 5,400 | 5,400 | ||||||
| Accumulated depreciation | 1,080 | 1,080 | ||||||
| Leasehold improvements | 8,000 | 1,600 | 6,400 | |||||
| Vehicle | 7,600 | 7,600 | ||||||
| Accumulated depreciation | 950 | 950 | ||||||
| Accounts payable | 7,550 | 1,800 | 9,350 | |||||
| Interest payable | 175 | 175 | ||||||
| Income tax payable | 2,036 | 2,036 | ||||||
| Loan payable, long-term | 30,000 | 30,000 | ||||||
| Loan payable to shareholder | 7,600 | 7,600 | ||||||
| Common shares | 70 | 70 | ||||||
| Sales revenue | 36,300 | 10,000 | 46,300 | |||||
| Rent expense | 12,000 | 3,000 | 9,000 | |||||
| Supplies inventory | 18,100 | 15,100 | 3,000 | |||||
| Supplies expense | 15,100 | 15,100 | ||||||
| Interest expense | 2,100 | 175 | 2,275 | |||||
| Insurance expense | 1,320 | 1,320 | ||||||
| Miscellaneous expense | 11,300 | 8,000 | 3,300 | |||||
| Bad debt expense | 350 | 350 | ||||||
| Income tax expense | 2,036 | 2,036 | ||||||
| Depreciation expense | 5,010 | 5,010 | ||||||
| Accounting expense | ______ | _______ | 1,800 | _____ | 1,800 | _____ | ||
| 73,920 | 73,920 | 53,071 | 53,071 | 40,191 | 46,300 | |||
| Earnings and comprehensive income | | | | | 6,109 | | _____ | 6,109 |
| | | | | 46,300 | 46,300 | 59,100 | 59,100 |
Assignment App1-20 (WEB)
Requirement 1
Current Entries
Posting
Ref.
a) Cash................................................................................. 101 60,000
Accounts receivable........................................................ 102 30,000
Sales revenue........................................................... 500 90,000
Cost of goods sold........................................................... 600 58,500
Inventory.................................................................. 104 58,500
b) Cash................................................................................. 101 51,000
Accounts receivable................................................. 102 51,000
c) Income taxes payable (20x5).......................................... 302 12,000
Cash.......................................................................... 101 12,000
d) Inventory......................................................................... 104 120,000
Cash.......................................................................... 101 96,000
Accounts payable..................................................... 300 24,000
e) Accounts payable............................................................ 300 18,000
Cash.......................................................................... 101 18,000
f) Cash................................................................................. 101 216,000
Sales revenue........................................................... 500 216,000
Cost of goods sold........................................................... 600 140,400
Inventory.................................................................. 104 140,400
g) Operating expenses......................................................... 601 57,000
Cash.......................................................................... 101 57,000
h) Cash................................................................................. 101 3,000
Common shares....................................................... 400 3,000
i) Inventory......................................................................... 104 300,000
Cash.......................................................................... 101 219,000
Accounts payable..................................................... 300 81,000
j) Cash................................................................................. 101 204,000
Accounts receivable........................................................ 102 90,000
Sales revenue........................................................... 500 294,000
Cost of goods sold........................................................... 600 191,100
Inventory.................................................................. 104 191,100
k) Cash................................................................................. 101 78,000
Accounts receivable................................................. 102 78,000
l) Accounts payable............................................................ 300 84,000
Cash.......................................................................... 101 84,000
m) Operating expenses......................................................... 601 54,000
Cash.......................................................................... 101 54,000
Requirements 2, 3, 5, & 8
Cash #101 Accounts Payable #300
Beg. bal 81,000 (c) 12,000 (e) 18,000 Beg. bal. 22,500
(a) 60,000 (d) 96,000 (l) 84,000 (d) 24,000
(b) 51,000 (e) 18,000 (i) 81,000
(f) 216,000 (g) 57,000
(h) 3,000 (i) 219,000
(j) 204,000 (l) 84,000
(k) 78,000 (m) 54,000
Accounts Receivable #102 Wages Payable #301
Beg. bal 63,000 (b) 51,000 Adj (b). 900
(a) 30,000 (k) 78,000
(j) 90,000
Allowance for
Doubtful Accts #103 Income Taxes Payable #302
Beg. bal. 3,000 (c) 12,000 Beg. bal. 12,000
Adj. (a) 600 Adj. (e) 35,352
Inventory (perpetual) #104 Common Shares, no-par #400
Beg. bal 105,000 (a) 58,500 Beg. bal. 240,000
(d) 120,000 (f) 140,400 (h) 3,000
(i) 300,000 (j) 191,100
Prepaid Insurance #105 Retained Earnings #401
Beg. bal 2,700 Adj. (c) 1,620 Beg. bal. 56,700
Clo. (c) 53,028
Equipment #200 Sales Revenue #500
Beg. bal 150,000 Clo. (a) 600,000 (a) 90,000
(f) 216,000
(j) 294,000
Accumulated Amortization., Equip. #201 Cost of Goods Sold #600
Beg. bal. 67,500 (a) 58,500 Clo. (b) 390,000
Adj. (d) 7,500 (f) 140,400
(j) 191,100
Operating Expenses #601 Income Tax Expense #602
(g) 57,000 Clo. (b) 121,620 Adj. (e) 35,352 Clo. (b) 35,352
(m) 54,000
Adj. (a) 600*
Adj. (b) 900
Adj. (c) 1,620
Adj. (d) 7,500
Income Summary #700
Clo. (b) 546,972 Clo. (a) 600,000
Clo. (c) 53,028
* AR from (a) + (j) = $120,000; $120,000 x 0.5% = $600
Requirements 4, 6, & 9
| Requirement 4 Unadjusted Trial Balance | Requirement 6 Adjusted Trial Balance | Requirement 9 Post-closing Trial Balance | ||||
| Accounts | Debit | Credit | Debit | Credit | Debit | Credit |
| Cash | 153,000 | 153,000 | 153,000 | |||
| Accounts receivable | 54,000 | 54,000 | 54,000 | |||
| Allowance for doubtful accounts | 3,000 | 3,600 | 3,600 | |||
| Inventory (perpetual system) | 135,000 | 135,000 | 135,000 | |||
| Prepaid insurance | 2,700 | 1,080 | 1,080 | |||
| Equipment | 150,000 | 150,000 | 150,000 | |||
| Accumulated amortization | 67,500 | 75,000 | 75,000 | |||
| Accounts payable | 25,500 | 25,500 | 25,500 | |||
| Wages payable | 900 | 900 | ||||
| Income taxes payable | 35,352 | 35,352 | ||||
| Common shares, no-par | 243,000 | 243,000 | 243,000 | |||
| Retained earnings | 56,700 | 56,700 | 109,728 | |||
| Sales revenue | 600,000 | 600,000 | ||||
| Cost of goods sold | 390,000 | 390,000 | ||||
| Operating expenses | 111,000 | 121,620 | ||||
| Income tax expense | 35,352 | |||||
| Income summary | | | | | | |
| Totals | 995,700 | 995,700 | 1,040,052 | 1,040,052 | 493,080 | 493,080 |
Requirement 5
Adjusting Entries
Posting
Ref.
a) Operating expense (bad debt expense)........................... 601 600
Allowance for doubtful accounts............................ 103 600
($30,000 + $90,000) x 1/2% = $600
b) Operating expense (wages)............................................. 601 900
Wages payable......................................................... 301 900
c) Operating expense (insurance)....................................... 601 1,620
Prepaid insurance..................................................... 105 1,620
$2,700 x 12/20 = $1,620.
d) Operating expense (amortization).................................. 601 7,500
Accumulated amortization, equipment................... 201 7,500
$150,000 ÷ 20 years = $7,500
e) Income tax expense......................................................... 602 35,352
Income taxes payable............................................... 302 35,352
Computation of income tax:
Revenues............................................................... $600,000
Expenses (includes CGS $390,000)*................... 511,620
Pretax earnings..................................................... 88,380
Income tax expense ($88,380 x 40%).................. 35,352
Earnings and comprehensive income................... $53,028
*per cost of goods sold account, #600.
Note: Perpetual inventory system—inventory and cost of goods sold are correctly stated.
Requirement 7
Fox Limited
Income Statement
For Year Ended 31 December 20x6
Sales revenue............................................................................ $600,000
Cost of goods sold.................................................................... $390,000
Operating expenses.................................................................. 121,620 511,620
Pretax operating earnings........................................................ 88,380
Income tax expense (40%)....................................................... 35,352
Net earnings............................................................................. $ 53,028
Earnings per share ($53,028 ÷ 101,000) = $0.53
Fox Limited
Balance Sheet
At 31 December 20x6
Assets Liabilities
Current Assets: Current Liabilities:
Cash $ 153,000 Accounts payable $ 25,500
Accounts receivable 54,000 Wages payable 900
Allowance for doubtful Income taxes payable 35,352
accounts (3,600) Total current liabilities 61,752
Inventory 135,000
Shareholders’ equity
Prepaid insurance 1,080 Common shares, no-par,
Total current assets 339,480 101,000 shares outstanding 243,000
Capital assets: Retained earnings* 109,728
Equipment 150,000 Total shareholders’ equity 352,728
Accumulated amortization,
equipment (75,000)
Total capital assets 75,000 Total liabilities and
Total assets $414,480 shareholders’ equity $414,480
*$56,700 + $53,028
Requirement 8
Closing Entries
Posting
Ref.
a) To close revenue accounts:
Sales revenue........................................................... 500 600,000
Income summary............................................... 700 600,000
b) To close expense accounts:
Income summary..................................................... 700 546,972
Cost of goods sold............................................. 600 390,000
Operating expenses............................................ 601 121,620
Income tax expense............................................ 602 35,352
c) To close income summary (earnings):
Income summary..................................................... 700 53,028
Retained earnings.............................................. 401 53,028
Assignment App1-21
Requirement 1
a. (1) Cash ($767,000 x 25%)................................................... 191,750
Accounts receivable........................................................ 575,250
Sales.......................................................................... 767,000
b.(2) Unearned revenue............................................................ 32,000
Sales.......................................................................... 32,000
c.(3) Operating expense........................................................... 67,200
Cash........................................................................... 67,200
d.(4) Fertilizer and supplies inventory.................................... 46,900
Accounts payable...................................................... 46,900
e.(5) Inventory......................................................................... 244,200
Cash........................................................................... 244,200
f.(6) Cost of goods sold........................................................... 281,400
Inventory................................................................... 281,400
g.(7) Cash ($31,000 + (.7 x $575,250))................................... 433,675
Accounts receivable.................................................. 433,675
h.(8) Accounts payable............................................................ 67,500
Cash........................................................................... 67,500
i.(9) Accounts payable ($46,900 x .9).................................... 42,210
Cash........................................................................... 42,210
j.(10) Dividends declared.................................................... 22,000
Cash........................................................................... 22,000
k.(11)Prepaid insurance........................................................... 10,800
Cash........................................................................... 10,800
l.(12) Cash........................................................................... 50,000
Unearned revenue...................................................... 50,000
m.(13)Notes payable................................................................ 50,000
Interest expense............................................................... 5,500
Cash........................................................................... 55,500
Requirements 2, 3
(Note: all postings, including those for adjusting, closing and reversing entries appear in the T accounts below for convenience. In journal entries and postings, for example, 3 refers to the third transaction entry in 20x6, a1 refers to the first adjusting entry, c2 refers to the second closing entry, and r1 refers to the first reversing entry.)
Cash 101 Accounts Receivable 102
Balance 42,000 3 67,200 Balance 35,800 7 433,675
1 191,750 5 244,200 1 575,250
7 433,675 8 67,500 Balance 177,375
12 50,000 9 42,210
10 22,000
11 10,800
13 55,500
Balance 208,015
Allowance for Doubtful Accounts 103 Inventory 104
Balance 2,000 Balance 46,000 6 281,400
a2 11,505 5 244,200
Balance 13,505 Balance 8,800
Fertilizer and Supplies Inv. 105 Prepaid Insurance 106
Balance 6,700 Balance 9,000
4 46,900 11 10,800
Balance 53,600 a3 46,000 Balance 19,800 a5 9,900
Balance 7,600 Balance 9,900
Equipment 200 Accumulated Depreciation, Equipment 201
Balance 344,800 Balance 124,600
a1 45,000
Balance 169,600
Land 202 Accounts Payable 300
Balance 682,000 8 67,500 Balance 67,500
9 42,210 4 46,900
Balance 4,690
a4 250
a6 5,000
Balance 9,940
Unearned Revenue 301
2 32,000 Balance 32,000
12 50,000
Balance 50,000
Notes Payable 302 Common Shares 400
13 50,000 Balance 75,000 Balance 400,000
25,000
Retained Earnings 401
Balance 465,200
c4 22,000 c3 327,245
Balance 770,445
Dividends Declared 402 Sales Revenue 500
10 22,000 1 767,000
c4 22,000 2 32,000
Balance 799,000
C1 799,000
Cost of Goods Sold 600 Operating Expenses 601
6 281,400 3 67,200
c2 281,400 a1 45,000
a2 11,505
a3 46,000
a5 9,900
a6 5,000
Balance 184,605 c2 184,605
Interest Expense 602 Income Summary 700
13 5,500 c2 471,755 c1 799,000
a4 250 c3 327,245
Balance 5,750 c2 5,750
Requirement 4
Gensing Enterprises
Unadjusted Trial Balance
31 December 20x7
Cash.......................................................................................... $ 208,015
Accounts receivable................................................................. 177,375
Allowance for doubtful accounts............................................. $ 2,000
Inventory.................................................................................. 8,800
Fertilizer and supplies inventory............................................. 53,600
Prepaid insurance..................................................................... 19,800
Equipment................................................................................ 344,800
Accumulated depreciation, equipment.................................... 124,600
Land.......................................................................................... 682,000
Accounts payable..................................................................... 4,690
Unearned revenue..................................................................... 50,000
Notes payable........................................................................... 25,000
Common shares........................................................................ 400,000
Retained earnings..................................................................... 465,200
Dividends declared................................................................... 22,000
Sales......................................................................................... 799,000
Cost of goods sold.................................................................... 281,400
Operating expenses.................................................................. 67,200
Interest expense........................................................................ 5,500 ________
Totals.................................................................................. $1,870,490 $1,870,490
Requirement 5
Debit Credit
a1 Operating expenses (depreciation) ................................. 45,000
Accumulated depreciation................................ 45,000
a2 Operating expenses (bad debts) ($575,250 x .02)............ 11,505
Allowance for doubtful accounts.............................. 11,505
a3 Operating expenses (fertilizer and supplies) ($53,600 - $7,600) 46,000
Fertilizer and supplies inventory.............................. 46,000
a4 Interest expense ($25,000 x 12% x 1/12)......................... 250
Accounts payable...................................................... 250
a5 Operating expense (insurance) ($9,000 + ($10,800/12)). 9,900
Prepaid insurance...................................................... 9,900
a6 Operating expenses (wages)............................................. 5,000
Accounts payable...................................................... 5,000
Requirement 6
Gensing Enterprises
Adjusted Trial Balance
31 December 20x7
Cash.......................................................................................... $ 208,015
Accounts receivable................................................................. 177,375
Allowance for doubtful accounts............................................. $ 13,505
Inventory.................................................................................. 8,800
Fertilizer and supplies inventory............................................. 7,600
Prepaid insurance..................................................................... 9,900
Equipment................................................................................ 344,800
Accumulated depreciation, equipment.................................... 169,600
Land.......................................................................................... 682,000
Accounts payable..................................................................... 9,940
Unearned revenue..................................................................... 50,000
Notes payable........................................................................... 25,000
Common shares........................................................................ 400,000
Retained earnings..................................................................... 465,200
Dividends declared................................................................... 22,000
Sales......................................................................................... 799,000
Cost of goods sold.................................................................... 281,400
General and administrative expense........................................ 184,605
Interest expense........................................................................ 5,750 ________
Totals.................................................................................. $1,932,245 $1,932,245
Requirement 7 Gensing Enterprises
Statement of Comprehensive Income
For the Year Ended 31 December 20x7
Sales......................................................................................... $799,000
Cost of goods sold.................................................................... 281,400
Gross margin............................................................................ 517,600
Operating expenses.................................................................. 184,605
Operating earnings................................................................... 332,995
Interest expense........................................................................ 5,750
Earnings and comprehensive income...................................... $327,245
Gensing Enterprises
Statement of Financial Position
31 December 20x7
Assets
Current assets:
Cash.................................................................... $208,015
Accounts receivable........................................... $177,375
Allowance for doubtful accounts...................... ( 13,505) 163,870
Inventory............................................................ 8,800
Fertilizer and supplies inventory....................... 7,600
Prepaid insurance............................................... 9,900
....................................................... $398,185
Capital assets:
Equipment.......................................................... 344,800
Accumulated depreciation................................. ( 169,600)
175,200
Land................................................................... 682,000 857,200
Total assets.................................................. $1,255,385
Liabilities
Current liabilities:
Accounts payable............................................ $ 9,940
Unearned revenue.............................................. 50,000
Total current liabilities...................................... $59,940
Long-term liability:
Note payable...................................................... 25,000
Total liabilities............................................ 84,940
Owner’s Equity
Common shares................................................. 400,000
Retained earnings ($465,200 - $22,000 + $327,245) 770,445
Total owners’ equity.................................... 1,170,445
Total liabilities and owners’ equity............ $1,255,385
Requirement 8
c1 Sales................................................................................... 799,000
Income summary.......................................................... 799,000
c2 Income summary................................................................ 471,755
Cost of goods sold........................................................ 281,400 Interest expense............................................................ 5,750
Operating expenses...................................................... 184,605
c3 Income summary................................................................ 327,245
Retained earnings......................................................... 327,245
c4 Retained earnings............................................................... 22,000
Dividends..................................................................... 22,000
Requirement 9
Gensing Enterprises
Post-closing Trial Balance
31 December 20x7
Cash.......................................................................................... $ 208,015
Accounts receivable................................................................. 177,375
Allowance for doubtful accounts............................................. $ 13,505
Inventory.................................................................................. 8,800
Fertilizer and supplies inventory............................................. 7,600
Prepaid insurance..................................................................... 9,900
Equipment................................................................................ 344,800
Accumulated depreciation, equipment.................................... 169,600
Land.......................................................................................... 682,000
Accounts payable..................................................................... 9,940
Unearned revenue..................................................................... 50,000
Notes payable........................................................................... 25,000
Common shares........................................................................ 400,000
Retained earnings..................................................................... _______ 770,445
Totals.................................................................................. $1,438,490 $1,438,490
Requirement 10
Reversing entries would be appropriate for the accrual of interest and wages, because they create accounts payable.
Assignment App1-22
Darma Corporation
Worksheet for Year Ended 31 December 20x5
(perpetual inventory system)
| | Trial Balance | Adjusting Entries | SCI | SCFP | ||||
| | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit |
| Cash | 120,520 | 120,520 | ||||||
| Accounts receivable | 76,000 | 76,000 | ||||||
| Allowance for doubtful accounts | 4,000 | (a) 1,000 | 5,000 | |||||
| Interest receivable | 0 | (b) 1,120 | 1,120 | |||||
| Inventory (perpetual system) | 210,000 | 210,000 | ||||||
| Sales supplies inventory | 1,800 | (h) 1,200 | 600 | |||||
| Long-term note receivable (14%) | 24,000 | 24,000 | ||||||
| Equipment | 360,000 | 360,000 | ||||||
| Accumulated depreciation, equipment | 128,000 | (c) 32,000 | 160,000 | |||||
| Patent | 16,800 | (d) 1,200 | 15,600 | |||||
| Accounts payable | 46,000 | 46,000 | ||||||
| Interest payable | 0 | (e) 1,200 | 1,200 | |||||
| Property taxes payable | 0 | (g) 2,600 | 2,600 | |||||
| Rent collected in advance | 0 | (f) 2,500 | 2,500 | |||||
| Mortgage payable, 12% | 120,000 | 120,000 | ||||||
| Common shares, no-par | 230,000 | 230,000 | ||||||
| Retained earnings | 64,880 | 64,880 |
| | Trial Balance | Adjusting Entries | SCI | SCFP | ||||
| | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit |
| Sales revenue | 1,400,000 | 1,400,000 | ||||||
| Investment revenue | 2,240 | (b) 1,120 | 3,360 | |||||
| Rent revenue | 6,000 | (f) 2,500 | 3,500 | |||||
| Cost of goods sold | 760,000 | 760,000 | ||||||
| Selling expenses | 328,800 | (a) 1,000 | 363,600 | |||||
| (c) 28,800 | ||||||||
| (d) 1,200 | ||||||||
| (g) 2,600 | ||||||||
| (h) 1,200 | ||||||||
| General and admin. expenses | 110,000 | (c) 3,200 | 113,200 | |||||
| Interest expense | 13,200 | (e) 1,200 | 14,400 | |||||
| Discontinued ops. gain (pretax) | | 20,000 | | | | 20,000 | ||
| 2,021,120 | 2,021,120 | 42,820 | 42,820 | 1,251,200 | 1,426,860 | |||
| Income tax expense | (i) 70,264 | 70,264 | ||||||
| Income tax payable | (i) 70,264 | 70,264 | ||||||
| Earnings and comprehensive income | 105,396* | | | 105,396 | ||||
| Totals | 1,426,860 | 1,426,860 | 807,840 | 807,840 |
Computations for adjusting entries:
(a) $400,000 x 1/4% = $1,000 (f) $6,000 x 5/12 = $2,500
(b) $24,000 x 14% x 4/12 = $1,120 (g) Given $2,600
(c) $320,000 x 1/10 = $32,000 (h) $1,800 – $600 = $1,200
(d) $16,800 x 1/14 = $1,200 (i) ($1,426,860 – $1,251,200) x 40% = $70,264.
(e) $120,000 x 12% x 1/12 = $1,200
*$1,426,860 – $1,251,200 – $70,264 = $105,396.
Requirement 3
Darma Corporation
Statement of Comprehensive Income
For Year Ended 31 December 20x5
Sales revenue.................................................................................. $1,400,000
Investment revenue........................................................................ 3,360
Rent revenue................................................................................... 3,500
Total revenue............................................................................ 1,406,860
Expenses:
Cost of goods sold.................................................................... $760,000
Selling expenses....................................................................... 363,600
General and administrative expenses...................................... 113,200
Interest expense........................................................................ 14,400 1,251,200
Pretax earnings......................................................................... 155,660
Income taxes on operations ($155,660 x 40%)....................... 62,264
Earnings before discontinued operations................................ 93,396
Discontinued operations:
Discontinued operations gain............................................ 20,000
Less: Income tax ($20,000 x 40%)................................. ( 8,000) 12,000
Earnings and comprehensive income............................................ $ 105,396
Earnings per share (10,000 shares outstanding):
Earnings before discontinued operations($93,396 ÷ 10,000 shares) $ 9.34
Discontinued operations ($12,000 ÷ 10,000 shares) 1.20
Earnings ($105,396 ÷ 10,000 shares) $10.54
Darma Corporation
Statement of Financial Position
At 31 December 20x5
Assets Liabilities
Current assets: Current Liabilities:
Cash $ 120,520 Accounts payable $ 46,000
Accounts receivable 76,000 Interest payable 1,200
Allowance for doubtful accts. (5,000) Income tax payable 70,264
Interest receivable 1,120 Property tax payable 2,600
Inventory (perpetual system) 210,000 Rent collected in advance 2,500
Sales supplies inventory 600 Total current liabilities 122,564
Total current assets 403,240 Long-term liability:
Long-term investment: Mortgage payable 12% 120,000
Long-term note receivable, Total liabilities 242,564
14% 24,000 Shareholders’ equity:
Capital assets: Common shares, no-par 230,000
Equipment 360,000 Retained earnings* 170,276
Accumulated depreciation, Total equity 400,276
equipment (160,000) Total liabilities and
Patent 15,600 equity $642,840
Total capital assets 215,600
Total assets $642,840
*$64,880 + $105,396 = $170,276.
Requirement 4
Closing Entries
(a) Revenues and gain:
Sales revenue................................................................ 1,400,000
Investment revenue...................................................... 3,360
Rent revenue................................................................. 3,500
Discontinued operations gain...................................... 20,000
Income summary.................................................... 1,426,860
(b) Expenses:
Income summary.......................................................... 1,321,464
Cost of goods sold.................................................. 760,000
Selling expenses..................................................... 363,600
General and administrative expenses.................... 113,200
Interest expense...................................................... 14,400
Income tax expense................................................ 70,264
(c) Income summary (earnings):
Income summary ($1,426,860 – $1,321,464).............. 105,396
Retained earnings................................................... 105,396
Assignment App1–23
(Note that in journal entries and postings, for example, 3 refers to the third transaction entry in 20x5, a1 refers to the first adjusting entry, c2 refers to the second closing entry, and r1 refers to the first reversing entry.)
NOTE: Students can and will do entries in different order and different combinations. This is acceptable.
Step 1, 2: Identify and journalize transactions
1 Cash................................................................................. 500,000
Common shares, no-par, 70,000 shares.................... 500,000
2 Cash................................................................................. 500,000
Long-term note payable............................................ 500,000
3 Rent expense (expedient method, as stated)................... 72,000
Cash........................................................................... 72,000
($60,000 + $12,000)
4 Equipment....................................................................... 350,000
Cash........................................................................... 350,000
5,6,7 Wages expense................................................................ 310,000
Utilities expense.............................................................. 47,000
Selling expense............................................................... 92,000
General and administrative expense............................... 198,000
Inventory......................................................................... 4,815,000
Cash........................................................................... 5,372,000
Accounts and other payables.................................... 90,000
8 Cash................................................................................. 4,925,000
Accounts receivable........................................................ 975,000
Sales revenue............................................................. 5,900,000
Cost of goods sold........................................................... 4,447,000
Inventory................................................................... 4,447,000
9 Dividends declared.......................................................... 114,000
Dividends payable..................................................... 114,000
Step 3: Posting transactions to ledger
(Note: all postings, including those for adjusting, closing and reversing entries appear in the T accounts below for convenience.)
Cash Accounts Receivable
1 500,000 72,000 3 8 975,000 12,000 a4
2 500,000 350,000 4 963,000
8 4,925,000 5,372,000 5,6,7
131,000
Allowance for Doubtful Accounts Prepaid Rent
a4 12,000 29,500 a4 a2 10,000
17,500 10,000 r2
Inventory
5,6,7 4,815,000 4,447,000 8
368,000
Equipment Long-term Prepaid Rent
4 350,000 a2 7,000
Accumulated Depreciation Accounts and Other Payables
52,500 a3 90,000 5, 6, 7
Income Tax Payable Interest Payable
342,000 a5 r1 27,500 27,500 a1
Dividends Payable Long-term Notes Payable
114,000 9 500,000 2
Common Shares
500,000 1
Dividends Declared Retained Earnings
9 114,000 114,000 c4 c4 114,000 299,500 c3
185,500
Sales Cost of Goods Sold
c1 5,900,000 5,900,000 8 8 4,447,000 4,447,000 c2
Rent Expense Wages Expense
3 72,000 17,000 a2 5, 6, 7 310,000 310,000 c2
55,000 55,000 c2
r2 10,000
Utilities Expense Selling Expense
5, 6, 7 47,000 47,000 c2 5, 6, 7 92,000 92,000 c2
General & Admin. Expense Interest Expense
5, 6, 7 198,000 198,000 c2 a1 27,500 27,500 c2
27,500 r1
Depreciation Expense Bad Debt Expense
a3 52,500 52,500 c2 a4 29,500 29,500 c2
Income Tax Expense Income Summary
a5 342,000 342,000 c2 c2 5,600,500 5,900,000 c1
c3 299,500
Step 4: Prepare Unadjusted Trial Balance
Construction Resources Limited
Unadjusted Trial Balance
31 December 20x5
Cash.......................................................................................... $ 131,000
Accounts receivable................................................................. 975,000
Inventory.................................................................................. 368,000
Equipment................................................................................ 350,000
Accounts, other payables......................................................... $ 90,000
Dividends payable.................................................................... 114,000
Long-term notes payable......................................................... 500,000
Common shares........................................................................ 500,000
Dividends declared................................................................... 114,000
Sales......................................................................................... 5,900,000
Cost of goods sold.................................................................... 4,447,000
Wages expense......................................................................... 310,000
Rent expense............................................................................ 72,000
Utilities expense....................................................................... 47,000
Selling expense........................................................................ 92,000
General and administrative expense........................................ 198,000
Totals.................................................................................. $7,104,000 $7,104,000
Step 5: Journalize and post-adjusting journal entries
Debit Credit
a1 Interest expense................................................................ 27,500
Interest payable......................................................... 27,500
($500,000 x 6% x 11/12)
a2 Long-term prepaid rent.................................................... 7,000
Prepaid rent....................................................................... 10,000
Rent expense............................................................. 17,000
a3 Depreciation expense ($350,000 – $35,000) x 1/6 ........ 52,500
Accumulated depreciation........................................ 52,500
a4 Bad debt expense ($5,900,000 x .005)............................. 29,500
Allowance for doubtful accounts.............................. 29,500
Allowance for doubtful accounts.................................... 12,000
Accounts receivable.................................................. 12,000
a5 Income tax expense.......................................................... 342,000
Income tax payable................................................... 342,000
Step 6: Prepare adjusted trial balance
Construction Resources Limited
Adjusted Trial Balance
31 December 20x5
Debit Credit
Cash.......................................................................................... $ 131,000
Accounts receivable................................................................. 963,000
Allowance for doubtful accounts............................................. $ 17,500
Inventory.................................................................................. 368,000
Prepaid rent.............................................................................. 10,000
Long-term prepaid rent............................................................ 7,000
Equipment................................................................................ 350,000
Accumulated depreciation....................................................... 52,500
Accounts, other payables......................................................... 90,000
Interest payable........................................................................ 27,500
Income tax payable.................................................................. 342,000
Dividend payable..................................................................... 114,000
Long-term notes payable......................................................... 500,000
Common shares........................................................................ 500,000
Dividends................................................................................. 114,000
Sales......................................................................................... 5,900,000
Cost of goods sold.................................................................... 4,447,000
Wages expense......................................................................... 310,000
Rent expense............................................................................ 55,000
Utilities expense....................................................................... 47,000
Selling expense........................................................................ 92,000
General and administrative expense........................................ 198,000
Interest expense........................................................................ 27,500
Depreciation expense............................................................... 52,500
Bad debt expense...................................................................... 29,500
Income tax expense.................................................................. 342,000 ______
Totals................................................................................ $7,543,500 $7,543,500
Step 7: Prepare financial statements
Construction Resources Limited
Statement of Comprehensive Income
For the Year Ended 31 December 20x5
Sales......................................................................................... $5,900,000
Cost of goods sold.................................................................... 4,447,000
Gross margin............................................................................ 1,453,000
Operating expenses
Depreciation expense....................................................... $ 52,500
Interest expense................................................................ 27,500
Rent expense..................................................................... 55,000
Wages expense................................................................. 310,000
Utilities expense............................................................... 47,000
Selling expense................................................................. 92,000
General and administrative expense................................ 198,000
Bad debt expense.............................................................. 29,500 811,500
Pretax operating earnings........................................................ 641,500
Income tax expense ................................................................ 342,000
Earnings and comprehensive income...................................... $ 299,500
Construction Resources Limited
Statement of Changes in Equity
For the Year Ended 31 December 20x5
| Common shares | Retained earnings | |
| Opening balance, 1 January | $ 0 | $ 0 |
| Plus: Investment by owners | 500,000 | |
| Plus: Earnings and comprehensive income | 299,500 | |
| Less: dividends | ________ | (114,000) |
| Closing balance, 31 December | $500,000 | $ 185,500 |
Construction Resources Limited
Statement of Financial Position
31 December 20x5
Assets
Current assets:
Cash.................................................................... $131,000
Accounts receivable........................................... $963,000
Allowance for doubtful accounts...................... ( 17,500) 945,500
Inventory............................................................ 368,000
Prepaid rent........................................................ 10,000 $1,454,500
Long-term assets:
Long-term prepaid rent...................................... 7,000
Capital assets:
Equipment.......................................................... 350,000
Accumulated depreciation................................. ( 52,500) 297,500
Total assets.................................................. $1,759,000
Liabilities
Current liabilities:
Accounts and other payables............................. $ 90,000
Interest payable.................................................. 27,500
Income tax payable............................................ 342,000
Dividend payable............................................... 114,000
Total current liabilities...................................... $573,500
Long-term liability:
Long-term note payable..................................... 500,000
Total liabilities............................................ 1,073,500
Owner’s Equity
Common shares, no-par, 70,000 shares............. 500,000
Retained earnings.............................................. 185,500
Total owners’ equity.................................... 685,500
Total liabilities and owners’ equity............ $1,759,000
Step 8: Journalize and post-closing entries
c1 Sales................................................................................... 5,900,000
Income summary.......................................................... 5,900,000
c2 Income summary................................................................ 5,600,500
Cost of goods sold........................................................ 4,447,000
Wages expense............................................................. 310,000
Rent expense................................................................ 55,000
Utilities expense........................................................... 47,000
Selling expense............................................................ 92,000
Interest expense............................................................ 27,500
Depreciation expense................................................... 52,500
Bad debt expense.......................................................... 29,500
Income tax expense...................................................... 342,000
General and administrative expense............................ 198,000
c3 Income summary................................................................ 299,500
Retained earnings......................................................... 299,500
c4 Retained earnings............................................................... 114,000
Dividends..................................................................... 114,000
Step 9: Prepare post-closing trial balance
Construction Resources Limited
Post-closing Trial Balance
31 December 20x5
Debit Credit
Cash.......................................................................................... $ 131,000
Accounts receivable................................................................. 963,000
Allowance for doubtful accounts............................................. $ 17,500
Inventory.................................................................................. 368,000
Prepaid rent.............................................................................. 10,000
Long-term prepaid rent............................................................ 7,000
Equipment................................................................................ 350,000
Accumulated depreciation....................................................... 52,500
Accounts, other payables......................................................... 90,000
Interest payable........................................................................ 27,500
Income tax payable.................................................................. 342,000
Dividend payable..................................................................... 114,000
Long-term notes payable......................................................... 500,000
Common shares, no-par........................................................... 500,000
Retained earnings..................................................................... 185,500
Totals................................................................................ $1,829,000 $1,829,000
Step 10: Journalize and post-reversing entries
r1 Interest payable.................................................................. 27,500
Interest expense............................................................ 27,500
r2 Rent expense...................................................................... 10,000
Prepaid rent.................................................................. 10,000
The accrual for income tax may also be reversed.
Assignment App1-24
Requirements 1 and 2
Sales Journal
| Date | Sales | Accounts | Terms | Post. | Receivable |
Post. | Cost of goods sold and Inventory Amount |
| Apr 4 | Cust. | 35,600 | 14,200 | ||||
| Apr 14 | Cust. | 100,700 | 51,900 |
| Purchases Journal | |||||
|
Date 20x5 | Purchase Order No |
Accounts Payable (name) |
Terms |
Post. Ref. | Inventory and Payable Amount |
| Apr. 16 | Supplier | 31,100 | |||
| Apr. 24 | Supplier | 58,200 |
General Journal
16 Apr. Sales returns................................................................. 5,200
Accounts receivable............................................... 5,200
Inventory...................................................................... 2,200
Cost of goods sold.................................................. 2,200
17 Apr. Accounts payable......................................................... 3,600
Inventory................................................................ 3,600
28 Apr. Office supplies (or expense)........................................ 3,250
Accounts payable................................................... 3,250
29 Apr. Machinery.................................................................... 68,200
Notes payable, 12%, 120 days............................... 68,200
31 Apr. Depreciation expense................................................... 9,400
Accumulated depreciation..................................... 9,400
| Cash Receipts Journal | |||||||
| Credits Dr and Cr | |||||||
| Date 20x5 |
Explanation | Debit Cash |
Account Title | Accounts Receivable | Sales Revenue | Misc. Accounts | COGS & Inventory |
| 9 Apr. | Sale | 78,200 | 78,200 | 24,700 | |||
| 14 Apr. | Partial pymt: Apr 4 | 21,360 | 21,360 | ||||
| 26 Apr. | Borrowed | 90,000 | Notes payable | 90,000 |
| Cash Disbursements Journal | ||||||||
| Debits | ||||||||
| Date 20x5 | Cheque No. |
Explanation | Credit Cash |
Account Name |
Post. Ref. | Accounts Payable |
Inventory | Misc. Accounts |
| 10 Apr. | Electricity bill | 1,900 | Electricity expense | 1,900 | ||||
| 15 Apr. | Note plus interest | 50,565 | Notes payable Interest expense | 50,000 565 | ||||
| 22 Apr. | Paid wages | 53,700 | Wages expense | 53,700 | ||||
| 22 Apr. | Dividends paid | 23,000 | Dividends declared | 23,000 | ||||
| 25 Apr. | Inventory | 7,350 | 7,350 | |||||
| 30 Apr. | Purchase of Apr. 16 less credit note | 27,500 | 27,500 |
Assignment App1–25 (WEB)
a. Cash receipts
b. Cash receipts
c. Sales
d. Purchases
e. Cash disbursements
f. Cash disbursements
g. Cash receipts
h. General journal
i. Cash disbursements
j. General journal
Assignment App1–26
Requirements 1 and 2
Sales Journal
| Date | Sales | Accounts | Terms | Post. | Receivable |
Post. | Cost of goods sold and Inventory Amount |
| 3 Aug. | 902 | D.Kennerly | 2/10, n/30 | 44,300 | 16,100 | ||
| 16 Aug. | 903 | S. Gunz | 2/10, n/30 | 10,735 | 5,400 |
| Purchases Journal | |||||
|
Date 20x5 | Purchase Order No |
Accounts Payable (name) |
Terms |
Post. Ref. | Inventory and Payable Amount |
| 3 Aug. | Worthy | n/15 | 97,800 | ||
| 20 Aug. | WayMobile | n/60 | 47,500 | ||
| 25 Aug. | Office Stop | n/10 EOM | 42,500 |
General Journal
3 Aug. Office equipment......................................................... 62,625
Accounts payable................................................... 62,625
21 Aug. Sales returns................................................................. 3,835
Accounts receivable............................................... 3,835
24 Aug. Accounts payable......................................................... 4,700
Inventory................................................................ 4,700
| Cash Receipts Journal | |||||||
| Credits Dr. and Cr. | |||||||
| Date 20x5 |
Explanation | Debit Cash |
Account Title | Accounts Receivable |
Sales Revenue | Misc. Accounts | COGS and Inventory |
| 11 Aug. | Sold supp. | 160 | Office Supplies | 160 | |||
| 18 Aug. | 44,300 | D. Kennerly | 44,300 | ||||
| 26 Aug. | 6,762* | S.Gunz/ Sales Disc. (dr) | 6,900 | (138) (dr) | |||
| 30 Aug. | Cash sales | 61,230 | Sales | 61,230 | 9,600 |
| Cash Disbursements Journal | |||||||||
| Debits | |||||||||
| Date 20x5 | Cheque No. |
Explanation | Credit Cash |
Account Name |
Post. Ref. | Accounts Payable |
Inventory | Misc. Accounts | |
| 3 Aug. | 546 | 2,175 | Rent Exp. | 2,175 | |||||
| 3 Aug. | 547 | 511 | Travel expenses | 511 | |||||
| 8 Aug. | 548 | 975 | Advertising Exp. | 975 | |||||
| 10 Aug. | 549 | 97,800 | Worthy | 97,800 | |||||
| 28 Aug. | 550 | 42,800 | WayMobile | 42,800 | |||||
*($10,735 – $3,835) x .98
Assignment App1–27
Sales Journal
| Date | Sales | Accounts | Terms | Post. | Receivable |
Post. | Cost of goods sold and Inventory Amount |
| 10 Sept | Customer | 2/10, n/30 | 16,900 | 7,600 | |||
| Purchases Journal | |||||
|
Date 20x5 | Purchase Order No |
Accounts Payable (name) |
Terms |
Post. Ref. | Inventory and Payable Amount |
| 1 Sept | Supplier | 2/10, n/30 | 13,132 | ||
| 5 Sept | Supplier | 1/15, n/30 | 53,757 |
General Journal
2 Sept Office equipment......................................................... 15,700
Note payable........................................................... 15,700
12 Sept Accounts payable......................................................... 3,168
Inventory................................................................ 3,168
| Cash Receipts Journal | |||||||
| Credits Dr. and Cr. | |||||||
| Date 20x5 |
Explanation | Debit Cash |
Account Title | Accounts Receivable |
Sales Revenue | Misc. Accounts | COGS & Inventory |
| 12 Sept | Loan | 70,000 | Bank loan payable | 70,000 | |||
| 22 Sept | Customer | 16,562 | 16,900 | (338) | |||
| 29 Sept | Cash sales | 97,250 | Cash sales | 97,250 | 42,160 |
| Cash Disbursements Journal | ||||||||
| Debits | ||||||||
| Date 20x5 | Cheque No. |
Explanation | Credit Cash |
Account Name |
Post. Ref. | Accounts Payable |
Inventory | Misc. Accounts |
| 1 Sept | Inventory | 5,600 | 5,600 | |||||
| 2 Sept | Auto | 35,000 | Auto | 35,000 | ||||
| 13 Sept | Supplier | 50,589* | 50,589 | |||||
| 25 Sept | Salaries | 6,200 | Salaries Exp | 6,200 |
*$53,757 – $3,168
Assignment App1–28
Multimedia, Inc.
Statement of Financial Position
31 December, 20x5 Computations (bb = beginning bal.)
Cash.................................... $ 9,000 From CFS
Accounts receivable........... 120,000 $10,000 bb + $200,000 sales – $90,000 collections
Prepaid insurance............... 30,000 $20,000 bb + $25,000 payments – $15,000 insurance expense
Supplies.............................. 30,000 $5,000 bb + $55,000 purchases (see analysis of accounts payable) – $30,000 supplies expense
Equipment, net................... 70,000 $80,000 bb – $10,000 depreciation
Total assets................... $259,000
Accounts payable............... $ 50,000 given
Unearned rent..................... 20,000 $13,000 bb + $19,000 receipts – $12,000 rent revenue
Wages payable................... 15,000 $7,000 bb + $60,000 wage expense – $52,000 payments to employees
Common shares.................. 27,000 from original information
Retained earnings............... 147,000 $50,000 bb + $97,000 earnings
Total L + OE................. $259,000
Analysis of accounts payable
Accounts Payable
40,000 beginning balance
payments (CFS) 45,000 55,000 supply purchases (derived)
50,000 ending balance
Assignment App1–29
Power Smart Ltd
Statement of Comprehensive Income
for the period ended 31 December 20x8
Design revenue ($254,500 - $5,000 + $41,400)..................... $290,900
Expenses:
Depreciation of equipment ($75,200 - $2,000) - $1,200) / 5................... $ 14,400
Operating expenses ($15,700 + $540 + $380)...................... 16,620
Supplies ($12,700 - $5,900).................................................. 6,800
Rent ($12,600- $1,800)......................................................... 10,800
Insurance ($5,400 x 1/3)....................................................... 1,800
Advertising............................................................................ 9,800
Wages ($46,200 + $900)....................................................... 47,100
Telephone ($12,940 + $250)................................................. 13,190
Salary ($74,000 + $2,000*)................................................... 76,000 196,510
Earnings and comprehensive income........................................ $ 94,390
* $2,000 of personal expenses (computer for James’ son) could alternatively be classified as a dividend, if
to be declared, or an account receivable, if to be repaid.
Power Smart Ltd
Statement of Financial Position
As at 31 December 20x8
Assets
Current assets:
Cash $ 6,960 Liabilities
Accounts receivable 41,400 Wages payable $ 900
Supplies 5,900 Accounts payable 1,170
Prepaid insurance 3,600 Unearned revenue 5,000
Rent deposit 1,800 7,070
59,660 Shareholders’ equity
Capital asset: Share capital 30,000
Equipment $73,200 Retained earnings 81,390
Less: accumulated 111,390
depreciation 14,400 58,800
Total assets $118,460 Total liabilities and equity $118,460
Assignment App1–30 (WEB)
Requirement 1
Wages expense......................................................................... 63,500
Wages payable......................................................................... 3,500
Cash................................................................................. 67,000
Accounts payable..................................................................... 90,000
Cash................................................................................. 90,000
Cash ......................................................................................... 220,000
Accounts receivable........................................................ 220,000
Accounts receivable................................................................. 225,000
Sales ($220,000 + $35,000 – $30,000)...................... 225,000
Purchases.................................................................................. 72,000
Accounts payable ($90,000 + $14,000 – $32,000)...... 72,000
Bad debt expense...................................................................... 2,000
Allowance for doubtful accounts (A/R)......................... 2,000
Rent expense ($225,000 x .10)................................................. 22,500
Cash................................................................................. 12,000
Rent payable ($225,000 x .10) – $12,000....................... 10,500
Operating expenses.................................................................. 6,000
Cash................................................................................. 6,000
Dividends (retained earnings).................................................. 14,500
Cash................................................................................. 14,500
Interest expense........................................................................ 1,480
Interest payable........................................................................ 200
Cash................................................................................. 1,680
Wages expense......................................................................... 1,500
Wages payable................................................................ 1,500
Amortization expense, leasehold improvements ($16,000 /4 years) 4,000
Acc’d amortization, leasehold improvements................ 4,000
Cost of goods sold.................................................................... 66,000
Inventory (closing)................................................................... 42,000
Purchases......................................................................... 72,000
Inventory......................................................................... 36,000
Requirement 2
Shirt Shack
Statement of Comprehensive Income
For the Year Ended 31 December 20x8
Sales ($220,000 + $35,000 – $30,000).................................... $225,000
Cost of goods sold:
Opening inventory........................................................... $ 36,000
Purchases ($90,000 + $14,000 – $32,000)...................... 72,000
108,000
Closing inventory............................................................ ( 42,000)
66,000
Gross profit.............................................................................. 159,000
Expenses:
Wages expense ($67,000 + $500 +
$1,000 – $3,500)........................................................ 65,000
Bad debts expense ($4,000 – $2,000)............................. 2,000
Rent expense ($12,000 + $10,5001)................................ 22,500
Amortization expense, leasehold improvements
($16,000/4)................................................................ 4,000
Miscellaneous operating expenses................................. 6,000
Interest expense ($1,680 – $200).................................... 1,480
Total expenses.......................................................................... 100,980
Earnings and comprehensive income...................................... $ 58,020
1 Total rent expense $225,000 x .10.......... $22,500
Monthly payments.................................. 12,000
Accrual.................................................... $10,500
Note: there are many permutations and combinations of the entries in requirement 1. It may be less confusing to students to debrief the problem by proceeding directly to the statement of comprehensive income in requirement 2; if the combination of entries presented in requirement 1 is correct, the statement of comprehensive income will also be correct.
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