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7/25/2019 Solutions exercises pre-course Fin Acc Session 3a_MIM.doc
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MIMFinancial Accounting PrecourseAnswers to Problems (Session 3a)
Problem 4
Dear Clay,
This trial balance lists the accounts of Mach-1, Inc. along with its balances at December 31,
20X6. The trial balance is an internal document used by accountants. It is not the same as
a balance sheet and an income statement. The balance sheet and the income statement
are financial statements used by managers, creditors, and investors for decision making.
The fact that the trial balance is in balance does not mean that Mach-1 is a sound
company. It merely means that total debits equal total credits in the company ledger. This
says nothing about the soundness of the business. To compute Mach-1s net income or net
loss for the current period, subtract total expenses from total revenue. During the current
period, Mach-1 earned a net income of $29,000 [service revenue of $86,000 minus total
expenses of $57,000($14,000 + $3,000 + $33,000 + $7,000)].
Note: Student responses may vary
.
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Problem 5
Req. 1
Haas Interiors, Inc.
Analysis of TransactionsASSETS = LIABILITIES + STOCKHOLDERS EQUITY
Cash +
Accounts
Receivable +Supplies + Land =
Accounts
Payable +
Common
Stock +
Retained
Earnings
Type of Stockholders
Equity Transaction
Bal. 1,250 1,500 12,000 8,000 4,000 2,750
a) 9,000 9,000 Issued stock
b) 6,700 6,700 Service revenue
c) (5,000) (5,000)
d) 1,000 1,000
e) 500 (500)
f) 1,000 1,000 Issued stockg) 2,400 2,400 Service revenue
h) (900) (900) Rent expense
(300) (300) Advertising expense
i) (1,800) ____ ____ (1,800) Dividends
Bal. 10,450 3,400 1,000 12,000 4,000 14,000 8,850
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$26,850 $26,850
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Req. 2
Haas Interiors, Inc.
Income StatementMonth Ended September 30, 20X8
Revenues:
Service revenue ($6,700 + $2,400)... $9,100
Expenses:
Rent expense $900
Advertising expense... 300
Total expenses. 1,200
Net income. $7,900
Req. 3
Haas Interiors, Inc.
Statement of Retained Earnings
Month Ended September 30, 20X8
Retained earnings, August 31, 20X8... $2,750
Add:Net income for the month. 7,900
10,650
Less:Dividends.. (1,800)
Retained earnings, September 30, 20X8 $8,850
Req. 4
Haas Interiors, Inc.
Balance Sheet
September 30, 20X8
ASSETS LIABILITIES
Cash. $10,450Accounts payable $ 4,000
Accounts receivable 3,400 STOCKHOLDERS
Supplies.. 1,000 EQUITY
Land. 12,000Common stock. 14,000
Retained earnings 8,850
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Total stockholders equity. 22,850
Total liabilities and
Total assets $26,850 stockholders' equity.. $26,850
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Problem 6
Reqs. 1 and 2
Journal:Debit Credit
(a)
Cash 10.000
Building 50.000
Common Stock 60.000
(b)
Cash 20.000
Note Payable 20.000
!"ansmitting #$ui%ment 22.000
Cash 22.000
(d)
&''ice Su%%lies 00
ccounts %ayable 00
(e)
Sala"y #*%ense 1.+00
Cash 1.+00
(')
Cash 500
Se",ice -e,enue 500
(g)
ccount -ecei,ables 1.00Se",ice -e,enue 1.00
(h)
ccount %ayable 100
Cash 100
(i)
/tility #*%ense 600
ccount %ayable 600
()
Cash 1.100
ccount -ecei,able 1.100
(k)
-ent #*%ense 1.000
d,e"tising #*%ense 00
Cash 1.00
(l)
i,idends 2.600
Cash 2.600
Account Title
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T-accounts:
Cash Accounts Receivable
(a) 10,000(c) 22,000 (g) 1,800(j) 1,100
(b) 20,000(e) 1,300 Bal. 700
(f) 500(h) 100(j) 1,100(k) 1,800
(l) 2,600
Bal. 3,800
Office Supplies Transmitting Equipment
(d) 400 (c) 22,000
Bal. 400 Bal. 22,000
Building Accounts Payable
(a) 50,000 (h) 100 (d) 400
Bal. 50,000 (i) 600
Bal. 900
Note Payable Common Stock
(b) 20,000 (a) 60,000
Bal. 20,000 Bal. 60,000
Dividends Service Revenue
(l) 2,600 (f) 500
Bal. 2,600 (g) 1,800
Bal. 2,300
Salary Expense Rent Expense
(e) 1,300 (k) 1,000
Bal. 1,300 Bal. 1,000
Advertising Expense Utilities Expense
(k) 800 (i) 600
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Bal. 800 Bal. 600
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Req. 3
CableVision, Inc.
Trial BalanceJanuary 31, 20X7
ACCOUNT DEBIT CREDIT
Cash... $ 3,800
Accounts receivable.. 700
Office supplies 400
Transmitting equipment... 22,000
Building. 50,000
Accounts payable.. $ 900
Note payable 20,000
Common stock 60,000
Dividends.. 2,600
Service revenue.. 2,300
Salary expense 1,300
Rent expense... 1,000
Advertising expense.. 800
Utilities expense. 600
Total... $83,200 $83,200
Req. 4
Total assets = $76,900 ($3,800 + $700 + $400 + $22,000 + $50,000)
Total liabilities = $20,900 ($900 + $20,000)
Net loss = $1,400 ($2,300 - $1,300 - $1,000 - $800- $600)
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Problem 7
Req. 1 (journal entries; explanations not required)
Journal
DATE ACCOUNT TITLES DEBIT CREDIT
Jan. 2 Cash 33,000
Common Stock 33,000
3Supplies. 500
Furniture 2,600
Accounts Payable.. 3,100
4Cash 1,500
Service Revenue. 1,500
7Land 22,000
Cash... 22,000
11Accounts Receivable.. 800
Service Revenue. 800
16Accounts Payable 2,600
Cash 2,600
17Utilities Expense.. 110
Cash 110
18Cash 400
Accounts Receivable. 400
Jan. 22 Utilities Expense 130
Cash.. 130
29 Cash.. 1,800
Service Revenue 1,800
31 Salary Expense.. 1,300
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Cash.. 1,300
31 Dividends. 2,200
Cash.. 2,200
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Req. 2 (ledger accounts)
Cash Accounts Receivable
Jan. 2 33,000 Jan. 7 22,000 Jan. 11 800 Jan. 18 400
4 1,500 16 2,600 Bal. 400
18 400 17 110
29 1,800 22 130
31 1,300 Supplies
31 2,200 Jan. 3 500
Bal. 8,360 Bal. 500
Furniture Land
Jan. 3 2,600 Jan. 7 22,000
Bal. 2,600 Bal. 22,000
Accounts Payable Common Stock
Jan. 16 2,600 Jan. 3 3,100 Jan. 2 33,000
Bal. 500 Bal. 33,000
Dividends
Jan. 31 2,200 Bal. 2,200
Service Revenue Salary Expense
Jan. 4 1,500 Jan. 31 1,300
11 800 Bal. 1,300
29 1,800
Bal. 4,100
Utilities ExpenseJan. 17
22
110
130
Bal. 240
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Req. 3
Pat ODell, Attorney, P.C.
Trial BalanceJanuary 31, 20XX
ACCOUNT DEBIT CREDIT
Cash... $ 8,360
Accounts receivable.. 400
Supplies 500
Furniture... 2,600
Land... 22,000
Accounts payable.. $ 500
Common stock 33,000
Dividends.. 2,200
Service revenue.. 4,100
Salary expense 1,300
Utilities expense. 240
Total... $37,600 $37,600
Req.4
Pat ODell
Income Statement
Month Ended January 31 st, current year
Revenues:
Service revenue ... $4,100
Expenses:
Salary expense $1.300
Utilities expense... 240
Total expenses. 1,540Net income. $2,560
Pat ODell
Statement of Retained Earnings
Month Ended January 31 st current year
Retained earnings, 1 st January ... $0
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Add: Net income for the month. 2,560
2,560
Less:Dividends.. (2,200)
Retained earnings, 31 st January $360
Req 5
Pat ODell
Balance Sheet
January 31stcurrent year
ASSETS LIABILITIES
Cash. $8,360Accounts payable $ 500
Accounts receivable 400 STOCKHOLDERS
Supplies.. 500 EQUITY
Land. 22,000Common stock. 33,000
Furniture.. 2,600 Retained earnings 360
Total stockholders equity. 33,360
Total liabilities and
Total assets $33,860 stockholders' equity.. $33,860
Pat ODell Attorney PC
Statement of Cash Flows
Period Ended January 31, current year
Cash flows from operating activities:
Collections from customers. $ 3,700
Payments to utilities suppliers . (240)
Payments to employees.. (1.300)
Net cash used for operating activities.. 2,160
Cash flows from investing activities:
Purchase of land/furniture.. (24,600)
Net cash used for investing activities (24,600)
Cash flows from financing activities:
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Issuance of common stock 33,000
Payment of dividend (2,200)
Net cash provided by financing activities 30,800
________
Increase in cash. $ 8,360
Cash balance, January 1, . 0Cash balance, January 31, ... $ 8,360
Req. 6
Total resources (assets) = $33,860 ($8,360 + $400 + $500 + $2,600 + $22,000)
Amount owed (total liabilities) = $500
Profit (net income) = $2,560 ($4,100 - $1,300 - $240)
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Problem 8
Req. 1
Lane Designers, Inc.
Analysis of Transactions
ASSETS = LIABILITIES + STOCKHOLDERS EQUITY
Cash +
Accounts
Receivable +Supplies + Land =
Accounts
Payable +
Common
Stock +
Retained
Earnings
Type of Stockholders
Equity Transaction
Bal. 1,720 2,240 24,100 5,400 10,000 12,660
a) 42,000 42,000 Issued stock
b) (1,400) (1,400)
c) 4,100 4,100 Service revenue
d) 750 (750)
e) 720 720f) 5,000 5,000 Service revenue
g) 1,700 1,700 Issued stock
h) (1,200) (1,200)Rent expense
(660) (660) Advertising expense
i) (2,400) ___ (2,400) Dividends
Bal. 44,610 6,490 720 24,100 4,720 53,700 17,500
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$75,920 $75,920
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Req. 2
Lane Designers, Inc.
Income StatementMonth Ended May 31, 20X5
Revenues:
Service revenue ($4,100 + $5,000).. $9,100
Expenses:
Rent expense... $1,200
Advertising expense.. 660
Total expenses 1,860
Net income $7,240
Req. 3
Lane Designers, Inc.
Statement of Retained Earnings
Month Ended May 31, 20X5
Retained earnings, April 30, 20X5 $12,660
Add:Net income for the month. 7,240
19,900
Less:Dividends.. (2,400)
Retained earnings, May 31, 20X5. $17,500
Req. 4
Lane Designers, Inc.
Balance Sheet
May 31, 20X5
ASSETS LIABILITIES
Cash. $44,610Accounts payable. $ 4,720
Accounts receivable 6,490 STOCKHOLDERS
Supplies.. 720 EQUITY
Land. 24,100Common stock.. 53,700
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Retained earnings.... 17,500
Total stockholders equity. 71,200
Total liabilities and
Total assets... $75,920 stockholders' equity... $75,920
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Problem 9
Req. 1 (journal entries; explanations not required)
Journal
DATE ACCOUNT TITLES DEBIT CREDIT
Sept. 3 Cash. 25,000
Common Stock. 25,000
4Supplies.. 200
Furniture. 1,800
Accounts Payable 2,000
6Cash. 1,000
Service Revenue.. 1,000
7Land. 15,000
Cash 15,000
10Accounts Receivable.. 600
Service Revenue.. 600
14Accounts Payable 1,800
Cash 1,800
16Utilities Expense.. 120
Cash 120
17Cash. 500
Accounts Receivable.. 500
Sept. 24 Utilities Expense. 110
Cash.. 110
28 Cash 1,500
Service Revenue. 1,500
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30 Salary Expense 1,200
Cash... 1,200
30 Dividends.. 2,400
Cash... 2,400
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Req. 2 (ledger accounts)
Cash Accounts Receivable
Sept. 325,000 Sept. 7 15,000 Sept. 10 600 Sept. 17 500
6 1,000 14 1,800 Bal. 100
17 500 16 120
28 1,500 24 110
30 1,200 Supplies
30 2,400 Sept. 4 200
Bal. 7,370 Bal. 200
Furniture Land
Sept. 4 1,800 Sept. 7 15,000
Bal. 1,800 Bal. 15,000
Accounts Payable Common Stock
Sept. 14 1,800 Sept. 4 2,000 Sept. 3 25,000
Bal. 200 Bal. 25,000
Dividends Service Revenue
Sept. 30 2,400 Sept. 6 1,000
Bal. 2,400 10 600
28 1,500
Bal. 3,100
Salary ExpenseSept. 30 1,200
Bal. 1,200
Utilities Expense
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Sept. 16
24
120
110
Bal. 230
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Req. 3
Toms Lopez, Attorney, P.C.
Trial BalanceSeptember 30, 20XX
ACCOUNT DEBIT CREDIT
Cash... $ 7,370
Accounts receivable.. 100
Supplies 200
Furniture... 1,800
Land... 15,000
Accounts payable.. $ 200
Common stock 25,000Dividends.. 2,400
Service revenue.. 3,100
Salary expense 1,200
Utilities expense. 230
Total... $28,300 $28,300
Rev. 4
Total resources (assets) = $24,470 ($7,370 + $100 + $200 + $1,800 + $15,000)
Amount owed (total liabilities)= $200
Profit (net income) = $1,670 ($3,100 - $1,200 - $230)
Toms Lpez
Income Statement
Month Ended September 30 , current year
Revenues:
Service revenue ... $3,100
Expenses:
Salary expense $1.200
Utilities expense... 230
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Total expenses. 1,430
Net income. $1,670
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Toms Lpez
Statement of Retained Earnings
Month Ended sept. 30 current year
Retained earnings, 1 st september ... $0
Add: Net income for the month. 1 .6701.670
Less:Dividends..
(2 .400)
Retained earnings, 30 sept. $(730 )
Req. 5 Toms Lpez
Balance Sheet
Sept. 30 current yearASSETS LIABILITIES
Cash $7.370 Accounts payable $ 200
Accounts receivable 100 STOCKHOLDERS
Supplies 200 EQUITY
Land 15,000 Common stock 25.000
Furniture 1,800 Retained earnings (730)
Total stockholders equity. 24.270
Total liabilities and
Total assets $24,470Stockholders' equity. $24,470
Toms Lpez
Statement of Cash Flows
Period Ended September 30, current year
Cash flows from operating activities:
Collections from customers. $ 3,000
Payments to utilities suppliers . (230)
Payments to employees.. (1.200)
Net cash used for operating activities.. 1,570
Cash flows from investing activities:
Purchase of land/furniture.. (16,800)
Net cash used for investing activities (16,800)
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Cash flows from financing activities:
Issuance of common stock 25,000
Payment of dividend (2,400)
Net cash provided by financing activities 22,600
________Increase in cash. $ 7,370
Cash balance, January 1, . 0
Cash balance, January 31, ... $ 7,370
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Problem 10
Reqs. 1 and 2
Cash Accounts Receivable
(a) 11,000(d) 88,000 (f) 2,100(j) 1,200
(b) 90,000(e) 2,200 Bal. 900
(i) 1,100(g) 800
(j) 1,200(k) 1,100
(l) 500
Bal. 10,700
Office Supplies Computer Equipment
(c) 1,300 (d) 88,000
Bal. 1,300 Bal. 88,000
Building Accounts Payable
(a) 60,000 (g) 800(c) 1,300
Bal. 60,000 (h) 600
Bal. 1,100
Note Payable Common Stock
(b) 90,000 (a) 71,000
Bal. 90,000 Bal. 71,000
Dividends Service Revenue(l) 500 (f) 2,100
Bal. 500 (i) 1,100
Bal. 3,200
Salary Expense Advertising Expense
(e) 2,200 (h) 600
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Bal. 2,200 Bal. 600
Rent Expense Utilities Expense
(k) 700 (k) 400
Bal. 700 Bal. 400
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Req. 3
Hendrix Computer Graphics Service, Inc.
Trial Balance
June 30, 20X3ACCOUNT DEBIT CREDIT
Cash $ 10,700
Accounts receivable... 900
Office supplies. 1,300
Computer equipment.. 88,000
Building.. 60,000
Accounts payable $ 1,100
Note payable. 90,000
Common stock. 71,000Dividends... 500
Service revenue 3,200
Salary expense. 2,200
Advertising expense... 600
Rent expense 700
Utilities expense.. 400 _______
Total. $165,300 $165,300
Req. 6
Total assets = $160,900 ($10,700 + $900 + $1,300 + $88,000 + $60,000)
Total liabilities = $91,100 ($1,100 + $90,000)
Net loss = $700 ($3,200 - $2,200 - $600 - $700 -$400)
Req. 4
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Revenue
Se",ice -e,enue .............. +.200
ExpensesSala"y #*%ense ................. 2.200
-ent #*%ense ................. 00
d,e"tising #*%ense ............. 600
/tilities #*%ense ................. 00
Total Expenses .............. +.300Net Income .................. !""#
$endrix Computer %rap&ics 'ervice( Inc.
Income 'tatement )#Mont& ended *une +"( ,"-+
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-etained ea"nings4 ay +14 20+ 0
dd7 Net income 'o" the month .............. (00)!""#
8ess7 i,idends ............................. (500)
-etained ea"nings4 end o' yea" ............... .,""#
$endrix Computer %rap&ics 'ervice( Inc.
'tatement o/ Retained Earnings )#Mont& ended *une +"( ,"-+
Req.5
Cash 10.00 ccounts %ayable 1.1
ccounts "ecei,able 300 Note %ayable 30.0
&''ice Su%%lies 1.+00
Com%ute" #$ui%ment .000 Total liabilities 0.
Building 60.000
Common Stock 1.0
-etained ea"nings (1.20
Total '$E 10.2
Total Assets 1".0"" Total 3iabilities and '$E 1".0
'T4C5$43DER'6 E78IT9
:alance '&eet )#
*une +"( ,"-+
A''ET' 3IA:I3ITIE'
$endrix Computer %rap&ics 'ervice( Inc.
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Problem 11
Req. 1
20X5 20X4
(Thousands)
STATEMENT OF OPERATIONS
Revenues 13,176 = $ k $15,487
Cost of goods sold 11,026 a = 12,822
Other expenses 1,230 1,169
Earnings before income taxes 920 1,496
Income taxes (35% in 20X5) 322 = l 100
Net earnings 598 =$ m $ b = 1,396
STATEMENT OF RETAINED EARNINGS
Beginning balance 4,043 =$ n $ 2,702
Net earnings 598 = o c = 1,396
Dividends (65) (55)
Ending balance 4,576 =$ p $ d = 4,043
BALANCE SHEET
Assets:
Cash 1,421 =$ q $ e = 1,086
Property, plant and equipment 1,597 1,750
Other assets 10,198 = r 10,190
Total assets 13,216 =$ s $13,026
Liabilities:
Current liabilities 5,706 =$ t $ 5,403
Notes payable and long-term debt 2,569 3,138
Other liabilities 69 72Total liabilities 8,344 f = 8,613
Shareholders Equity:
Common stock $ 117 $ 118
Retained earnings 4,576 = u g = 4,043
Other shareholders equity 179 252
Total shareholders equity 4,872 = v 4,413
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Total liabilities and shareholders equity 13,216 =$ w $ h = 13,026
STATEMENT OF CASH FLOWS
Net cash provided by operating activities 986 =$ x $ 475
Net cash provided by investing activities 58 574
Net cash used for financing activities (709) (1,045)
Increase (decrease) in cash 335 i = 4
Cash at beginning of year 1,086 = y 1,082
Cash at end of year 1,421 =$ z $ j = 1,086
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Req. 2
a.Operations deteriorated during 20X5. Revenues decreased, and net earnings fell
from $1,396 thousand to $598 thousand.
b.The company retained most of its net earnings for use in the business. Dividends
were only $55 thousand in 20X4 and $65 thousand in 20X5, which are much less
than net earnings.
c.Total assets at the end of 20X5 were $13,216 thousand. This is the amount of total
resources that the company has to work with as it moves into the year 20X6.
d.At the end of 20X4 the company owed total liabilities of $8,613 thousand. At the
end of 20X5 the company owed $8,344 thousand. A decrease in total liabilities is a
good trend in relation to an increase in total assets because this means that total
stockholders equity is increasing.
e.The companys major source of cash is operating activities, and cash is
increasing. Based on these two facts, it appears that the companys ability to
generate cash is strong despite the drop in 20X5 net earnings.
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