Chapter 1 - WordPress.com€¦ · Web viewApex Architectural Designs. Income Statement. For Year Ended June 30, 2011 Revenues: ... March 31 Assets 2011 2010 Current assets Cash

Chapter 5 Completing the Accounting

Cycle and Classifying Accounts

Questions

1. A work sheet is used to collect and organize the data for preparing adjusting entries, closing entries, and financial statements.

2. The adjustment debits and credits are identified by letter to ensure that they are complete. The letters can also be used to identify the reasons for the entries. The letters also simplify the preparation of the actual adjusting journal entries.

3. Closing entries prepare the revenue, expense, and withdrawal accounts for the upcoming year by giving them zero balances. Closing entries also update the owner’s capital account for the transactions of the year just finished.

4. Closing entries include: (1) closing the revenue accounts, (2) closing the expense accounts, (3) closing the Income Summary account, and (4) closing the withdrawals account.

5. Closing entries zero out the temporary accounts (revenues, expenses, Income Summary, and withdrawals) and transfer these balances to a permanent account (capital). The asset and liability accounts (also permanent accounts) are not affected by closing entries.

6. Both adjusting and closing entries are recorded at the end of the accounting period. Adjusting entries update the accounts for economic transactions that have taken place but not in the form of external transactions. Closing entries update the owner’s capital account and prepare the temporary accounts for use in the next accounting period.

7. The Income Summary account is used to summarize the period’s revenues and expenses. As a result, it momentarily has a balance equal to the net income (or net loss) for the period. (In fact, closing can be accomplished without the Income Summary account by closing the revenue and expense accounts directly to the capital account.)

8. Yes, an error has occurred because Amortization Expense is a temporary account that should be closed. If the item appears on the post-closing trial balance, the amounts of net income, total assets, and owner’s equity are all overstated.

9. This closing entry would have been recorded on June 25, 2005 to close Interest Income to the Income Summary.

Interest Income..................................... 340,000Income Summary.......................... 340,000

10. A company’s operating cycle is the average time between paying cash for salaries or merchandise and receiving cash from customers in exchange for goods or services.

11. An unearned revenue is usually a current liability.

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Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.318 Fundamental Accounting Principles, Twelfth Canadian Edition

12. Assets on a typical balance sheet include current assets; long-term investments; property, plant and equipment; and intangible assets. Liabilities are classified as current and long-term.

13. Property, plant and equipment are tangible long-lived assets used to produce or sell goods and services.

14. Long-term debt due before December 31, 2006 is $114,115,000. *15. Reversing entries simplify subsequent entries for accrued expenses and revenues by

eliminating the need to record the removal of the accrued liability or receivable.*16. This reversing entry could be made as of the first day of the next fiscal year:

Salaries Payable................................................ 500Salaries Expense........................................ 500

QUICK STUDY

Quick Study 5-11. BS 4. BS2. BS 5. BS3. IS 6. IS


Quick Study 5-2Balance Sheet

Unadjusted Adjusted

& Statement

ofTrial

BalanceAdjustm

entsTrial

BalanceIncome

StatementOwner's Equity

Account Dr Cr Dr Cr Dr Cr Dr Cr Dr CrCash 15 15 15Accounts receivable 22 22 22Supplies 25 13 12 12Ed Wolt, capital 40 40 40Ed Wolt, withdrawals 12 12 12Fees earned 48 48 48Supplies expense 14 13 27 27Totals 88 88 13 13 88 88 27 48 61 40

21 21Net income 48 48 61 61


Copyright © 2007 by M

cGraw

-Hill Ryerson Lim

ited. All rights reserved.Solutions M

anual for Chapter 5319

Quick Study 5-3Alice Pursley, capital for the December 31, 2011 balance sheet:

Beginning capital.......................... $50,000

Add: Net income ($184,000 – $125,000).....................................

59,000

Less: Withdrawals........................ 32,00 0

Ending capital.............................. $77,000

Quick Study 5-4Sam Hascal, Capital for the December 31, 2011, balance sheet:

Beginning capital ................$165,000Less: Net loss ($74,000 – $115,000) 41,000Less: Withdrawals .............. 32,000 Ending capital ....................$ 92,000

Quick Study 5-5Income Summary balance after closing revenues and expenses:

Revenues: $35,000 + $3,500 ............. =$38,500Expenses: $19,000 + $4,000 + $2,300 = –25,300Credit balance .................................. =$13,200

Peter Jontil, Capital balance after all closing entries:

Beginning balance...........

$14,000

Peter Jontil, Capital

Add: Net income............

13, 200

14,000 (Beg. Bal.)

Total............... $27,200

OR

(Withdrawals)

6,000

13,200 (Net income)

Less: Withdrawals....

6, 000

21,200 (End. Bal.)

Ending balance...........

$21,200



Quick Study 5–6

Assets Liabilities CapitalApr. 30

250

30 Apr. 30

200

Apr. 30

(4)

20 40 (3)

220

Balance

Withdrawals Revenue ExpensesApr. 30

20 20 (4) (1) 100

100

Apr. 30

Apr. 30

60

60 (2)

Balance

-0-

-0- Balance

Balance

-0-


cGraw

-Hill Ryerson Lim



2011(1) Apr

30Revenue.............................. 100

Income Summary............. 100 To close the revenue account.

(2) 30 Income Summary................. 60 Expenses........................ 60 To close the expenses account.

(3) 30 Income Summary................. 40 Capital............................ 40 To close the income summary to capital.

Income Summary(2) 60 10

0(1)

(3) 40 40 Balance

-0-

Balance

QS 5-7

Assets Liabilities CapitalOct. 31

250

110

Oct. 31

(4)

20 200

Oct. 31

(3)

40

140

Balance

Withdrawals Revenue ExpensesOct. 31

20 20 (4) (1) 100

100

Oct. 31

Oct. 31

140

140

(2)

Balance

-0-

-0- Balance

Balance

-0-

Income Summary(2) 14 10 (1)

2011(1) Oct.

31Revenue.............................. 100

Income Summary............. To close the revenue account.

(2) 31 Income Summary................. 140 Expenses........................ To close the expenses account.

(3) 31 Capital................................ 40 Income Summary............. To close the income summary to capital.


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-Hill Ryerson Lim

ited. All rights reserved.322

Fundamental Accounting Principles, Tw

elfth Canadian Edition

0 0Balan

ce40 40 (3)

Balance

-0-

Quick Study 5-8

SilverStar AutomotivePost-Closing Trial Balance

October 31, 2011Account Debit Credit

Cash.......................................... $ 40

Accounts receivable.................... 20Unearned revenue...................... $ 10 Capital....................................... 50 Totals........................................ $ 60 $ 60

Quick Study 5-91. (f) Journalizing transactions.2. (g) Posting the transaction entries.3. (a) Preparing the unadjusted trial balance.4. (h) Completing the work sheet (optional).5. (c) Journalizing and posting adjusting entries.6. (e) Preparing the financial statements.7. (d) Journalizing and posting closing entries.8. (b) Preparing the post-closing trial balance.

Quick Study 5-101. C 5. B2. E 6. A3. A 7. D4. F

QS 5-11

1. z. 6. f. 11. c. 16. c.2. g. 7. e. 12. a. 17. z.3. a. 8. a. 13. c. 18. a.4. z. 9. b. 14. d. 19. e.5. c. 10. e. 15. c. 20. b.


Quick Study 5-12

Jardine ServicingPartial Balance Sheet

March 31, 2011Liabilities Current liabilities Accounts payable................... $14,0

00 Unearned fees........................ 26,00

0 Notes payable, due February 1, 2012............................................

45,000

Current portion of mortgage payable...........................................

56,0 00

Total current liabilities............ $141,000

Long-term liabilities Mortgage payable (less $56,000 current portion)...........................................

59,0 00

Total liabilities............................ $200,000

*Quick Study 5-132012

Jan. 1 Rent Revenue............................... 9,800 Rent Receivable...................... 9,800 To reverse accrued revenue.

20

Cash............................................ 15,500

Rent Revenue.......................... 15,500 To record collection of rent revenue.

*Quick Study 5-14Current assets:

Accounts receivable ..........$15,000Cash ................................ 6,000

Office supplies .................. 1,800


Prepaid insurance ............. 2,500Total ................................$25,300

Current liabilities:Accounts payable .............$10,000Unearned services revenue 4,000Total ................................$14,000

Current ratio =

$25,300 = 1.81 $14,000

EXERCISES

Exercise 5-1 (15 minutes)1. C 5. C 9. C 13

.C

2. B 6. A 10.

C 14.

A

3. D 7. A 11.

D 15.

A

4. B 8. D 12.

D 16.

C

Exercise 5-2 (20 minutes)Balance Sheet

Adjusted andTrial Income Statement of

Balance Statement Owner’s EquityNo. Title Debit Credit Debit Credit Debit Credit101Cash..................... 3,000 3,000106Accounts receivable 13,100 13,100153Trucks..................41,000 41,000154Accum. amortization, trucks 16,500

16,500193Franchise.............15,000 15,000201Accounts payable.. 7,000 7,000209Salaries payable. . . 1,600 1,600233Unearned fees...... 1,300 1,300301Bo Webber, capital 37,750 37,750302Bo Webber, withdrawals….. 7,200 7,200401Plumbing fees earned 49,000 49,000


1.81 is less than the industry average of 2.2 so compares unfavourably. However, a current ratio of 1.81 is generally

611Amortization expense, trucks5,500 5,500622Salaries expense...18,500 18,500640Rent expense........ 6,000 6,000677Misc. expenses..... 3,850 3,850

Totals................113,150113,15033,85049,00079,30064,150Net income........... 15,150

15,150 Totals................ 49,000 49,000 79,300 79,300


Exercise 5-3 (25 minutes) Parts 1, 2, and 3Musical Sensations

Work SheetFor Year Ended December 31, 2011

Account

Unadjusted Trial

Balance Adjustments

Adjusted Trial

BalanceIncome

Statement

Balance Sheet &

Statement of Owner’s Equity

Debit Credit

Debit Credit Debit Credit

Debit Credit

Debit Credit

Cash................... 14,000

14,000

14,000

Accounts receivable...........

26,000

26,000

26,000

Office supplies... . 950 d) 430

520 520

Musical equipment..........

212,000

212,000

212,000

Accum. amort. musical equip. 16,20

0b)

16,200

32,400

32,400

Accounts payable 3,350 3,350 3,350Unearned performance revenue......

12,400

a) 10,60

0

1,800 1,800

Jim Daley, capital 272,000

272,000

272,000

Jim Daley, withdrawals........

52,000

52,000

52,000

Performance revenue..............

119,000

a) 10,60

0

129,600

129,600



cGraw

-Hill Ryerson Lim




Salaries expense. 76,000

c) 13,80

0

89,800

89,800

Travelling expense..............

42,000

42,000

42,000

Totals.............. 422,950

422,950

Amortization expense, musical equip......

b) 16,20

0

16,200

16,200

Salaries payable.. c) 13,80

0

13,800

13,800

Office supplies expense..............

d) 430

430 430

Totals.............. 41,030

41,030

452,950

452,950

148,430

129,600

304,520

323,350

Net loss.............. 18,830

18,830

Totals.............. 148,430

148,430

323,350

323,350

Exercise 5-3 (concluded)Part 4$272,000 – $52,000 – $18,830 = $201,170

or

Jim Daley, Capital

272,000

(Beg. bal.)

(With.) 52,000

(Net Loss)

18,830

201,170

(End. bal.)

Exercise 5-4 (20 minutes)1. (a) Income = $36,800

2. (a)Mar.

31Income Summary........................... 36,80

0 Capital...................................... 36,80

0 To close the income summary account to capital.

3. (a) Capital63,000

(Beg. bal.)

$63,000 + $36,800 – $17,000 = $82,800 OR

(With.)

17,000

36,800

(Net income)

82,800

(End. bal.)

1. (b) Net Loss = $60,000

2. (b)June 30

Capital.......................................... 60,000


Income Summary....................... 60,000

To close the income summary account to capital.

3. (b) Capital114,00

0(Beg. bal.)

$114,000 – $60,000 = $54,000 OR

(Net loss)

60,000

54,000 (End. bal.)


Exercise 5-5 (30 minutes)Debit Credit

Rent earned....................................... 99,000Salaries expense................................ 35,3

00Insurance expense............................. 4,40

0Dock rental expense........................... 12,0

00Boat supplies expense........................ 6,22

0Amortization expense, boats.............. 21,5

00

Totals................................................ 79,420

99,000

Net income................................... 19,580

Totals................................................ 99,000

99,000

2011 Closing entries:Dec.

31Rent Earned....................................... 99,0

00 Income Summary.......................... 99,000 To close the revenue account.

31 Income Summary............................... 79,420

Salaries Expense........................... 35,300 Insurance Expense........................ 4,400 Dock Rental Expense..................... 12,000 Boat Supplies Expense.................. 6,220 Amortization Expense, Boats......... 21,500 To close the expense accounts.

31 Income Summary............................... 19,580

Carl Winston, Capital.................... 19,580 To close Income Summary.

31 Carl Winston, Capital.......................... 18,000


Carl Winston, Withdrawals............ 18,000 To close the withdrawals account.


Exercise 5-6 (20 minutes)2011 Closing entries:

Apr.

30

Plumbing Fees Earned............. 39,500

Income Summary................ 39,500 To close revenue to the income summary.

30

Income Summary..................... 31,100

Amortization Expense, Trucks....................................

5,500

Salaries Expense................ 15,750 Rent Expense..................... 6,000 Advertising Expense........... 3,850 To close expense accounts to income summary.

30

Income Summary..................... 8,400

Frank Block, Capital............ 8,400 To close income summary to capital.

30

Frank Block, Capital................ 7,200

Frank Block, Withdrawals.... 7,200 To close withdrawals to capital.

Block Plumbing Co.Post-Closing Trial Balance

April 30, 2011Acct.

No. Account Debit Credit101 Cash $

4,100

106 Accounts receivable.................... 12,000 153 Trucks........................................ 20,500 154 Accumulated amortization,

trucks........................................ $

8,250193 Franchise................................... 15,000 201 Accounts payable....................... 7,000


209 Salaries payable......................... 1,600233 Unearned fees............................ 1,300301 Frank Block, capital.................... 33,450*

Totals........................................ $51,600

$51,600

*Calculated as:

32,250 + 8,400 – 7,200 = 33,450 or


Frank Block, Capital

32,250

(Adj. Bal, Apr. 30)

(Withdrawals)

7,200

8,400 (Net income)

33,45(Post-closing Bal., Apr. 30)

Exercise 5-7 (20 minutes)2011 Closing entries:

January 31

Subscription Revenues............. 62,000

Interest Revenue...................... 450 Income Summary................. 62,450 To close revenues to the income summary.

31 Income Summary...................... 65,400 Amortization Expense, Equipment...............................

2,000

Rent Expense....................... 7,400 Salaries Expense.................................................................

56,000

To close expense accounts to income summary.

31 Kate Goldberg, Capital............. 2,950 Income Summary................. 2,950 To close income summary to capital.

31 Kate Goldberg, Capital............. 4,000 Kate Goldberg, Withdrawals. 4,000 To close withdrawals to capital.


Exercise 5-8 (20 minutes) 2011 Closing entries:Dec.31 Services Revenue .................... 72,000

Income Summary ................ 72,000To close the revenue account to the income summary.

31 Income Summary ..................... 73,400Amortization Expense, Equipment

4,000Salaries Expense ................ 42,000Insurance Expense .............. 3,000Rent Expense ..................... 22,000Supplies Expense ................ 2,400

To close the expense accounts to the income summary.

31 Jo Weller, Capital..................... 1,400Income Summary ................ 1,400

To close the income summary to capital.

31 Jo Weller, Capital ..................... 12,000Jo Weller, Withdrawals ........ 12,000

To close withdrawals to capital.

Exercise 5-9 (20 minutes)2011 Closing entries:Sept.

30Consulting Fees Earned............ 68,000

Income Summary................. 68,000 To close revenues to the income summary.

30 Income Summary..................... 18,750 Amortization Expense, Office Equipment...............................

3,500

Rent Expense...................... 1,750 Wages Expense................... 13,500 To close expense accounts to income summary.

30 Income Summary..................... 49,250


Sandra Sloley, Capital.......... 49,250 To close income summary to capital.

30 Sandra Sloley, Capital.............. 19,000 Sandra Sloley, Withdrawals. 19,000 To close withdrawals to capital.

Exercise 5-10 (35 minutes)Closing entries:

2011(1)

Dec.

31

Services Revenue..................... 73,000

Income Summary................ 73,000 To close the revenue account to the Income Summary.

(2)

31

Income Summary...........................48,100

Rent Expense........................... 8,600 Salaries Expense...................... 20,000 Insurance Expense.................... 3,500 Amortization Expense............... 16,000 To close the expense accounts to the income summary.

(3)

31

Income Summary...........................24,900

Marcy Jones, Capital ................ 24,900 To close the income summary to capital.

(4)

31

Marcy Jones, Capital ......................24,000

Marcy Jones, Withdrawals......... 24,000 To close withdrawals to capital.


Exercise 5-10 (concluded)Posted accounts:

Assets Rent ExpenseDec. 31

80,000 Dec. 31

8,600

8,600

(2)

Balance

0

Liabilities38,100

Dec. 31

Salaries Expense

Dec. 31

20,000

20,000

(2)

Marcy Jones, Capital Balance

0

(4) 24,000 41,000

Dec. 31

24,900

(3) Insurance Expense

41,900

Balance

Dec. 31

3,500

3,500

(2)

Balance

0

Marcy Jones, WithdrawalsDec. 31

24,000 24,000

(4) Amortization Expense

Balance

0 Dec. 31

16,000

16,000

(2)

Balance

0

Income Summary(2) 48,100 73,0

00(1)

(3) 24,900 24,900

Balance

0 Balance

Services Revenue(1) 73,000 73,0

00Dec. 31

0 Balance


Exercise 5-11 (10 minutes)Jones’ Consulting

Post-Closing Trial BalanceDecember 31, 2011

Account Debit CreditAssets........................................ $

80,000Liabilities................................... $

38,100Marcy Jones, Capital................... 41,900Totals........................................ $80,00

0$80,00

0


Exercise 5-12 (12 minutes)1. Bill Duggan, Withdrawals; Interest Revenue, and Other

Expenses have not been closed.

2.2011June 30

Bill Duggan, Capital............... 71,000

Interest Revenue................... 1,150

Bill Duggan, Withdrawals... 72,000

Other Expenses................. 150 To close interest earned, withdrawals and other expenses directly to capital.

Bill Duggan, Capital

216,200

3. $216,200 – $71,000 = $145,200

OR

71,000

145,200

(Balance)


Exercise 5-13 (15 minutes) Part A

Account TitleAdjusted Trial Balance Debit Credit

Accounts payable...................................... $ 11,000

Accounts receivable................................... $ 59,000

Accumulated amortization, equipment........ 9,000Accumulated amortization, truck................ 21,000

X Amortization expense................................ 3,800Cash......................................................... 29,000Equipment................................................ 13,000Franchise.................................................. 17,800

X Gas and oil expense................................... 7,500X Interest expense....................................... 4,500

Interest payable........................................ 750Land not currently used in business operations................................................

52,000

Long-term notes payableNote 1...................... 35,000Notes payable, due February 1, 2012.......... 7,000Notes receivableNote 2.................................. 6,000Patent...................................................... 7,000Prepaid rent.............................................. 14,000

X Rent expense............................................ 39,000X Repair revenue.......................................... 247,00

0Repair supplies.......................................... 17,000

X Repair supplies expense............................ 14,000X Sid Whimsly, capital................................... 24,050X Sid Whimsly, withdrawals........................... 49,000

Truck........................................................ 26,000Unearned repair revenue...........................

3,80

0 Totals....................................................... $358,6

00 $358,6

00

b. $24,050 -$3,800 - $7,500 - $4,500 - $39,000 + $247,000 - $14,000 - $49,000 = $153,250.

Analysis component:Amortization expense, gas and oil expense, interest expense, rent expense, repair revenue, repair supplies expense, and withdrawals are all temporary accounts and do not appear on the post-closing trial balance because their balances were transferred to capital during the closing process leaving each Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 5 345

with a zero post-closing balance. The adjusted balance of $24,050 in capital is the balance prior to closing all temporary accounts into it. A capital account balance does appear on the post-closing trial balance but it is the post-closing balance of $153,250 as determined in part (b) above. Therefore, the adjusted capital balance of $24,050 will not appear on the post-closing trial balance Note to instructor: Reinforce to the student that the question asks which account balances from the adjusted trial balance will not appear on the post-closing trial balance.


Exercise 5-14 (15 minutes)a. Current assets = $59,000 + $29,000 + $2,000 + $14,000 +

$17,000 = $121,000.b. Property, plant and equipment = -$9,000 - $21,000 +

$13,000 + $26,000 = $9,000.c. Intangible assets = $17,800 + 7,000 = $24,800.d. Long-term investments = $4,000 + $52,000 = $56,000.e. Total assets = $121,000 + $9,000 + $24,800 + $56,000 =

$210,800.f. Current liabilities = $11,000 + $750 + $5,000 + $7,000 +

$3,800 = $27,550g. Long-term liabilities = $30,000.h. Total liabilities = $27,550 + $30,000 = $57,550.i. Total liabilities and owner’s equity = $210,800.


Exercise 5-15 (30 minutes)DOVER PACIFIC TOURS

Balance SheetNovember 30, 2011

Assets Current assets: Cash.............................................. $

5,000 Accounts receivable........................ 13,00

0 Prepaid insurance......................... 700 Prepaid rent.................................. 9,000 Supplies......................................... 2,2

50 Current portion of notes receivable 7,50

0 Total current assets........................ $

37,450

Long-term investments: Notes receivable, less $7,500 current portion....................................

13,000

Property, plant and equipment: Vehicles......................................... $64,0

00 Less: Accumulated amortization.. . 17,0

00$47,0

00 Office furniture............................... $

6,500 Less: Accumulated amortization.. . 3,6

00 2,9

00 Total property, plant and equipment...........................................

49,900

Intangible assets: Copyright.................................... 1,0

00Total assets......................................... $101,

350

Liabilities Current liabilities: .........................Accounts payable $

11,00


0 Salaries payable........................... 900 ...........Unearned touring revenue 23,00

0 ............................Notes payable 4,000

Current portion of long-term notes payable...............................................

10,0 00

Total current liabilities................. $ 48,90

0 Long-term liabilities: Long-term notes payable, less $10,000 current portion........................................

10,5 00

Total liabilities............................... $59,400

Owner’s Equity Pat Dover, capital*......................... 41,

950 Total liabilities and owner’s equity....... $101,

350

*Calculated as Total assets of $101,350 less Total liabilities of $59,400 = $41,950.


Exercise 5-16 (20 minutes)HANSON TRUCKING COMPANY

Balance SheetDecember 31, 2011

Assets Current assets: Cash....................................... $

7,000 Accounts receivable................. 16,500 Office supplies......................... 2,00

0 Total current assets................ $

25,500 Property, plant and equipment: Land....................................... $

75,000 Trucks.................................... $170,0

00 Less: Accumulated amortization.................................

35,0 00

135,000

Total property, plant and equipment....................................

$210,000

Total assets.................................. $235,500

Liabilities Current liabilities: Accounts payable.................... $

11,000 Interest payable...................... 3,00

0 Total current liabilities............ $

14,000 Long-term notes payable............ 52,00

0 Total liabilities........................... $

66,000

Owner’s Equity Stanley Hanson, capital ............. 169,5


00Total liabilities and owner’s equity $235,5

00


Exercise 5-17 (60 minutes)a. Withdrawals, tutoring fees earned, rent expense, amortiza-

tion expense, and advertising expense have zero balances because each account was closed at December 31, 2011 res-ulting in each balance being transferred to capital leaving a zero balance behind.

b.2012Jan.

15Accounts Receivable............ 8,000

Tutoring Fees Earned.... 8,000 To record revenues earned on account.

Feb. 20

Advertising Expense............ 2,000

Cash............................ 2,000 To record payment for advertising.

July 7 Cash................................... 9,000 Accounts Receivable..... 9,000 To record collection from customers.

Dec. 10

Leda Svenson, Withdrawals.. 3,000

Cash............................ 3,000 To record cash withdrawals by owner.


Exercise 5-17 (continued)b.

Cash Accounts Receivable Prepaid RentDec 31/11Jul 07/12

2,0009,000

2,000

3,000

Feb 20/12

Dec 10/12

Dec 31/11Jan. 15/12

5,0008,000

9,000

Jul 07/12

Dec 31/11

3,000

Unadj Bal

6,000

Unadj Bal

4,000

Office Equip. Accum. Amort., Office Equipment

Unearned Fees

Dec 31/11

20,000

10,000

Dec 31/11

2,900

Dec 31/11

Leda Svenson, Capital Leda Svenson, Withdrawals Tutoring Fees Earned17,1

00Dec

31/11Dec 31/11Dec 10/12

-0-3,000

-0-8,000

Dec 31/11

Jan. 15/12

Unadj Bal

3,000

8,000

Unadj Bal

Rent Expense Amortization Expense Advertising ExpenseDec 31/11

-0- Dec 31/11

-0- Dec 31/11Feb 20/12

-0-2,000

Unadj Bal

2,000


cGraw

-Hill Ryerson Lim




Exercise 5-17 (continued)c.

Svenson’s Tutoring ClinicUnadjusted Trial Balance

December 31, 2012Account Debit Credit

Cash................................................ $ 6,000Accounts receivable.......................... 4,000Prepaid rent..................................... 3,000Office equipment.............................. 20,000Accumulated amortization, office equipment.......................................

$10,000

Unearned fees.................................. 2,900Leda Svenson, capital....................... 17,100Leda Svenson, withdrawals............... 3,000Tutoring fees earned........................ 8,000Advertising expense......................... 2,000Totals.............................................. $38,000 $38,00

0

d. Journalize adjustments:2012Dec.

31Amortization Expense........... 2,000

Accum. Amort., office equipment............................

2,000

To record annual amortization.

31 Unearned Fees..................... 2,400 Tutoring Fees Earned..... 2,400 To record earned fees.

31 Rent Expense....................... 3,000 Prepaid Rent................. 3,000 To record expired prepaid rent.


Exercise 5-17 (continued)d. Post adjustments:

Cash Accounts Receivable Prepaid Rent Dec 31/11Jul 07/12

2,0009,000

2,0003,000

Feb 20/12

Dec 10/12

Dec 31/11Jan. 15/12

5,0008,000

9,000 Jul 07/12

Dec 31/11

3,000

3,000 Dec 31/12

Unadj Bal

6,000 Unadj Bal

4,000

Adj Bal -0-

Office Equip. Accum. Amort., Office Equipment

Unearned Fees

Dec 31/11

20,000

10,000

2,000

Dec 31/11

Dec 31/12

Dec 31/12

2,400

2,900 Dec 31/11

12,000

Adj Bal 500 Adj Bal

Leda Svenson, Capital Leda Svenson, Withdrawals Tutoring Fees Earned17,10

0Dec

31/11Dec 31/11Dec 10/12

-0-3,000

-0-8,000

Dec 31/11

Jan 15/12

Unadj Bal

3,000

8,0002,400

Unadj BalDec

31/1210,40

0Adj Bal


cGraw

-Hill Ryerson Lim




Rent Expense Amortization Expense Advertising ExpenseDec 31/11Dec 31/12

-0-3,000

Dec 31/11Dec 31/12

-0-2,000

Dec 31/11Feb 20/12

-0-2,000

Adj Bal 3,000 Adj Bal 2,000

Unadj Bal

2,000

Exercise 5–17 (continued)e.

Svenson’s Tutoring ClinicAdjusted Trial Balance


Cash.......................................... $ 6,000

Accounts receivable.................... 4,000Office equipment........................ 20,000Accumulated amortization, office equipment..................................

$12,000

Unearned fees............................ 500Leda Svenson, capital................. 17,100Leda Svenson, withdrawals......... 3,000Tutoring fees earned................... 10,400Rent expense............................. 3,000Amortization expense................. 2,000Advertising expense................... 2,000Totals........................................ $40,00

0$40,00

0


Exercise 5–17 (continued)f.

Svenson’s Tutoring ClinicIncome Statement

For Year Ended December 31, 2012Revenue.................................................. $10,40

0

Operating expenses: Rent expense...................................... $3,00

0 Advertising expense............................ 2,00

0 Amortization expense.......................... 2,00

0 Total operating expenses................. 7,00

0Net income.............................................. $

3,400

Svenson’s Tutoring ClinicStatement of Owner’s Equity

For Year Ended December 31, 2012Leda Svenson, capital, January 1............... $17,10

0Add: Investments by owner..................... $

0 Net income..................................... 3,4

00 3,400

Total................................................... $20,500

Less: Withdrawals by owner.................... 3,00 0

Leda Svenson, capital, December 31......... $17,500

Svenson’s Tutoring ClinicBalance Sheet

December 31, 2012Assets Current assets: Cash.................................................. $

6,000 Accounts receivable............................ 4,00

0Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.358 Fundamental Accounting Principles, Twelfth Canadian Edition

Total current assets............................ $ 10,000

Property, plant and equipment: Office equipment................................ $20,0

00 Less: Accumulated amortization....... 12,00

0 8,00

0Total assets............................................. $18,00

0

Liabilities Current liabilities: Unearned fees.................................... $

500

Owner’s Equity Leda Svenson, capital............................ 17,50

0 Total liabilities and owner’s equity........... $18,00

0Exercise 5–17 (continued)g. Journalize the closing entries:

2012(1) Dec.

31Tutoring Fees Earned...........10,40

0 Income Summary.......... 10,40

0To close the revenue

account to the income summary.

(2) 31 Income Summary.................7,000 Rent Expense............... 3,000 Amortization Expense..............................

2,000

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

2,000

To close the expense accounts

to the income summary.

(3) 31 Income Summary.................3,400


Leda Svenson, Capital................................

3,400

To close the income summary to

capital.

(4) 31 Leda Svenson, Capital..........3,000 Leda Svenson, Withdrawals........................

3,000



Exercise 5–17 (continued)g. Post the closing entries:

Cash Accounts Receivable Prepaid RentDec 31/11Jul 07/12

2,0009,000

2,0003,000

Feb 20/12

Dec 10/12

Dec 31/11Jan. 15/12

5,0008,000

9,000

Jul 07/12

Dec 31/11 3,00

0

3,000

Dec 31/12

Unadj Bal 6,000 Unadj Bal

4,000 Adj Bal -0-

Office Equip. Accum. Amort., Office Equip. Unearned FeesDec 31/11 20,000 10,0

002,00

0

Dec 31/11Dec 31/12

Dec 31/12 2,40

0

2,900

Dec 31/11

12,000

Adj Bal 500 Adj Bal

Leda Svenson, Capital Leda Svenson, Withdrawals Tutoring Fees Earned(4) 3,000 17,10

03,400

Dec 31/11(3)

Dec 31/11Dec 10/12

-0-3,000

-0-8,00

0

Dec 31/11Jan 15/12

17,500

Post-closing

balance

Unadj Bal

3,000 3,000

(4) 8,000

2,400

Unadj BalDec 31/12

-0- (1)10,400

10,400

Adj Bal

-0-


cGraw

-Hill Ryerson Lim




Rent Expense Amortization Expense Advertising ExpenseDec 31/11Dec 31/12

-0-3,000

Dec 31/11Dec 31/12

-0-2,000

Dec 31/11Feb 20/12

-0-

2,000

Adj Bal 3,000 3,000 (2) Adj Bal 2,000 2,000

(2) Unadj Bal 2,00

0

2,000 (2)

-0- -0- -0-

Income Summary(2) 7,000 10,40

0(1)

(3) 3,400 3,400 Bal.-0-


Exercise 5–17 (concluded)h.

Svenson’s Tutoring ClinicPost-Closing Trial Balance


Cash......................................... $ 6,000

Accounts receivable................... 4,000Office equipment........................ 20,000Accumulated amortization, office equipment.................................

$12,000

Unearned fees........................... 500Leda Svenson, capital................. 17,500Totals........................................ $30,00

0$30,00

0


*Exercise 5-18 (10 minutes)Reversing entries are appropriate for adjustments (a) and (e): 2011Sept.1 Service Fees Earned................. 5,000

Accounts Receivable............ 5,000To reverse accrued

revenues.1 Salaries Payable...................... 2,400

Salaries Expense................. 2,400To reverse accrued salaries.

*Exercise 5-19 (30 minutes)1. Adjusting entries: 2011Oct.31 Rent Expense........................... 3,200

Rent Payable....................... 3,200To record accrued rent expense.

31 Rent Receivable....................... 750Rent Earned........................ 750

To record accrued rent revenue.

2. Subsequent entries without reversing:Nov.5 Rent Payable........................... 3,200

Rent Expense........................... 3,200Cash................................... 6,400

To record payment of two months’ rent.

8 Cash........................................ 1,500Rent Receivable................... 750Rent Earned........................ 750

To record collection of two months’ rent.

3. Reversing entries and subsequent entries:Nov.1 Rent Payable........................... 3,200

Rent Expense...................... 3,200To reverse the accrual of

rent expense.1 Rent Earned............................. 750

Rent Receivable................... 750To reverse the accrual of

rent revenue.


5 Rent Expense........................... 6,400Cash................................... 6,400

To record payment of two months’ rent.

8 Cash........................................ 1,500Rent Earned........................ 1,500

To record collection of two months’ rent.

*Exercise 5-20 (15 minutes)

Current Current CurrentAssets Liabilities Ratio F/U

Case 1 .....$ 78,000 /$31,000 = 2.52 FCase 2 .....104,000 / 75,000 = 1.39 FCase 3 ..... 44,000 / 48,000 = 0.92 UCase 4 ..... 84,500 / 80,600 = 1.05 U


PROBLEMSProblem 5-1A (30 minutes)

Wigger RentalsWork Sheet

For Year Ended March 31, 2011

Account Number Account

Unadjusted Trial Balance Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet & Statement

of Owner’s Equity

Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit101 Cash......................... 17,000 17,00

017,00

0110 Rent receivable......... 60,000 a)

8,00068,00

068,00

0124 Office supplies.......... 6,800 b)

6,100700 700

141 Notes receivable, due 2008

143,000

143,000

143,000

161 Furniture.................. 46,000 46,000

46,000

173 Building.................... 625,000

625,000

625,000

183 Land......................... 110,000

110,000

110,000

191 Patent...................... 3,000 3,000 3,000201 Accounts payable...... 5,800 f)

2,6208,420 8,420

252 Long-term note payable....................

375,000

375,000

375,000

301 Joan Wigger, capital.. 499,525

499,525

499,525

302 Joan Wigger, withdrawals..............

28,000 28,000

28,000

406 Rent earned.............. 406,200

a) 8,000

414,200

414,200

620 Office salaries expense....................

124,000

d) 2,625

126,625

126,625

633 Interest expense....... 20,625 g) 22,50 22,50


cGraw

-Hill Ryerson Lim




1,875 0 0655 Advertising expense. 28,000 e)

40027,60

027,60

0673 Janitorial expense..... 41,000 41,00

041,00

0690 Utilities expense....... 34,100 f)

2,62036,72

036,72

0 Totals.................. 1,286,5

251,286,

525650 Office supplies

expense....................b)

6,1006,100 6,100

601 Amortization expense, furniture.....

c) 3,500

3,500 3,500

162 Accumulated amort., furniture...................

c) 3,500

3,500 3,500

606 Amort. expense, building....................

c) 25,00

0

25,000

25,000

174 Accumulated amort., building....................

c) 25,00

0

25,000

25,000

209 Salaries payable....... d) 2,625

2,625 2,625

131 Prepaid advertising. . e) 400

400 400

203 Interest payable....... g) 1,875

1,875 1,875

Totals.................. 50,120

50,120

1,330,145

1,330,145

289,045

414,200

1,041,100

915,945

Net income............... 125,155

125,155

Totals.................. 414,200

414,200

1,041,100

1,041,100

Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 5

367

Problem 5-2A (25 minutes)

Parts 1, 2, and 3Trenton Consulting

Work SheetFor Year Ended June 30, 2011

Account

Unadjusted Trial

Balance Adjustments

Adjusted Trial

BalanceIncome

Statement

Balance Sheet &

Statement of Owner’s

EquityDebi

tCredit Debit Credi

tDebi

tCredi

tDebit Credi

tDebit Credi

tCash.................. 3,44

03,44

03,440

Accounts receivable..........

2,990

d) 1,820

4,810

4,810

Prepaid rent....... 6,600

b) 4,400

2,200

2,200

Equipment.......... 6,400

6,400

6,400

Accounts payable..............

1,440 1,440

1,440

Toni Trenton, capital...............

26,650 26,650

26,650

Toni Trenton, with. .................

800 800 800

Consulting fees earned...............

30,200 d) 1,820

32,020

32,020

Wages expense. . 28,120

c) 2,500

30,620

30,620

Insurance expense.............

1,620

1,620

1,620


cGraw

-Hill Ryerson Lim



Rent expense..... 8,320

b) 4,400

12,720

12,720

Totals.............. 58,290

58,290

Amortization expense.............

a) 2,540

2,540

2,540

Accumulated amortization, equip. ........

a) 2,540

2,540

2,540

Wages payable... c) 2,500

2,500

2,500

Totals.............. 11,260

11,260

65,150

65,150

47,500

32,020

17,650

33,130

Net loss............. 15,480

15,480

Totals.............. 47,500

47,500

33,130

33,130

Problem 5-2A (concluded)Part 4

Toni Trenton, Capital

26,650

(Beg. bal.)

$26,650 – $800 – $15,480 = $10,370 OR

(With.) 800

(Net Loss)

15,480

10,370

(End. bal.)

Analysis component:

A net loss causes the equity in the accounting equation to decrease. To offset the decrease in equity, liabilities would have to increase and/or assets would have to decrease.


Problem 5-3A (90 minutes) Part 1CHALLENGER CONSTRUCTION

Work SheetFor Year Ended September 30, 2011

Account

Unadjusted Trial

Balance Adjustments

Adjusted Trial

BalanceIncome

Statement

Balance Sheet &


EquityNo.

Debit Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

101

Cash........................ 36,000

36,000

36,000

126

Supplies.................. 18,800

(a) 13,800

5,000

5,000

128

Prepaid insurance.... 12,400

(b) 8,000

4,400

4,400

149

Land not currently used in op.

50,000

50,000

50,000

167

Equipment............... 106,000

106,000

106,000

168

Accum. amort., equipment...............

40,500

(c) 18,000

58,500

58,500

191

Copyright................ 6,000

6,000

6,000

201

Accounts payable..... 9,600 (d) 800

10,400

10,400

203

Interest payable....... (f) 500

500 500

210

Wages payable........ (e) 3,000

3,000 3,000

251

Long-term notes payable...................

50,000

50,000

50,000

301

Chris Challenger, capital.....................

55,320

55,320

55,320

302

Chris Challenger, withdrawals.............

72,000

72,000

72,000

40 Construction fees 280,0 280,0 280,0


cGraw

-Hill Ryerson Lim

ited. All rights reserved.Solution M


1 earned..................... 00 00 00612

Amort. expense, equipment...............

(c) 18,000

18,000

18,000

623

Wages expense........ 82,000

(e) 3,000

85,000

85,000

633

Interest expense...... 3,000

(f) 500

3,500

3,500

637

Insurance expense... (b) 8,000

8,000

8,000

640

Rent expense........... 26,400

26,400

26,400

652

Supplies expense..... (a) 13,800

13,800

13,800

683

Business taxes expense...................

10,000

10,000

10,000

684

Repairs expense...... 5,020

5,020

5,020

690

Utilities expense...... 7, 800

(d) 800

8, 600

8,600

Totals................... 435,420

435,420

44, 100

44,1 00

457,720

457,720

178,320

280,000

279,400

177,720

Net income.............. 101,680

101,680

Totals................... 280,000

280,000

279,400

279,400

Problem 5-3A (continued) Part 22011 Adjusting entries:

a)

Sept.

30

Supplies Expense.......................... 13,800

Supplies.................................. 13,800

To record consumption of supplies.

b)

30

Insurance expense........................ 8,000

Prepaid Insurance.................... 8,000 To record consumption of insurance coverage.

c) 30

Amortization Expense, Equipment.. 18,000

Accumulated Amortization, Equipment....................................

18,000

To record amortization.

d)

30

Utilities Expense........................... 800

Accounts Payable..................... 800 To record accrued utilities costs.

e)

30

Wages Expense............................. 3,000

Wages Payable........................ 3,000 To record accrued wages.

f) 30

Interest Expense........................... 500

Interest Payable...................... 500 To record accrued interest expense.


Problem 5-3A (continued) Part 22011 Closing entries:

Sept.

30

Construction Fees Earned............... 280,000

Income Summary...................... 280,000 To close the revenue account to the Income Summary account.

30

Income Summary............................ 178,320

Amortization Expense, Equipment.....................................

18,000

Wages Expense......................... 85,000 Interest Expense....................... 3,500 Insurance Expense.................... 8,000 Rent Expense............................ 26,400 Supplies Expense...................... 13,800 Business Taxes Expense............ 10,000 Repairs Expense........................ 5,020 Utilities Expense....................... 8,600 To close the expense accounts to the Income Summary account.

30

Income Summary............................ 101,680

Chris Challenger, Capital........... 101,680 To close the Income Summary account to capital.

30

Chris Challenger, Capital................ 72,000

Chris Challenger, Withdrawals... 72,000 To close the withdrawals account to capital.


Problem 5-3A (continued) Part 3CHALLENGER CONSTRUCTION

Income StatementFor Year Ended September 30, 2011

Revenues: Construction fees earned.......... $280,

000Operating expenses: Wages expense........................ $85,0

00 Rent expense........................... 26,40

0 Amortization expense, equipment 18,0

00 Supplies expense...................... 13,80

0 Business taxes expense............ 10,00

0 Utilities expense....................... 8,60

0 Insurance expense.................... 8,000 Repairs expense....................... 5,020 Interest expense......................

3,500 Total operating expenses....... 178,

320Net income.................................... $101,

680

CHALLENGER CONSTRUCTION Statement of Owner’s Equity

For Year Ended September 30, 2011

Chris Challenger, capital, October 1 $25,320

Add: ............Investments by owner $30,000

Net income.............................. 101, 680

131, 680

Total........................................... $157,000

Less: Withdrawals.......................... 72,0 00


Chris Challenger, capital, September 30.................................................

$85,000


Problem 5-3A (concluded)CHALLENGER CONSTRUCTION

Balance Sheet September 30, 2011

Assets Current assets: Cash........................................... $36,0

00 Supplies..................................... 5,000 Prepaid insurance....................... 4,40

0 Total current assets.................... $45,40

0 Long-term investments: Land not currently used in operations.......................................

50,000

Property, plant and equipment: Equipment................................. $106,

000 Less: Accumulated amortization....................................

58,5 00

$47,500

Intangible assets: Copyright................................. 6,00

0Total assets..................................... $148,9

00

Liabilities Current liabilities: Accounts payable........................ $10,

400 Interest payable......................... 500 Wages payable........................... 3,00

0 Current portion of long-term notes payable..................................

16, 000

Total current liabilities................ $29,900

Long-term liabilities: Long-term notes payable (less current portion)...............................

34,0 00

Total liabilities.............................. $63,900


Owner’s Equity Chris Challenger, capital................ 85,00

0Total liabilities and owner’s equity. . . $148,9

00

Analysis component:a) No, the error will not be discovered in completing the

worksheet because it will balance. Net income will be overstated by $8,800 (= $13,800 – $5,000) as a result and Supplies on the balance sheet will be overstated by $8,800.

b) Yes, the error will be discovered in completing the worksheet.


Problem 5-4A (25 minutes)Part 1

2011 Closing entries:Dec.

31 Repair Fees Earned...................... 155,500

Income Summary.................... 155,500

To close revenue to the income summary.

31 Income Summary......................... 166,600

Amortization Expense, Equipment..................................

8,000

Wages Expense....................... 107,000

Insurance Expense.................. 1,400 Rent Expense.......................... 41,600 Office Supplies Expense........... 5,200 Utilities Expense..................... 3,400 To close expense accounts to income summary.

31 Mike Yang, Capital....................... 11,100 Income Summary.................... 11,100 To close income summary to capital.

Mike Yang, Capital....................... 30,000 Mike Yang, Withdrawals.......... 30,000 To close withdrawals to capital.

Part 2MY Autobody


Acct. No. Account Debit Credit101 Cash.................................. $

26,000

124 Shop supplies..................... 2,400 128 Prepaid insurance............... 3,900 167 Equipment.......................... 96,000


168 Accumulated amortization, equipment..........................

$ 8,000

201 Accounts payable............... 24,000210 Wages payable................... 1,000301 Mike Yang, capital.............. 95,

300Totals................................ $128,3

00$128,3

00


Problem 5-5A (30 minutes)

MY AUTOBODYIncome Statement

For Year Ended December 31, 2011

Revenue: Repair fees earned................ $155,500Operating expenses:

Wages expense........................$107,000Rent expense........................... 41,600Amortization expense, equipment 8,000

Office supplies expense............ 5,200Utilities expense...................... 3,400Insurance expense................... 1,400 Total operating expenses.... 166,600

Net loss..................................... $ 11,100

MY AUTOBODYStatement of Owner’s Equity


Mike Yang, capital, January 1......$136,400Less: Net loss........................... 11,100

Withdrawals..................... 30,000Mike Yang, capital, December 31.$95,300


Problem 5-5A (concluded)

MY AUTOBODYBalance Sheet

December 31, 2011Assets Current assets: Cash........................................ $26,

000 Office supplies.......................... 2,40

0 Prepaid insurance..................... 3,

900 Total current assets.................. $32,30

0 Property, plant and equipment: Equipment............................... $96,

000 Less: Accumulated amortization..................................

8, 000

88,00 0

Total assets................................... $120,300

Liabilities Current liabilities: Accounts payable..................... $24,

000 Wages payable......................... 1,

000 Total current liabilities............. $25,00

0

Owner’s Equity Mike Yang, capital ...................... 95,30

0Total liabilities and owner’s equity. $120,3

00

Analysis component:


As a creditor, I would review the current assets on the balance sheet to determine MY Autobody’s ability to pay current obligations in 2012. At December 31, 2011 MY Autobody has $32,300 in current assets of which $26,000 is cash and accounts payable total $24,000. Therefore, as a creditor, although MY experienced a loss, it appears to have sufficient current assets to meet its current obligations.


Problem 5-6A (25 minutes) 2011 Closing entries:Dec. 31............Professional Fees Earned 192,000

Rent Earned................................. 26,000 Income Summary..................... 218,000

To close the revenue accounts.

31 ..........................Income Summary 142,600 Amortization Expense, Building 20,000 Amortization Expense, Equipment

8,000 Amortization Expense, Franchise

2,000 Wages Expense....................... 62,000 Interest Expense..................... 8,200 Insurance Expense................... 18,000 Supplies Expense.................... 12,800 Telephone Expense.................. 4,400 Utilities Expense..................... 7,200

To close the expense accounts.

31 Income Summary.......................... 75,400 Sig Lloyd, Capital.................... 75,400

To close the Income Summary account.

31 Sig Lloyd, Capital.......................... 24,000 Sig Lloyd, Withdrawals............ 24,000

To close the withdrawals account.


Problem 5-7A (50 minutes) Part 1

LLOYD CONSTRUCTIONIncome Statement


Revenues:Professional fees earned..........$192,000Rent earned............................. 26,000 Total revenues..................... $218,000

Operating expenses:Wages expense........................$62,000Amortization expense, building. 20,000Insurance expense................... 18,000Supplies expense..................... 12,800Interest expense...................... 8,200Amortization expense, equipment 8,000Utilities expense...................... 7,200Telephone expense.................. 4,400Amortization expense, franchise 2,000 Total operating expenses..... 142,600

Net income................................. $ 75,400

LLOYD CONSTRUCTIONStatement of Owner’s Equity

For Year Ended December 31, 2011Sig Lloyd, capital, January 1........ $ 43,800Add:.........Investments by owner $100,000

Net income.......................... 75,400 175,400 Total....................................... $219,200Less: Withdrawals by owner........ 24,000Sig Lloyd, capital, December 31. . $ 195,200


Problem 5-7A (continued)

LLOYD CONSTRUCTIONBalance Sheet

December 31, 2011Assets Current assets: Cash........................................ $

8,000 Temporary investments............ 44,000 Supplies................................... 14,

200 Total current assets.................. $

66,200 Long-term investments: Notes receivable..................... 42,000 Property, plant and equipment: Land....................................... $90,

000 Building.................................. $260,0


150, 000

110,000

Equipment............................... $ 78,000

Less: Accumulated amortization..................................

40,0 00

38,00 0

Total property, plant and equipment.....................................

238,000

Intangible assets: Franchise............................ 28,0

00 Total assets................................ $374,2

00Liabilities Current liabilities: Accounts payable..................... $

31,000 Interest payable....................... 3,000


Unearned professional fees....... 13,000 Current portion of long-term notes payable................................

50, 000

Total current liabilities............. $ 97,000

Long-term liabilities: Long-term notes payable (less current portion).............................

82,0 00

Total liabilities............................ $ 179,00

0Owner’s Equity Sig Lloyd, capital......................... 195,


00


Problem 5-7A (concluded)Analysis component:

Liabilities must be separated between those that are due within one year of the balance sheet date (current) and those that are due beyond one year of the balance sheet date (long-term) because decision makers must be able to assess whether the business has sufficient current assets to cover its current obligations. If the $50,000 current portion of the $132,000 long-term note was not shown as a current liability on the balance sheet, it would have appeared that Lloyd had sufficient current assets to cover its current liabilities when in fact it does not.

Problem 5-8A (20 minutes)2011 Closing entries:

March

31 Revenues......................... 61,350

Income Summary......... 61,350To close the revenue account to the

income summary.

31 Income Summary.............. 49,630 Amortization Expense, Equipment.......................

700

Amortization Expense, Copyright 350 Insurance Expense....... 1,950 Interest Expense.......... 330 Rent Expense............... 7,500 Supplies Expense......... 1,800 Telephone Expense...... 2,100 Utilities Expense.......... 900 Wages Expense............ 34,00

0To close expense accounts to the

income summary.

31 Income Summary.............. 11,720 Becky Brenner, Capital. 11,720 To close the income summary to capital.


31 Becky Brenner, Capital..... 23,500 Becky Brenner, Withdrawals 23,500



Problem 5-9A (40 minutes)Brenner Climbing Adventures

Income StatementFor Year Ended March 31, 2011

Revenues...................................... $61,350

Operating expenses: Wages expense........................... $34,0

00 Rent expense.............................. 7,500 Telephone expense..................... 2,100 Insurance expense...................... 1,950 Supplies expense........................ 1,800 Utilities expense......................... 900 Amortization expense, equipment 700 Amortization expense, copyright. 350 Interest expense......................... 33

0 Total operating expenses.......... 49,6

30Net income.................................... $

11,720

Brenner Climbing AdventuresStatement of Owner’s Equity

For Year Ended March 31, 2011Becky Brenner, capital, April 1........ $32,2

00Add: Net income........................... $11,7

20 Investments by owner .......... 2,5

00 14,2

20 Total......................................... $46,4

20Less: Withdrawals for the year..... 23,5

00Becky Brenner, capital, March 31.... $22,9

20


Problem 5-9A (concluded)Brenner Climbing Adventures

Balance SheetMarch 31, 2011

Assets Current assets:......................... Cash..................................... $

7,500

Accounts receivable.............. 3,350

Supplies............................... 27 0

Total current assets.............. $11,120

Long-term investments: Notes receivable..................... 10,00

0 Property, plant and equipment: Equipment............................. $20,


7,0 00

$13,500

Intangible assets: Copyright.............................. 6,00

0Total assets................................... $40,6

20

Liabilities Current liabilities: Accounts payable.................. $

1,200

Unearned revenues............... 11,000

Current portion of long-term notes payable................................

3,0 00

Total current liabilities.......... $15,200

Long-term liabilities: Long-term notes payable (less current portion).............................

2, 500

Total liabilities.......................... $17,700


Owner’s Equity Becky Brenner, capital................ 22,9


20

Analysis component:

Brenner Climbing Adventures might be tempted to report the notes receivable as a current asset on the March 31, 2011 balance sheet because total current assets would then be greater than total current liabilities giving the misimpression that Brenner is in a position to cover its current obligations.


Problem 5-10A (20 minutes)1.

Apex Architectural DesignsIncome Statement

For Year Ended June 30, 2011Revenues: Design fees earned............................. $124,0

00

Operating expenses: Salaries expense................................ $64,50

0 Supplies expense............................... 2,150 Amortization expense, office equipment 1,750 Telephone expense............................. 1,600 Amortization expense, office furniture. 950 Utilities expense................................ 750 Interest expense................................ 720 Insurance expense............................. 600 Total operating expenses.................. 73,02

0Net income............................................. $

50,980

2. $86,000 + $50,980 – $35,000 = $101,980

OR

Noel Apex, Capital

86,000

(Beg. bal.)

(With.)

35,000

50,980

(Net income)

101,980

(End. bal.)


Problem 5-11A (40 minutes)IMPRESSIONS DANCE SCHOOL

Income StatementFor Year Ended September 30, 2011

Revenues: Fees earned............................. $154,6

80 Rent earned............................ 18,00

0 Total revenues..................... $172,6

80Operating expenses: Salaries expense...................... $174,

000 Gas, oil, and repairs expense.. . 29,60

0 Amortization expense, building. 29,60

0 Amortization expense, automobiles 6,56

0 Total operating expenses....... 239,7

60Net loss......................................... $

67,080

IMPRESSIONS DANCE SCHOOLStatement of Owner’s Equity

For Year Ended September 30, 2011Alisha Bjorn, capital, October 1...... $168,9

60Less: Net loss............................... $67,0

80 Withdrawals........................ 10,0

00 77,08

0Alisha Bjorn, capital, September 30 $91,88

0


Problem 5-11A (continued)2.

Impressions Dance SchoolBalance Sheet

September 30, 2011Assets Current assets: Cash.............................................. $

10,120

Accounts receivable........................ 6,580 Store supplies................................ 2,80

0 Total current assets........................ $

19,500

Long-term investments: Land for future expansion............... 50,00

0

Property, plant and equipment: Land.............................................. $28,

000 Building......................................... $240,

000 Less: Accumulated amortization.. . 144,

00096,00

0 Automobiles................................... $

65,600

Less: Accumulated amortization.. . 39,3 60

26,240

Total property, plant and equipment...........................................

150,240

Intangible assets: Patents....................................... $

8,600 Copyright.................................... 4,3

60 Total intangible assets.................

12,960

Total assets...................................... $232,700


Liabilities Current liabilities: Accounts payable......................... $

27,320

Unearned fees............................. 23,5 00

Total current liabilities.............. $50,820

Long-term liabilities: Note payable, due in 18 months. . . 90,0

00 Total liabilities............................... $140,

820

Owner’s Equity Alisha Bjorn, capital........................ 91,8

80 Total liabilities and owner’s equity.... $232,

700


Problem 5-11A (concluded)Analysis component:The business experienced a loss for the year ended September 30, 2011, has current assets that are less than current liabilities at September 30, 2011, and, in the longer term, there is a note payable that is due 18 months from September 30, 2011. The business does not have the ability to meet current obligations let alone a new one that would be created by the purchase of a new car. However, if Alisha were to sell the Land for future expansion, a long-term investment, she may be able to meet current liabilities and consider buying a new car. But then there is the issue of the loss: will this be ongoing? If so, the sale of the land might provide only temporary relief and the purchase of the car would complicate things for the business in the long-term.

Problem 5-12A (30 minutes)Part 1Wyett North, capital = $499,525 – $28,000 + $125,155 = $596,680

OR

Wyett North, Capital

499,525

(Beg. bal.)

(With.)28,000125,155

* (Net income)

596,680

(End. bal.)

*Net income = Revenues – Expenses = 414,200 – (27,600 + 25,000 + 3,500 + 22,500 + 41,000 + 126,625 + 6,100 + 36,720) = 414,200 – 289,045 = 125,155


Problem 5-12A (concluded) Part 2North Country Rentals

Balance SheetMarch 31, 2011

Assets Current assets: Cash........................................... $

17,000 Rent receivable........................... 68,000 Office supplies............................ 700 Prepaid advertising.................... 40

0 Current portion of notes receivable........................................

40,00 0

Total current assets.................... $ 126,10

0 Long-term investments: Notes receivable, less $40,000 current portion................................

103,000

Property, plant and equipment: Land........................................... $110,

000 Building..................................... $625,0

00 Less: Accumulated amortization 25,

000600,00

0 Furniture.................................... $

46,000 Less: Accumulated amortization 3,

500 42,5

00 Total property, plant and equipment.......................................

752,500

Intangible assets: Patent...................................... 3,0

00Total assets..................................... $984,6

00

Liabilities Current liabilities: Accounts payable........................ $

8,420 Interest payable......................... 1,875 Salaries payable......................... 2,625


Current portion of long-term notes payable..................................

75,0 00

Total current liabilities................ $87,920

Long-term liabilities: Long-term notes payable (less current portion)...............................

300,0 00

Total liabilities.............................. $387,920

Owner’s Equity Wyett North, capital...................... 596,6


00

Problem 5-13A (90 minutes) NOTE: The general ledger accounts are shown at the end of the solution (in both balance column and T-account format) as they would appear after all entries have been posted.Part 2Transactions for June:

General Journal Page G1

Date

Account Titles and Explanations PR

Debit Credit

2011June

1 Cash........................................ 101

40,000

Computer Equipment................ 167

60,000

Sam Near, Capital............... 301

100,000

To record the owner’s initial investment.

2 Rent Expense........................... 640

3,200


Analysis component:It is reasonable to assume that the $375,000 in addition to the owner’s original investment was used to acquire capital assets. Since the purpose of capital assets is to generate revenues, borrowing to purchase them is generally considered

Cash................................... 101

3,200

Paid one month of rent.3 Office Supplies......................... 12

42,400

Cash................................... 101

2,400

Acquired office supplies.10

Prepaid Insurance.................... 128

7,200

Cash................................... 101

7,200

Paid one year’s premium in advance.

14

Salaries Expense...................... 622

3,600

Cash................................... 101

3,600

Paid two weeks salary.24

Cash........................................ 101

13,600

Commissions Earned........... 405

13,600

Collected commissions from airlines.

28

Salaries Expense...................... 622

3,600

Cash................................... 101

3,600

Paid two weeks salary.29

Telephone Expense.................. 688

3,500

Cash................................... 101

3,500

Paid the telephone bill.30

Repairs Expense....................... 684

700

Cash................................... 101

700

Repaired the computer.30

Sam Near, Withdrawals............ 302

2,850


Cash................................... 101

2,850

Owner’s withdrawal of cash.Problem 5-13A (continued) Part 3


Date

Account Titles and Explanations PR Debit

Credit

2011 Adjusting entries:a)

June

30

Insurance Expense........................... 637 400

Prepaid Insurance....................... 128 400 To record expired insurance (2/3 × $600 per month).

b)

30

Office Supplies Expense.................... 650 800

Office Supplies............................ 124 800 To record the cost of consumed supplies ($2,400 – $1,600).

c)

30

Amortization Expense, Computer Equip. .............................................

612 1,650

Accumulated Amortization, Computer Equip. .............................

168 1,650


d)

30

Salaries Expense.............................. 622 320

Salaries Payable......................... 209 320 To record accrued salaries.

e)

30

Accounts Receivable......................... 106 3,500

Commissions Earned................... 405 3,500

To record accrued commissions.


Problem 5-13A (continued) Part 4TOURS-FOR-LESSIncome Statement

For Month Ended June 30, 2011

Revenues: Commissions earned............................. $17,1

00Operating expenses: Salaries expense................................... $7,520 Telephone expense............................... 3,500 Rent expense........................................ 3,200 Amortization expense, computer equipment.................................................

1,650

Office supplies expense......................... 800 Repairs expense................................... 700 Insurance expense................................ 400 Total operating expenses................. 17,77

0Net loss..................................................... $ 670

TOURS-FOR-LESSStatement of Owner’s Equity

For Month Ended June 30, 2011

Sam Near, capital, June 1............................ $ 0

Add: ..........................Investment by owner 100,000

Total..................................................... $100,000

Less:........................Withdrawals by owner $2,850

Net loss.......................................... 670 3,52 0

Sam Near, capital, June 30.......................... $96,480


Problem 5-13A (continued) Part 4TOURS-FOR-LESS

Balance SheetJune 30, 2011

Assets Current assets: Cash................................................ $26,55

0 Accounts receivable......................... 3,500 Office supplies................................. 1,600 Prepaid insurance............................ 6,80

0 Total current assets......................... $38,4

50 Property, plant and equipment: Computer equipment....................... $60,00

0 Less: Accumulated amortization..... 1,6

50 58,3

50Total assets.......................................... $96,8

00

Liabilities Current liabilities Salaries payable.............................. $

320

Owner’s Equity Sam Near, capital............................... 96,4

80Total liabilities and owner’s equity......... $96,8

00


Problem 5-13A (continued) Part 5


Date

Account Titles and Explanation PR Debit

Credit

2011 Closing entries:June

30

Commissions Earned.................... 405

17,100

Income Summary.................... 901

17,100

To close the revenue account to the Income Summary account.

30

Income Summary......................... 901

17,770

Amortization Expense, Computer Equipment...................................

612

1,650

Salaries Expense.................... 622

7,520

Insurance Expense................. 637

400

Rent Expense......................... 640

3,200

Office Supplies Expense.......... 650

800

Repairs Expense..................... 684

700

Telephone Expense................. 688

3,500

To close the expenses to the income summary.

30

Sam Near, Capital........................ 301

670

Income Summary.................... 901

670

To close the Income Summary to


capital.

30

Sam Near, Capital........................ 301

2,850

Sam Near, Withdrawals.......... 302

2,850



Problem 5-13A (continued) Part 6TOURS-FOR-LESS

Post-Closing Trial BalanceJune 30, 2011

Acct.

No. Account101 Cash................................................ $26,5

50106 Accounts receivable.......................... 3,500124 Office supplies.................................. 1,600128 Prepaid insurance............................ 6,800167 Computer equipment........................ 60,00

0168 Accumulated amortization, computer

equipment.......................................$

1,650209 Salaries payable............................... 320301 Sam Near, capital.............................

96,48

0Totals.............................................. $98,4

50$98,4

50

Parts 1, 2, 3, 5 Ledger as of June 30 (using the balance column format):

Cash Acct. No. 101Date Explanation P

RDebi

tCredit Balanc

e2011

June

1 G1

40,000

40,000

2 G1

3,200 36,800

3 G1

2,400 34,400

10

G1

7,200 27,200

14

G1

3,600 23,600

24

G1

13,600

37,200

28

G1

3,600 33,600


29

G1

3,500 30,100

30

G1

700 29,400

30

G1

2,850 26,550

Accounts Receivable Acct. No. 106Date Explanation P

RDebi

tCredit Balanc

e2011

June

30

G2

3,500

3,500

Office Supplies Acct. No. 124Date Explanation P

RDebi

tCredit Balanc

e2011

June

3 G1

2,400

2,400

30

G2

800 1,600

Problem 5-13A (continued) Parts 1, 2, 3, 5 Prepaid Insurance Acct. No. 128

Date

Explanation PR

Debit

Credit Balance

2011June

10

G1

7,200

7,200

30

G2

400 6,800

Computer Equipment Acct. No. 167Date

Explanation PR

Debit

Credit Balance

2011June

1 G1

60,000

60,000

Accumulated Amortization, Computer Equipment

Acct. No. 168

Date

Explanation PR

Debit

Credit Balance

2011Jun 3 G 1,650 1,650


e 0 2

Salaries Payable Acct. No. 209Date

Explanation PR

Debit

Credit Balance

2011June

30

G2

320 320

Sam Near, Capital Acct. No. 301Date

Explanation PR

Debit

Credit Balance

2011June

1 G1

100,000

100,000

30

G3

670 99,330

30

G3

2,850

96,480

Sam Near, Withdrawals Acct. No. 302Date

Explanation PR

Debit

Credit Balance

2011June

30

G1

2,850

2,850

30

G3

2,850 0

Commissions Earned Acct. No. 405Date

Explanation PR

Debit

Credit Balance

2011June

24

G1

13,600 13,600

30

G2

3,500 17,100

30

G3

17,100

0


Problem 5-13A (continued) Parts 1, 2, 3, 5 Amortization Expense, Computer

EquipmentAcct. No. 612

Date

Explanation PR

Debit

Credit Balance

2011June

30

G2

1,650

1,650

30

G3

1,650 0

Salaries Expense Acct. No. 622Date

Explanation PR

Debit

Credit Balance

2011June

14

G1

3,600

3,600

28

G1

3,600

7,200

30

G2

320 7,520

30

G3

7,520 0

Insurance Expense Acct. No. 637Date

Explanation PR

Debit

Credit Balance

2011June

30

G2

400 400

30

G3

400 0

Rent Expense Acct. No. 640Date

Explanation PR

Debit

Credit Balance

2011June

2 G1

3,200

3,200

30

G3

3,200 0

Office Supplies Expense Acct. No. 650Date

Explanation PR

Debit

Credit Balance


2011June

30

G2

800 800

30

G3

800 0

Repairs Expense Acct. No. 684Date

Explanation PR

Debit

Credit Balance

2011June

30

G1

700 700

30

G3

700 0

Telephone Expense Acct. No. 688Date

Explanation PR

Debit

Credit Balance

2011June

29

G1

3,500

3,500

30

G3

3,500 0


Problem 5-13A (continued) Parts 1, 2, 3, 5 Income Summary Acct. No. 901

Date

Explanation PR

Debit

Credit Balance

2011June

30

G3

17,100 17,100

30

G3

17,770

670

30

G3

670 0

Parts 1, 2, 3, 5 Ledger as of June 30 (using the T-account format):

Cash 101

Accounts Receivable

106

Office Supplies 124

Jun 1

40,000

3,200

Jun 2

Jun 30

3,500

Jun 3

2,400

800 Jun 30

24 13,600

2,400

3 Bal. 1,600

7,200

10

3,600

14

3,600

28

3,500

29

700 302,85

030



cGraw

-Hill Ryerson Lim




Bal. 26,550

Prepaid Insurance128

Computer Equipment

167

Accum. Amort., Computer Equipment

168

Jun 10

7,200

400 Jun 30

Jun 1

60,000

1,650

Jun 30

Bal. 6,800

Salaries Payable209 Sam Near, Capital

301

Sam Near, Withdrawals 302

320 Jun 30

Jun 30

670 100,000

Jun 1

Jun 30

2,850

2,850

Jun 30

30 2,850

96,480

Bal. Bal. -0-

Problem 5-13A (concluded) Parts 1, 2, 3, 5

Commissions Earned

405

Amort. Expense, Computer

Equip.

612 Salaries Expense 622

Jun 30

17,100

13,600

Jun 24

Jun 30

1,650

1,650

Jun 30

Jun14 3,600

7,520

Jun 30

3,500

30 28 3,600

30 320-0- Bal. Bal. -0- Bal. -0-

Insurance Expense

637 Rent Expense 640 Office Supplies Expense

650

Jun 30

400 400 Jun 30

Jun 2

3,200

3,200

Jun 30

Jun30 800 800 Jun 30

Bal. -0- Bal. -0- Bal. -0-

Repairs Expense 684 Telephone Expense

688 Income Summary 901

Jun 30

700 700 Jun 30

Jun 29

3,500

3,500

Jun 30

Jun

30

17,770

17,100

Jun30

Bal. -0- Bal. -0- Balance

670 670 30

Balance

-0-


cGraw

-Hill Ryerson Lim



*Problem 5-14A (30 minutes)Part 1


Dec.

31

Salaries Expense....................... 1,600

Salaries Payable................... 1,600 To record accrued salaries.

b)

31

Supplies Expense...................... 5,400

Supplies.............................. 5,400 To record cost of consumed supplies; $9,000 - $3,600 on hand = $5,400 used.

c) 31

Interest Expense....................... 2,500

Interest Payable................... 2,500 To record accrued interest expense.

d)

31

Unearned Membership Fees....... 16,000

Membership Fees Earned...... 16,000 To record earned fees; $48,000 - $32,000 still unearned = $16,000 earned.

e)

31

Accounts Receivable.................. 24,000

Membership Fees Earned...... 24,000 To record accrued fees revenues.

f) 31

Amortization Expense, Equipment 30,000

Accumulated Amortization, Equipment................................

30,000

To record amortization.Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.414 Fundamental Accounting Principles, Twelfth Canadian Edition


*Problem 5-14A (concluded)Part 2

2012 Reversing entries:a) Jan

.1 Salaries Payable........................ 1,600

Salaries Expense.................. 1,600 To reverse accrued salaries.

c) 1 Interest Payable........................ 2,500 Interest Expense.................. 2,500 To reverse accrued interest expense.

e) 1 Membership Fees Earned........... 24,000 Accounts Receivable............. 24,000 To reverse accrued revenues.

Part 32012

Jan.

4 Salaries Expense......................... 2,400

Cash...................................... 2,400 To record payroll.

15

Interest Expense......................... 3,000

Cash...................................... 3,000 To record interest payment.

21

Cash ($24,000 + $14,000)............ 38,000

Membership Fees Earned....... 38,000 To record collection of membership fees.


ALTERNATE PROBLEMSProblem 5-1B (30 minutes)Parts 1, 2 and 3

Landmark ToursWork Sheet

For Month Ended July 31, 2011

Account

Number Account


Adjusted Trial Balance

Income Statement

Balance Sheet & Statement of

Owner’s EquityDebit Credit Debit Credit Debit Credit Debi

tCredit Debit Credit

101 Cash 17,800

17,800 17,800

106 Accounts receivable 42,500

(g) 23,800

66,300 66,300

111 Notes receivable 28,000

28,000 28,000

128 Prepaid insurance 21,000

(d) 2,625

18,375 18,375

161 Furniture 13,500

13,500 13,500

201 Accounts payable 13,850 (b) 650

14,500 14,500

230 Unearned tour revenue 28,000 (f) 18,200

9,800 9,800

301 Jan Rider, capital 121,950

121,950

121,950

302 Jan Rider, withdrawals 0 0 0(f) 18,200

403 Tour revenue 31,000 (g)23,800**

73,000 73,000

623 Wages expense 72,000

(e) 1,008

73,008 73,008

Totals 194,800

194,800

109 Interest receivable (a) 400 400



cGraw

-Hill Ryerson Lim




400409 Interest revenue (a)

400 400 400

690 Utility expense (b) 650

650 650

601 Amortization expense, furniture

(c) 350

350 350

162 Accumulated amortization, furniture

(c) 350

350 350

637 Insurance expense (d) 2,625

2,625 2,625

210 Wages payable (e) 1,008*

1,008 1,008

Totals 47,033 47,033 221,008 221,008

76,633

73,400 144,375

147,608

Net loss 3,233 3,233 Totals 76,6

3376,633 147,60

8147,60

8

*$630/5 days per week = $126/day × 2 days × 4 employees = $1,008**40 children x $35/day x 17 days = $23,800

Problem 5-2B (25 minutes)Parts 1, 2, and 3

Family PhotographersWork Sheet

For Month Ended December 31, 2011

Account


Adjusted Trial

BalanceIncome

Statement

Balance Sheet &


EquityDebi

tCredit

Debit Credit

Debit

Credit

Debit

Credit

Debit Credit

Cash......................... 14,000

14,000

14,000

Accounts receivable... 3,100

3,100

3,100

Prepaid equipment rental.......................

1,930

a) 1,240

690 690

Automobile............... 26,000

26,000

26,000

Accumulated amort., automobile. . 0 b)

275275 275

Accounts payable...... 960 c) 980

1,940

1,940

Unearned fees........... 2,870

d) 250

2,620

2,620

Jim Tucker, capital..... 39,400

39,400

39,400

Jim Tucker, withdrawals..............

700 700 700

Fees earned.............. 4,20 d) 4,45 4,450


cGraw

-Hill Ryerson Lim



0 250 0Amort., expense, automobile................

0 b) 275

275 275

Equipment rental expense....................

1,700

a) 1,240

2,940

2,940

Totals..................... 47,430

47,430

Utilities expense....... c) 980

980 980

Totals..................... 2,745 2,745 48,685

48,685

4,195

4,450 44,490

44,235

Net income................ 255 255 Totals..................... 4,45

04,450 44,49

044,49

0

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.420 Fundamental Accounting Principles, Eleventh Canadian Edition

Problem 5-2B (concluded)Part 4

Jim Tucker, Capital

39,400 (Beg. bal.)

$39,400 – $700 + $255 = $38,955 OR

(With.)

700

255 (Net income)

38,955 (End. bal.)

Analysis component:

A net income causes the equity in the accounting equation to increase. To offset the increase in equity, liabilities would decrease and/or assets would increase.

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 5

Problem 5-3B (90 minutes) Part 1BOOMER DEMOLITION COMPANY

Work SheetFor Year Ended June 30, 2011

Balance SheetAdjusted and

Unadjusted Trial Income Statement of Trial Balance Adjustments Balance

Statement Owner’s Equity No. Title Debit Credit Debit Credit. Debit Credit Debit Credit Debit Credit101 Cash........................... 9,000 9,000 9,000126 Supplies......................18,000 (a)9,9008,100 8,100128 Prepaid insurance........14,600 (b)11,5003,100 3,100167 Equipment..................140,000 140,000 140,000168 Accumulated amort.,

equipment................ 10,000 (c)18,000 28,00028,000

201 Accounts payable......... 16,000 (d)700 16,70016,700

203 Interest payable.......... (f) 200 200 200210 Wages payable............ (e)2,200 2,200 2,200251 Long-term notes payable 90,000 90,000

90,000301 Rusty Boomer, capital. . 66,900 66,900

66,900302 Rusty Boomer, withdrawals 4,000 4,000 4,000401 Demolition fees earned 137,000 137,000 137,000612 Amortization expense,

equipment................ (c)18,000 18,000 18,000623 Wages expense...........51,400 (e)2,200 53,600 53,600633 Interest expense.......... 2,200 (f) 200 2,400 2,400637 Insurance expense....... (b)11,500 11,500 11,500640 Rent expense..............48,800 48,800 48,800652 Supplies expense......... (a)9,900 9,900 9,900683 Business tax expense... 8,400 8,400 8,400684 Repairs expense.......... 6,700 6,700 6,700

Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.422 Fundamental Accounting Principles, Eleventh Canadian Edition


cGraw

-Hill Ryerson Lim



690 Utilities expense.......... 16,800 (d) 700 17,500 17,500 Totals.......................319,900319,900 42,500 42,500 341,000341,000176,800137,000...........164,200204,000Net loss...................... 39,800 39,800 Totals....................... 176,800176,800204,000 204,000

Problem 5-3B (continued) Part 22011 Adjusting entries:

(a)

June

30

Supplies Expense......................... 9,900

Supplies................................. 9,900 To record consumption of supplies.

(b)

30

Insurance Expense....................... 11,500

Prepaid Insurance................... 11,500

To record consumption of insurance coverage.

(c) 30

Amortization Expense, Equipment. 18,000

Accumulated Amortization, Equipment...................................

18,000


(d)

30

Utilities Expense.......................... 700

Accounts Payable.................... 700 To record accrued utilities costs.

(e)

30

Wages Expense............................ 2,200

Wages Payable....................... 2,200 To record accrued wages.

(f) 30

Interest Expense ......................... 200

Interest Payable..................... 200 To record accrued interest expense.


Problem 5-3B (continued) Part 2 2011 Closing entries:June 30Demolition Fees Earned.............. 137,000

Income Summary..................... 137,000To close the revenue account.

30 Income Summary........................ 176,800 Amortization Expense, Equipment

18,000 Wages Expense........................ 53,600 Interest Expense...................... 2,400 Insurance Expense................... 11,500 Rent Expense.......................... 48,800 Supplies Expense..................... 9,900 Business Tax Expense.............. 8,400 Repairs Expense...................... 6,700 Utilities Expense...................... 17,500

To close the expense accounts.30 Rusty Boomer, Capital................ 39,800

Income Summary..................... 39,800To close the Income Summary account.

30 Rusty Boomer, Capital................ 4,000 Rusty Boomer, Withdrawals..... 4,000


Part 3BOOMER DEMOLITION COMPANY

Income StatementFor Year Ended June 30, 2011

Revenue:Demolition fees earned............. $137,000

Operating expenses:Wages expense........................$53,600Rent expense........................... 48,800Amortization expense, equipment 18,000Utilities expense...................... 17,500Insurance expense................... 11,500Supplies expense..................... 9,900Business tax expense............... 8,400Repairs expense....................... 6,700Interest expense...................... 2,400 Total operating expenses....... 176,800

Net loss..................................... $ 39,800


Problem 5-3B (continued) Part 3

BOOMER DEMOLITION COMPANYStatement of Owner’s EquityFor Year Ended June 30, 2011

Rusty Boomer, capital, July 1...... $ 36,900Add:.........Investments by owner

30,000 Total..................................... $ 66,900Less: Withdrawals by owner........$ 4,000 Net loss........................... 39,800 43,800Rusty Boomer, capital, June 30.... $ 23,100

BOOMER DEMOLITION COMPANYBalance SheetJune 30, 2011

Assets Current assets: Cash.......................................... $

9,000 Supplies.................................... 8,100 Prepaid insurance...................... 3,1

00 Total current assets................... $

20,200 Property, plant and equipment:.... Equipment................................. $140,0

00 Less: Accumulated amortization, equipment

28,0 00

112,0 00

Total assets.................................... $132,200

Liabilities Current liabilities: Accounts payable....................... $16,70

0 Interest payable........................ 200 Wages payable.......................... 2,200 Current portion of long-term note payable...................................

4,0 00

Total current liabilities............... $ 23,100

Long-term liabilities: Long-term note payable (less 86,0 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.426 Fundamental Accounting Principles, Twelfth Canadian Edition

current portion)............................... 00 Total liabilities............................. $109,1

00

Owner’s Equity Rusty Boomer, capital................... 23,1

00Total liabilities and owner’s equity. . $132,2

00

Problem 5-3B (concluded) Analysis component:(a)This error enters the wrong amount in the correct

accounts. The ending balance of the Prepaid Insurance account should be $3,100, but the entry reduces that account by $3,100. Because its unadjusted balance was $14,600, the adjusted balance will be $11,500 (= $14,600 – $3,100), which is $8,400 greater than the correct $3,100 balance. In addition, the Insurance Expense account balance will be only $3,100 instead of $11,500.The adjusted trial balance columns in the work sheet will be equal, but the error will cause the work sheet’s net income to be overstated by $8,400 because of the understatement of the expense. In addition, the balance sheet columns will include the overstated balance for the Prepaid Insurance account. The Rusty Boomer, Capital account will also be overstated.This error is not likely to be detected as a result of completing the work sheet. If it is not, the income statement will overstate net income by $8,400, and the balance sheet will overstate the cost of the unexpired insurance and owner’s equity by $8,400.

(b)This error inserts a debit in the balance sheet columns instead of the income statement columns. In the unlikely event that this error is not immediately detected, it will cause the work sheet measure of net income to be overstated because the total debits will incorrectly omit the $6,700 expense for repairs.


In all likelihood, the error will be discovered in the process of drafting the balance sheet because the accountant will realize that repairs expense is not an asset. If it is detected and corrected, the financial statements will be unaffected. However, if the repairs expense is erroneously included on the balance sheet, the reported net income will be overstated by $6,700. On the balance sheet, a nonexistent asset will be reported for the repairs expense and owner’s equity will be overstated by $6,700.

Problem 5-4B (25 minutes) Part 12011 ....................Closing entries:Dec. 31...................Sewing Fees Earned 62,000

Income Summary..................... 62,000 To close the revenue.

31 Income Summary........................ 38,060 Amortization Expense, Equipment

3,000 Wages Expense........................ 28,400 Insurance Expense................... 1,100 Rent Expense.......................... 2,400 Store Supplies Expense............ 1,300 Utilities Expense...................... 1,860

To close the expense accounts.31 Income Summary........................ 23,940

Anne Taylor, Capital................. 23,940 To close the Income Summary account.

31 Anne Taylor, Capital................... 16,000Anne Taylor, Withdrawals......... 16,000


Part 2Anne’s Tailoring ServicesPost-Closing Trial Balance

December 31, 2011Acct.

No. Account Debit Credit101 Cash..................................... $13,45

0125 Store supplies...................... 4,140


128 Prepaid insurance................. 2,200 167 Equipment............................ 33,000168 Accumulated amortization,

equipment............................$

9,000201 Accounts payable.................. 21,000210 Wages payable..................... 3,200301 Anne Taylor, capital*............. 19,59

0Totals................................... $52,79

0$52,79

0

*Beginning capital $11,650 + Net income $23,940 – Withdrawals $16,000 = Ending capital $19,590


Problem 5-5B (90 minutes) Part 1ANNE’S TAILORING SERVICES

Income StatementFor Year Ended December 31, 2011

Revenue: Sewing fees earned................. $62,000Operating expenses:

Wages expense........................$28,400Amortization expense, equipment 3,000Rent expense........................... 2,400Utilities expense...................... 1,860Store supplies expense............ 1,300Insurance expense................... 1,100 Total operating expenses....... 38,060

Net income................................. $23,940

ANNE’S TAILORING SERVICESStatement of Owner’s Equity

For Year Ended December 31, 2011Anne Taylor, capital, January 1.... $11,650Add: .........................Net income

23,940 Total....................................... $35,590Less: Withdrawals...................... 16,000Anne Taylor, capital, December 31

$19,590


Problem 5-5B (concluded)

ANNE’S TAILORING SERVICESBalance Sheet

December 31, 2011AssetsCurrent assets: Cash............................................. $13,4

50 Store supplies............................... 4,140 Prepaid insurance......................... 2,2

00 Total current assets...................... $19,7

90Property, plant and equipment: Equipment.................................... $33,0

00 Less: Accumulated amortization.. 9,0

00 24,0

00Total assets....................................... $43,7

90

Liabilities Current liabilities: Accounts payable.......................... $

21,000

Wages payable............................. 3,2 00

Total current liabilities.................. $ 24,20

0

Owner’s Equity Anne Taylor, capital......................... 19,5

90Total liabilities and owner’s equity...... $43,7

90

Analysis component:


Net income is not a guarantee that a business can meet its current obligations. As a creditor, I would review the current assets on the balance sheet to determine Anne’s ability to pay current obligations during the year 2012. At December 31, 2011 Anne’s Tailoring had $19,790 in current assets and $24,200 in current liabilities. Therefore, as a creditor, I would be concerned that current liabilities exceed current assets indicating that there are insufficient current assets to meet current obligations.


Problem 5-6B (25 minutes)2011 Closing entries:

Dec. 31

Photography Fees Earned 47,000

Dividends Earned....................... 500 Income Summary................... 47,50

0 To close the revenue account.

31 Income Summary....................... 26,266 Amortization Expense, Building.....................................

2,000

Amortization Expense, Equipment.................................

1,000

Amortization Expense, franchise...................................

500

Wages Expense..................... 17,000

Interest Expense................... 1,200 Insurance Expense................. 1,425 Supplies Expense.................. 900 Telephone Expense................ 421 Utilities Expense................... 1,820 To close expense accounts.

31 Income Summary....................... 21,234 Bea Jones, Capital.................. 21,23

4 To close the income summary to capital.

31 Bea Jones, Capital...................... 6,000 Bea Jones, Withdrawals......... 6,000 To close withdrawals to capital.


Problem 5-7B (50 minutes) BEA’S PHOTO STUDIO


Revenues:Photography fees earned................$47,000Dividends earned............................ 500 Total revenues............................. $47,500

Operating expenses:Wages expense...............................$17,000Amortization expense, building....... 2,000Utilities expense............................. 1,820Insurance expense.......................... 1,425Interest expense............................. 1,200Amortization expense, equipment.... 1,000Supplies expense............................ 900Amortization expense, franchise...... 500Telephone expense......................... 421 Total operating expenses............. 26,266

Net income....................................... $21,234

BEA’S PHOTO STUDIOStatement of Owner’s Equity

For Year Ended December 31, 2011Bea Jones, capital, January 1.............. $67,316Add: ...............Investments by owner $ 20,000

Net income.................................. 21,234 41,234 Total.............................................. $108,550Less: Withdrawals............................. 6,000Bea Jones, capital, December 31........ $102,550


Problem 5-7B (concluded)BEA’S PHOTO STUDIO


AssetsCurrent assets:

Cash.......................................... $ 6,400Temporary investments.............. 10,200Supplies..................................... 3,600Total current assets................... $20,200

Long-term investments: Notes receivable....................... 35,000Property, plant and equipment:

Land.......................................... $ 28,500Building.....................................$60,000

Less: Accumulated amortization 29,00031,000

Equipment.................................$18,000 Less: Accumulated amortization 3,000 15,000Total property, plant and equipment74,500

Intangible assets:Franchise................................... 8,000

Total assets.................................. $137,700

LiabilitiesCurrent liabilities: Accounts payable..................... $ 2,500 Unearned professional fees...... 650 Current portion of long-term notes payable 26,400 Total current liabilities............. $ 29,550Long-term liabilities: Long-term notes payable (less current portion) 5,600Total liabilities........................... $35,150

Owner’s EquityBea Jones, capital....................... 102,550

Total liabilities and owner’s equity $137,700


Analysis component:Liabilities must be separated between those that are due within one year of the balance sheet date (current) and those that are due beyond one year of the balance sheet date (long-term) because decision makers must be able to assess whether the business has sufficient current assets to cover its current obligations. If the $26,400 current portion of the $32,000 long-term note was not shown as a current liability on the balance sheet, it would have appeared that Bea’s Photo Studio had

Problem 5-8B (20 minutes)2011 Closing entries:

Dec.

31

Consulting Fees Earned.............. 97,000

Dividends Earned....................... 2,300 Income Summary................... 99,300 To close the revenue accounts.

31 Income Summary........................ 108,310 Amortization Expense, Equipment.................................

2,000

Amortization Expense, Office Furniture...................................

900

Amortization Expense, Copyright...................................

500

Insurance Expense................. 1,200 Interest Expense.................... 720 Supplies Expense................... 4,300 Telephone Expense................ 940 Utilities Expense.................... 21,750 Wages Expense...................... 76,000 To close expense accounts.

31

Abby Dehara, Capital................ 9,010

Income Summary................. 9,010 To close the income summary to capital.

31 Abby Dehara, Capital................ 8,000 Abby Dehara, Withdrawals... 8,000 To close withdrawals to capital.


Problem 5-9B (40 minutes)Wellness Consulting Services


Revenues: Consulting fees earned..................... $97,00

0 Dividends earned.............................. 2,3

00 Total revenues............................. $

99,300

Operating expenses: Wages expense................................. $76,00

0 Utilities expense............................... 21,750 Supplies expense.............................. 4,300 Amortization expense, equipment...... 2,00

0 Insurance expense............................ 1,200 Telephone expense........................... 940 Amortization expense, office furniture 900 Interest expense............................... 720 Amortization expense, copyright....... 500 Total operating expenses.............. 108,3

10Net loss.............................................. $

9,010

Wellness Consulting ServicesStatement of Owner’s Equity

For Year Ended December 31, 2011Abby Dehara, capital, April 1.................... $61,3

60Less: Withdrawals by owner.................... $8,000 Net loss......................................... 9,010 17,01

0Abby Dehara, capital, March 31 $44,3

50


Problem 5-9B (concluded)Wellness Consulting Services


Assets Current assets: Cash....................................... $

3,500 Temporary investments........... 14,000 Supplies................................. 1,500 Current portion of notes receivable........................................

3,000

Total current assets................ $22,000

Long-term investments: Notes receivable (less $3,000 current portion)..............................

7,000

Property, plant and equipment: Equipment............................... $32,

000 Less: Accumulated amortization....................................

17, 000

$15,000

Office furniture........................ 10,200

Less: Accumulated amortization....................................

6,9 00

3,300

Total property, plant and equipment.......................................

18,300

Intangible assets: Copyright............................... 7,00

0Total assets $54,3

00

Liabilities Current liabilities: Accounts payable.................... $

1,200

Unearned professional fees..... 750 Current portion of long-term notes payable..................................

5,0 00

Total current liabilities............ $ 6,950 Long-term liabilities:................... Long-term notes payable (less 3,000


current portion)...............................Total liabilities............................... $

9,950

Owner’s Equity Abby Dehara, capital................... 44,3


00

Analysis component:The business experienced a decrease in equity during 2011 of $17,010 which will have caused assets to decrease and/or liabilities to increase by a net amount of $17,010.


Problem 5-10B (20 minutes)1.

Enviro Gardening ServicesIncome Statement

For Year Ended October 31, 2011Revenues: Service revenue................................... $74,00

0Operating expenses: Wages expense................................... $56,00

0 Supplies expense................................ 12,400 Amortization expense, vehicles............ 5,300 Amortization expense, gardening equipment...............................................

4,800

Fuel expense....................................... 4,600 Insurance expense............................... 3,600 Utilities expense.................................. 900 Telephone expense.............................. 850 Interest expense................................. 680 Total operating expenses............... 89,13

0Net loss................................................... $15,13

0

Grant Craig, Capital

38,000

(Beg. bal.)

2. $38,000 – $15,130 – $5,000 = $17,870 OR

(Net loss)

15,130

(With.) 5,00017,8

70(End. bal.)


Problem 5-11B (50 minutes)TelsCo Drill Servicing

Income StatementFor Year Ended August 31, 2011

Revenues: Drill servicing revenue...................... $106,

000 Interest earned................................. 1,3

00 Total revenues............................. $107,3

00Operating expenses: Wages expense................................. $

71,000

Insurance expense............................ 8,340 Telephone expense........................... 1,400 Amortization expense, furniture........ 1,030 Utilities expense............................... 23

0 Total operating expenses.............. 82,00

0Net income.......................................... $

25,300

TelsCo Drill ServicingStatement of Owner’s Equity

For Year Ended August 31, 2011Angela Telsco, capital, September 1......... $24,2

10Add: Owner investments......................... $25,00

0 Net income.................................... 25,300 50,30

0 Total................................................. $74,5

10Less: Withdrawals by owner.................... 17,00

0Angela Telsco, capital, August 31, 2011.... $57,5

10


Problem 5-11B (concluded)TelsCo Drill Servicing

Balance SheetAugust 31, 2011

Assets Current assets: Cash..................................... $5,000 Accounts receivable.............. 18,000 Interest receivable................ 140 Office supplies...................... 850 Total current assets.............. $23,99

0 Long-term investments: Investment in Nortel shares. . 29,000 Property, plant and equipment: Furniture ............................... $53,00

0 Less: Accumulated amortization.................................

21,75 0

$31,250

Intangible assets: Franchise................................ 6,320 Total assets.................................. $90,56

0Liabilities Current liabilities: Accounts payable.................... $14,9

50 Short-term notes payable........ 1,600 Unearned servicing revenue..... 2,500 Current portion of long-term notes payable...............................

9,00 0


Long-term liabilities: Long-term notes payable (less current portion)............................

5,000

Total liabilities........................... $33,050

Owner’s Equity Angela Telsco, capital................ 57,510 Total liabilities and owner’s equity $90,56

0

Analysis component:


TelsCo Drill Servicing might be tempted to report the investment in Nortel shares as a current asset on the August 31, 2011 balance sheet because total current assets would then be greater than total current liabilities giving the misimpression that TelsCo is in a position to cover its current obligations.


Problem 5-12B (30 minutes)Part 1

Jan Rider, Capital

Jan Rider, capital = $121,950 - $3,233* = $118,717 OR

121,950

3,233*118,7

17*Net loss = Revenues – Expenses = (73,000 + 400) – (350 + 2,625 + 650 + 73,008) = 73,400 – 76,633 = 3,233 net loss

Part 2

Landmark ToursBalance SheetJuly 31, 2011

Assets Current assets: Cash.................................................. $17,80

0 Accounts receivable............................ 66,300 Interest receivable.............................. 400 Notes receivable................................. 28,000 Prepaid insurance............................... 18,375 Total current assets............................ $130,8

75 Property, plant and equipment: Furniture............................................ $13,50

0 Less: Accumulated amortization..... 350 13,1

50 Total assets.......................................... $144,0

25

Liabilities Current liabilities: Accounts payable............................. $14,50

0 Wages payable................................ 1,008 Unearned tour revenue..................... 9,800 Total liabilities...................................... $

25,308


Owner’s Equity Jan Rider, capital................................... 118,7

17Total liabilities and owner’s equity........... $144,0

25


Problem 5-13B (90 minutes)NOTE: The general ledger accounts are shown at the end of the solution (in both balance column and T-account format) as they would appear after all entries have been posted.

Part 2Transactions for July:

General Journal Page G1Date Account Titles and Explanations PR Debit

Credit 2011July 1 Cash................................. 101 20,000

Buildings.......................... 173 120,000Cindy Tucker, Capital.... 301 140,000

Owner invested in the business.2 Equipment Rental Expense 640 1,800

Cash............................ 101 1,800Paid one month’s rent.

5 Office Supplies.................. 124 2,300Cash............................ 101 2,300

Acquired office supplies.10 Prepaid Insurance............. 128 5,400

Cash............................ 101 5,400Paid one year’s premium in advance.

14 Salaries Expense............... 622 900Cash............................ 101 900

Paid two weeks’ salary.24 Cash................................. 101 8,800

Storage Fees Earned.... 401 8,800Collected fees from customers.

28 Salaries Expense............... 622 900Cash............................ 101 900

Paid two weeks’ salary.29 Telephone Expense........... 688 300

Cash............................ 101 300Paid the telephone bill.

30 Repairs Expense............... 684 850Cash............................ 101 850

Repaired the roof.31 Cindy Tucker, Withdrawals 302 1,600


Cash............................ 101 1,600Owner withdrew cash.

Problem 5-13B (continued) Part 3General Journal Page G2

Date Account Titles and Explanations PR DebitCredit

2011 Adjusting entries:July31 Insurance Expense............ 637 300

Prepaid Insurance........ 128 300To record expired insurance ($5,400/12 = $450/month; 2/3 × $450 per month).

31 Office Supplies Expense... . 650 750Office Supplies............. 124 750

To record the cost of consumed supplies ($2,300 – $1,550).

31 Amortization Expense, Buildings 606 1,200Accumulated Amortization, Buildings 174

1,200To record amortization.

31 Salaries Expense............... 622 180Salaries Payable........... 209 180

To record accrued salaries.

31 Accounts Receivable......... 106 950Storage Fees Earned.... 401 950

To record accrued storage fees.

Part 4LOCKIT CO.

Income StatementFor Month Ended July 31, 2011

Revenue:Storage fees earned................. $9,750

Operating expenses:Salaries expense...................... $1,980Equipment rental expense........ 1,800Amortization expense, buildings 1,200Repairs expense....................... 850Office supplies expense............ 750


Insurance expense................... 300Telephone expense.................. 300 Total operating expenses....... 7,180

Net income................................. $2,570Problem 5-13B (continued) Part 4

LOCKIT CO.Statement of Owner’s Equity

For Month Ended July 31, 2011Cinty Tucker, capital, July 1......... $ 0Add:.........Investments by owner $140,000

Net income........................... 2,570 $142,570Total....................................... $142,570

Less: Withdrawals by owner........ 1,600Cindy Tucker, capital, July 31...... $140,970

LOCKIT CO.Balance SheetJuly 31, 2011

Assets Current assets: Cash................................................ $

14,750 Accounts receivable.......................... 950 Office supplies.................................. 1,550 Prepaid insurance............................. 5,10

0 Total current assets.......................... $

22,350 Property, plant and equipment: Buildings.......................................... $120,0

00 Less: Accumulated amortization..... 1,20

0 118,8

00 Total assets........................................ $141,1

50

Liabilities Current liabilities: Salaries payable............................... $

180

Owner’s Equity Cindy Tucker, capital........................... 140,9

70Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.448 Fundamental Accounting Principles, Twelfth Canadian Edition

Total liabilities and owner’s equity......... $141,150


Problem 5-13B (continued) Part 5General Journal Page G3

Date Account Titles and Explanations PR DebitCredit

2011 Closing entries:July31 Storage Fees Earned.......... 401 9,750

Income Summary.......... 901 9,750To close the revenue account.

31 Income summary............... 901 7,180Amortization Expense, Buildings 606

1,200Salaries Expense.......... 622 1,980Insurance Expense....... 637 300Equipment Rental Expense 640 1,800Office Supplies Expense 650 750Repairs Expense........... 684 850Telephone Expense....... 688 300

To close the expense accounts.

31 Income Summary.............. 901 2,570Cindy Tucker, Capital.... 301 2,570


31 Cindy Tucker, Capital........ 301 1,600Cindy Tucker, Withdrawals 302 1,600


Part 6LOCKIT CO.

Post-Closing Trial BalanceJuly 31, 2011

Acct.No. Account Debit Credit101 Cash...................................$ 14,750106 Accounts receivable............. 950124 Office supplies..................... 1,550128 Prepaid insurance................ 5,100173 Buildings.............................120,000174 Accumulated amortization, buildings

$ 1,200209 Salaries payable.................. 180301 Cindy Tucker, capital........... 140,970

Totals.................................$142,350 $142,350


Problem 5-13B (continued)Parts 1, 2, 3, 5:Ledger as of July 31 (using balance column format):

Cash Acct. No. 101Date

Explanation PR Debit Credit Balance

2011July

1 G1 20,000 20,000

2 G1 1,800 18,2005 G1 2,300 15,90010

G1 5,400 10,500

14

G1 900 9,600

24

G1 8,800 18,400

28

G1 900 17,500

29

G1 300 17,200

30

G1 850 16,350

31

G1 1,600 14,750

Accounts Receivable Acct. No. 106Date


2011July

31

G2 950 950

Office Supplies Acct. No. 124Date


2011July

5 G1 2,300 2,300

31

G2 750 1,550

Prepaid Insurance Acct. No. 128Da Explanation PR Debit Credit Balanc


te e2011

July

10

G1 5,400 5,400

31

G2 300 5,100

Buildings Acct. No. 173Date


2011July

1 G1 120,000

120,000

Accumulated Amortization, Buildings

Acct. No. 174

Date


2011July

31

G2 1,200 1,200

Problem 5-13B (continued)Salaries Payable Acct. No. 209

Date


2011July

31

G2 180 180

Cindy Tucker, Capital Acct. No. 301Date


2011July

1 G1 140,000

140,000

31

G3 2,570 142,570

31

G3 1,600 140,970

Cindy Tucker, Withdrawals Acct. No. 302Date


2011


July

31

G1 1,600 1,600

31

G3 1,600 0

Storage Fees Earned Acct.No. 401Date


2011July

24

G1 8,800 8,800

31

G2 950 9,750

31

G3 9,750 0

Amortization Expense, Buildings Acct. No. 606Date


2011July

31

G2 1,200 1,200

31

G3 1,200 0

Salaries Expense Acct. No. 622Date


2011July

14

G1 900 900

28

G1 900 1,800

31

G2 180 1,980

31

G3 1,980 0



2011July

31

G2 300 300

31

G3 300 0


Problem 5-13B (continued)Equipment Rental Expense Acct. No. 640

Date


2011July

2

G1 1,800 1,800

31

G3 1,800 0

Office Supplies Expense Acct. No. 650Date


2011July

31

G2 750 750

31

G3 750 0

Repairs Expense Acct. No. 684Date


2011July

30

G1 850 850

31

G3 850 0

Telephone Expense Acct. No. 688Date


2011July

29

G1 300 300

31

G3 300 0

Income Summary Acct. No. 901Date


2011July

31

G3 9,750 9,750

31

G3 7,180 2,570


31

G3 2,570 0


Problem 5-13B (continued) Parts 1, 2, 3, 5 Ledger as of July 31 (using the T-account format):

Cash 101

Accounts Receivable

106

Office Supplies 124

Jul 1 20,000

1,800

Jul 2

Jul 31

950 Jul 5

2,300

750 Jul 31

24 8,800

2,300

5 Bal. 1,550

5,400

10

900 14900 28300 29850 30

1,600

31

Bal. 14,750

Prepaid Insurance

128

Buildings

173 Accum.

Amort., Building

174

Jul 10

5,400

300 Jul 31

Jul 1

120,000

1,200

Jul 31

Bal. 5,100

Salaries Payable

209

Cindy Tucker, Capital

301 Cindy

Tucker, Withdrawa

ls

302

180 Jul Jul 1,60 140, Jul Jul 1,60 1,6 Jul


cGraw

-Hill Ryerson Lim




31 31 0 000 1 31 0 00 312,57

031

140,970

Bal. Bal. -0-


Problem 5-13B (concluded) Parts 1, 2, 3, 5

Storage Fees Earned

401Amort.

Expense, Building

606 Salaries Expense 622

Jul 31 9,750

8,800

950

Jul 2431

Jul 31 1,200

1,200

Jul 31 Jul 142831

900900180

1,980

Jul 31

-0- Bal. Bal. -0- Bal. -0-

Insurance Expense

637Equipment

Rental Expense 640 Office Supplies Expense

650

Jul 31 300 300 Jul 31 Jul 2 1,800

1,800

Jul 31 Jul 31 750 750 Jul 31

Bal. -0- Bal. -0- Bal. -0-

Repairs Expense 684 Telephone Expense

688 Income Summary 901

Jul 30 850 850 Jul 31 Jul 29 300 300 Jul 31 Jul 31 7,180 9,750

Jul 31

Bal. -0- Bal. -0- 31 2,570 2,570

Bal.

-0- Bal.


cGraw

-Hill Ryerson Lim



*Problem 5-14B (30 minutes)Part 1


Dec.

31

Salaries Expense......................... 5,250

Salaries Payable..................... 5,250

To record accrued salaries.

b)

31

Rent Receivable........................... 675

Rent Revenue......................... 675 To record accrued rent revenue; $1,125 – $450.

c)

31

Office Supplies Expense............... 3,525

Office Supplies....................... 3,525

To record supplies used; $4,200 – $675 left on hand = $3,525 used.

d)

31

Insurance Expense....................... 450

Insurance Payable.................. 450 To record insurance payable.

e)

31

Interest Expense ......................... 2,250

Interest Payable..................... 2,250

To record accrued interest; $900 + $900 + $450.

f) 31

Unearned Service Fees................. 11,700

Service Fees Earned............... 11,700

To record fees earned; $18,000 – $6,300 still unearned = $11,700 earned.

g)

31

Interest Receivable...................... 175


Interest Revenue.................... 175 To record accrued interest.

h)

31

Accounts Receivable.................... 8,250

Service Fees Earned............... 8,250

To record accrued service fees.


*Problem 5-14B (continued)Part 22012

Reversing entries:

Jan. 1 Salaries Payable......................... 5,250 Salaries Expense................... 5,250 To reverse accrued salaries.

1 Rent Revenue............................. 675 Rent Receivable.................... 675 To reverse accrued rent revenue.

1 Insurance Payable...................... 450 Insurance Expense................ 450 To reverse accrued insurance.

1 Interest Payable......................... 2,250 Interest Expense................... 2,250 To reverse accrued interest expense.

1 Interest Revenue........................ 175 Interest Receivable............... 175 To reverse accrued interest revenue.

1 Service Fees Earned................... 8,250 Accounts Receivable.............. 8,250 To reverse accrued service fees.

Part 3January 2012 transactions:2012Jan. 4 Salaries Expense........................ 7,500

Cash..................................... 7,500 To record payment of salaries.

12

Cash.......................................... 1,800

Rent Revenue........................ 1,800 To record receipt of rent revenue; $675 + $1,125.


12

Insurance Expense...................... 450

Cash..................................... 450 To record payment of insurance.


*Problem 5-14B Part 3 (concluded)2012Jan.

15

Interest Expense................................ 2,700

Cash............................................. 2,700

To record payment of interest.

22

Cash.................................................. 38,075

Note Receivable............................ 37,500

Interest Revenue........................... 575 To record receipt of note plus interest; $37,500 + $575.

24

Cash.................................................. 11,350

Service Fees Earned...................... 11,350

To record receipt of service fees; $8,250 + $3,100.


ANALYTICAL AND REVIEW PROBLEMS

A&R Problem 5-1Part 1

Net income= $105,000 – ($147,000 – $126,000) = $84,000

Or

Total revenues = $84,000 + $168,000 = $252,000

Part 2

Dec. 31 Revenue................... 252,000 Income Summary. . 252,000

To close revenue.

31 Income Summary...... 168,000 Wages Expense..... 126,000 Advertising Expense 42,000

To close expenses.

31 Income Summary...... 84,000 Owner, Capital..... 84,000

To close the Income Summary to capital.

31 Owner, Capital......... 105,000 Owner, Withdrawal105,000



Owner, Capital

105,000

147,000

X = 84,000 NI

126,000

A&R Problem 5-2 Part 1

SANDY’S DELIVERY SERVICEWork Sheet

For the Year Ended December 31, 2011Balance Sheetand

Unadjusted Adjusted Income Statement of

Trial Balance

Adjustments Trial Balance

Statement Owner’s Equity

Account Debit Credit

Debit Credit Debit Credit

Debit

Credit

Debit Credit

Cash...................................... 10,650

10,650

10,650

Accounts receivable................ 7,000

a) 2,000

9,000

9,000

Supplies ................................ 4,200

b) 2,600

1,600

1,600

Prepaid insurance................... 2,400

c) 800

1,600

1,600

Prepaid rent........................... 1,800

d) 900

900 900

Delivery trucks....................... 40,000

40,000

40,000

Accounts payable................... 3,130

3,130

3,130

Unearned delivery fees........... 4,500

a) 2,500

2,000

2,000

Sandra Berlasty, capital.......... 50,000

50,000

50,000

Sandra Berlasty, withdrawals.. 3,000

3,000

3,000

Delivery service revenue......... 18,500

a) 4,500

23,000

23,000

Advertising expense............... 600

600 600



cGraw

-Hill Ryerson Lim




Gas and oil expense................ 680

680 680

Salaries expense.................... 5,600

e) 400

6,000

6,000

Utilities expense..................... 20 0

200 200

Totals.................................. 76,130

76,130

Insurance expense.................. c) 800

800 800

Rent expense......................... d) 900

900 900

Supplies expense.................... b) 2,600

2,600

2,600

Amortization expense, delivery trucks.......................

f) 2,000

2,000

2,000

Accumulated amortization, delivery trucks.......................

f) 2,000

2,000

2,000

Salaries payable..................... e) 400

4 00

40 0

Totals.................................. 11,200 11,200

80,530

80,530

13,780

23,000

66,750

57,530

Net income............................. 9,2 20

9,2 20

Totals.................................. 23,000

23,000

66,750

66,750

A&R Problem 5-2 (concluded) Part 22011 Adjusting entries:

a) Dec.

31

Accounts Receivable....................... 2,000

Unearned Delivery Fees................... 2,500 Delivery Service Revenue........... 4,500

b)

31

Supplies Expense............................ 2,600

Supplies.................................... 2,600c) 3

1Insurance Expense.......................... 800

Prepaid Insurance...................... 800d)

31

Rent Expense.................................. 900

Prepaid Rent............................. 900e) 3

1Salaries Expense............................. 400

Salaries Payable....................... 400f) 3

1Amortization Expense, Delivery Trucks............................................

2,000

Accumulated Amortization, Delivery Trucks...............................

2,000

Closing entries:31

Delivery Service Revenue................ 23,000

Income Summary....................... 23,000

31

Income Summary............................ 13,780

Advertising Expense.................. 600 Gas and Oil Expense................... 680 Salaries Expense........................ 6,000 Utilities Expense........................ 200 Insurance Expense..................... 800 Rent Expense............................. 900 Supplies Expense....................... 2,600


Amortization Expense, Delivery Trucks...............................

2,000

31

Income Summary............................ 9,220

Sandra Berlasty, Capital............. 9,22031

Sandra Berlasty, Capital.................. 3,000

Sandra Berlasty, Withdrawals..... 3,000


ETHICS CHALLENGE1. There are several courses of action that Jennifer could

have taken:a. Probably she should have consulted with the

president and told him that the finalized financial statements would not be ready by the time of the meeting. She should explain that delay in final statement preparation is a normal event given the need to wait for final information to prepare accurate adjustments. Possibly the meeting could be rescheduled or Jennifer could have asked how the president preferred her to proceed.

b. The estimation route was not a bad choice in itself. Jennifer probably should have used worst case estimates instead of recording expenses on the low side. Users of financial statements usually prefer knowing worst case scenarios over best case outcomes.

The use of estimates gets the financial statements closer to their final form than ignoring the adjustments completely.

2. Students may offer one of the above alternatives or another response they may think of, given the situation.


FOCUS ON FINANCIAL STATEMENTSFFS 5-1Part 1

Sarda Electrical ServicingIncome Statement

For Year Ended December 31, 2011Revenues Electrical fees earned.................. $126,

600Operating expenses: Salaries expense......................... $27,0

00 Rent expense.............................. 21,00

0 Amortization expense, truck........ 3,600 Amortization expense, tools........ 2,250 Insurance expense...................... 1,275 Interest expense......................... 90

0 Total operating expenses.......... 56,0

25Net income.................................... $

70,575

Sarda Electrical ServicingStatement of Owner’s Equity

For Year Ended December 31, 2011Nymeth Sarda, capital, January 1.... $

7,825Add: Net income........................... $70,5

75 Investments by owner .......... 20,

000 90,5

75 Total......................................... $98,4

00Less: Withdrawals for the year..... 61,5

00Nymeth Sarda, capital, December 31 $36,9

00


FFS 5-1 (continued)Sarda Electrical Servicing


Assets Current assets:........................... Cash....................................... $5,0

00 Accounts receivable................ 10,5

00 Prepaid insurance................... 1,05

0 Prepaid rent........................... 7,20

0 Electrical supplies................... 19,0

00 Current portion of notes receivable.......................................

2,0 00

Total current assets................ $ 44,75

0 Long-term investments: Notes receivable, less $2,000 current portion...............................

10,000

Property, plant and equipment: Tools...................................... $21,

000 Less: Accumulated amortization...................................

4,5 00

$16,500

Truck...................................... $40,500

Less: Accumulated amortization...................................

21,000

19,500

Total property, plant and equipment......................................

36,000

Intangible assets: Copyright............................... 5,

100Total assets.................................... $95,8

50

Liabilities Current liabilities: Accounts payable................... $21,

000


Salaries payable.................... 3,150

Unearned electrical fees......... 5,250

Notes payable, due June 1, 2012...............................................

2,550

Total current liabilities........... $31,950

Long-term liabilities: Notes payable, due August 31, 2013...............................................

27,000

Total liabilities........................... $58,950

Owner’s Equity Nymeth Sarda, capital................. 36,

900Total liabilities and owner’s equity. . $95,8

50


FFS 5-1 (continued)Part 22011 Closing entries:

Dec.

31

Electrical Fees Earned.....................126,600

Income Summary...................... 126,600

To close credit balance temporary accounts.

31

Income Summary............................56,025

Amortization Expense, Tools.... 2,250 Amortization Expense, Truck..... 3,600 Insurance expense.................... 1,275 Interest Expense....................... 900 Rent Expense........................... 21,000 Salaries Expense...................... 27,000 To close debit balance temporary accounts.

31

Income Summary............................70,575

Nymeth Sarda, Capital.............. 70,575 To close Income Summary to capital.

31

Nymeth Sarda, Capital....................61,500

Nymeth Sarda, Withdrawals...... 61,500 To close withdrawals to capital.

Part 3Sarda Electrical ServicingPost-Closing Trial Balance

December 31, 2011Debits Credits

Cash....................................................... $ 5,000

Accounts Receivable............................... 10,500Electrical Supplies................................... 19,000Prepaid Insurance................................... 1,050Prepaid Rent........................................... 7,200Tools...................................................... 21,000Accumulated Amortization, Tools............. $

4,500Truck...................................................... 40,500


Accumulated Amortization, Truck............ 21,000Copyright............................................... 5,100Notes Receivable.................................... 12,000Accounts Payable.................................... 21,000Salaries Payable..................................... 3,150Unearned Electrical Fees......................... 5,250Notes Payable, due June 1, 2012.............. 2,550Notes Payable, due August 31, 2013 27,000Nymeth Sarda, Capital............................

36,9

00

Totals.....................................................$

121,350

$ 121,35

0FFS 5-1 (concluded)Analysis component:Nymeth Sarda is not reinvesting profits. This is evident by the amount of his withdrawals: $61,500 which represents 87% of net income ($61,500/$70,575 × 100 = 87%). Reinvesting profits means that as net income causes equity to increase, assets are retained by the business for the purpose of growth rather than withdrawn which depletes assets.

A = L + E

Withdrawals cause equity and assets to decrease which depletes rather than grows the assets.


FFS 5-2a.

December 31, 2005

December 31, 2004

Cash....................................... $ 791

$ 1,057

Accounts receivable................ 2,135 1,794Inventories and prepaid expenses................................

3,182 3,256

Current portion of mortgages and loans receivable............... 3,72

3 2,79

5Total current assets................ $

9,831$

8,902

b.Decembe

r 31, 2005

December 31, 2004

Accounts payable and accrued liabilities................................

$11,730

$11,660

Current portion of long-term debt.......................................

6,713 8,210

Other current liabilities........... 8,131 5,860Prepaid annual dues and deposits.................................

6,03 2

6,564


$32,294

*c. December 31, 2005 December 31, 2004

Current ratio.

9,831/32,606 = 0.30:1

8,902/32,294 = 0.28:1

*d. The change in the ratio was favourable. ClubLink Corporation had greater current assets at December 31, 2005 to cover current obligations ($0.30 of current assets to cover every $1.00 of current liability) than it had at December 31, 2004. However, it appears that ClubLink Corporation may have difficulty in meeting short-term obligations.


Critical Thinking QuestionCT 5-1Note to instructor: Student responses will vary therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity.

Problem(s):— Delton Property Rentals cannot pay employees in March

and the bank will not lend it moneyGoal(s)*:

— From the perspective of the bank, the bank needs to follow internal policies and procedures regarding who it is appropriate to lend cash to

Assumption(s)/Principle(s):— That a decision to lend money will be based on the

balance sheet prepared belowFacts:

— as presented in balance sheet below prepared from information provided

Conclusion(s)/Consequence(s):


— the balance sheet was weakened significantly from 2010 to 2011 given that liabilities were 32% of total assets (240,000/750,000 × 100) in 2010 and 98% in 2011 (2,780,000/2,850,000 × 100). It appears that the increase was caused by a note payable used to purchase land and buildings.

— The $2,440,000 note payable requires a $200,000 annual payment and quick assets on hand as of March 31, 2011 total $90,000 (15,000 + 75,000); it appears that Delton Property Rentals will be unable to make the payment.

— Given that accounts receivable have decreased significantly from 2010 to 2011, it could be assumed that sales have decreased in a corresponding manner.

— Accounts payable have increased from $7,000 in 2010 to $340,000 in 2011 yet there are quick assets on hand as of March 31, 2011 totalling $90,000 (15,000 + 75,000); it appears that Delton Property Rentals will be unable to pay its creditors.

— The 2011 quick ratio is: (15,000 + 75,000)/340,000 = $0.26:$1.00 which indicates that Delton will have difficulty meeting its short-term obligations; the 2010 quick ratio was: (40,000 + 215,000)/(7,000 + 29,000) = $7.08:$1.00 which indicates a dramatic deterioration in Delton’s liquidity.

— If the bank lends Delton money, it risks noncollection; on the assumption that the $2,440,000 loan is with the same bank and that it is secured by the land and building, the bank should not lend Delton the money.

*The goal is highly dependent on “perspective.”


CT 5-1 (concluded)

Delton Property RentalsBalance Sheet

March 31Assets 2011 2010

Current assets Cash.................................. $

15,000$

40,000 Accounts receivable...........

75,000215,00

0 Supplies............................ 8,0

00 50,00

0 Total current assets..........

$ 98,000

$ 305,00

0 Property, plant and equipment Land..................................

$ 675,000

$ 150,00

0 Buildings........................... 2,112,0

00430,00

0 Accumulated amortization, buildings........... -

165,000

-150,00

0 Equipment......................... 45,000 45,000 Accumulated amortization, equipment.........

- 35,000

- 30,000

Total property, plant and equipment..............................

$2,632,000

$445,000

Long-term investments Notes receivable, due Nov. 30, 2015.................................

120,0 00

0

Total assets............................ $2,850,000

$750,000

Liabilities Current liabilities Accounts payable............... $

340,000$

7,000 Unearned fees....................

0 29,00

0 Total current liabilities..... 340,000 36,000 Long-term liabilities


Notes payable*................... 2,440, 000

204,00 0

Total liabilities........................ 2,780,000

240,000

Owner's equity Teal Delton, capital**............ 70,0

00 510,0

00Total liabilities and owner's equity....................................

$2,850,000

$750,000


Serial Problem, Echo Systems (45 minutes) Part 1Closing entries and general ledger accounts:

General Journal Page G6Date Account Titles and Explanations PR Debit

Credit2011 Closing entries:Dec.31 Computer Services Revenue. .403 52,200

Income Summary..............901 52,200To close the revenue account.

31 Income Summary..................901 35,940Amortization Expense, Office

Equipment.....................612 1,500Amortization Expense, Computer

Equipment.....................613 2,250Wages Expense................623 6,200Insurance Expense...........637 1,080Rent Expense...................640 6,750Computer Supplies Expense 652

5,430Advertising Expense.........655 5,820Mileage Expense..............676 2,800Repairs Expense, Computer 684

2,610Charitable Donations Expense 699

1,500To close the expense accounts.

31 Income Summary..................901 16,260Mary Graham, Capital.......301 16,260


31 Mary Graham, Capital...........301 14,400Mary Graham, Withdrawals 302

14,400To close the withdrawals account.

Note: All accounts with numbers that start with the digit 1 (Assets) or 2 (Liabilities) are unaffected by the closing process.


Serial Problem (continued)NOTE: This solution includes all entries from prior months in the accounts. However, the Working Papers shorten the solution by simply showing the balances of the accounts as of December 31, 2011.

Cash Acct. No. 101Date

Explanation PR

Debit Credit Balance

2011Oct.

1 G1

90,000

90,000

2 G1

9,000 81,000

5 G1

4,320 76,680

8 G1

2,640 74,040

15

G1

6,600 80,640

17

G1

1,410 79,230

20

G1

3,720 75,510

22

G1

2,400 77,910

31

G2

1,400 76,510

31

G2

7,200 69,310

Nov.

1 G2

1,000 68,310

2 G2

9,300 77,610

5 G2

1,920 75,690

18

G2

3,750 79,440

22

G2

1,500 77,940

28

G2

1,200 76,740

30

G2

2,800 73,940

3 G 3,600 70,340


0 3Dec.

3 G4

2,100 68,240

3

G4

1,200 67,040

4

G4

7,500 74,540

10

G4

1,200 73,340

14

G4

3,000 76,340

20

G4

11,250

87,590

28

G4

5,700 93,290

31

G4

600 92,690

31

G4

3,600 89,090


Serial Problem (continued)Accounts Receivable Acct. No. 106

Date

Explanation PR


2011Oct.

6 G1

6,600 6,600

12

G1

2,400 9,000

15

G1

6,600 2,400

22

G1

2,400 0

28

G2

6,450 6,450

Nov.

8 G2

8,700 15,150

18

G2

3,750 11,400

24

G2

7,500 18,900

Dec.

4

G4

7,500 11,400

28

G4

5,700 5,700

Computer Supplies Acct. No. 126Date

Explanation PR


2011Oct.

3 G1

2,640 2,640

Nov.

5 G2

1,920 4,560

Dec.

17

G4

2,310 6,870

31

G5

5,430 1,440

Prepaid Insurance Acct. No. 128Date

Explanation PR


201


1Oct.

5 G1

4,320 4,320

Dec.

31

G5

1,080 3,240

Prepaid Rent Acct. No. 131Date

Explanation PR


2011Oct.

2 G1

9,000 9,000

Dec.

31

G5

6,750 2,250

Office Equipment Acct. No. 163Date

Explanation PR


2011Oct.

1 G1

18,000

18,000

Accumulated Amortization, Office Equipment

Acct. No.164

Date

Explanation PR


2011Dec.

31

G5

1,500 1,500

Serial Problem (continued)Computer Equipment Acct. No. 167

Date

Explanation PR


2011Oct.

1 G1

36,000

36,000

Accumulated Amortization, Computer Equipment

Acct. No. 168

Dat Explanation P Debit Credit Balanc


e R e2011Dec.

31

G5

2,250 2,250

Accounts Payable Acct. No. 201Date

Explanation PR


2011Oct.

3 G1

2,640 2,640

8 G1

2,640 0

Dec.

17

G4

2,310 2,310

Wages Payable Acct. No. 210Date

Explanation PR


2011Dec.

31

G5

800 800

Unearned Computer Services Revenue Acct. No. 236Date

Explanation PR


2011Dec.

14

G4

3,000 3,000

Mary Graham, Capital Acct. No. 301Date

Explanation PR


2011Oct.

1 G2

144,000

144,000

Dec.

31

G6

16,260 160,260

31

G6

14,400

145,860


Mary Graham, Withdrawals Acct. No. 302Date

Explanation PR


2011Oct.

31

G2

7,200 7,200

Nov.

30

G3

3,600 10,800

Dec.

31

G4

3,600 14,400

31

G6

14,400 0


Serial Problem (continued)Computer Services Revenue Acct. No. 403

Date

Explanation PR


2011Oct.

6 G1

6,600 6,600

12

G1

2,400 9,000

28

G2

6,450 15,450

Nov.

2 G2

9,300 24,750

8 G2

8,700 33,450

24

G2

7,500 40,950

Dec.

20

G4

11,250 52,200

31

G6

52,200

0

Amortization Expense, Office Equipment

Acct. No. 612

Date

Explanation PR


2011Dec.

31

G5

1,500 1,500

31

G6

1,500 0

Amortization Expense, Computer Equipment

Acct. No. 613

Date

Explanation PR


2011Dec.

31

G5

2,250 2,250

31

G6

2,250 0


Wages Expense Acct. No. 623Date

Explanation PR


2011Oct.

31

G2

1,400 1,400

Nov.

30

G2

2,800 4,200

Dec.

10

G4

1,200 5,400

31

G5

800 6,200

31

G6

6,200 0


Explanation PR


2011Dec.

31

G5

1,080 1,080

31

G6

1,080 0

Rent Expense Acct. No. 640Date

Explanation PR


2011Dec.

31

G5

6,750 6,750

31

G6

6,750 0

Serial Problem (continued)Computer Supplies Expense Acct. No. 652

Date

Explanation PR


2011Dec.

31

G5

5,430 5,430

31

G6

5,430 0


Advertising Expense Acct. No. 655Date

Explanation PR


2011Oct.

20

G1

3,720 3,720

Dec.

3

G4

2,100 5,820

31

G6

5,820 0

Mileage Expense Acct. No. 676Date

Explanation PR


2011Nov.

1 G2

1,000 1,000

28

G2

1,200 2,200

Dec.

31

G4

600 2,800

31

G6

2,800 0

Repairs Expense, Computer Acct. No. 684Date

Explanation PR


2011Oct.

17

G1

1,410 1,410

Dec.

3

G4

1,200 2,610

31

G6

2,610 0

Charitable Donations Expense Acct. No. 699Date

Explanation PR


2011Nov.

22

G2

1,500 1,500


Dec.

31

G6

1,500 0

Income Summary Acct. No. 901Date

Explanation PR


2011Dec.

31

G6

52,200 52,200

31

G6

35,940

16,260

31

G6

16,260

0

Serial Problem (concluded) Part 2ECHO SYSTEMS


Acct.No. Account Debit Credit101 Cash........................................ $89,090106 Accounts receivable................. 5,700126 Computer supplies................... 1,440128 Prepaid insurance.................... 3,240131 Prepaid rent............................ 2,250163 Office equipment...................... 18,000164 Accumulated amortization, office equipment

................................$ 1,500167 Computer equipment................ 36,000168 Accum. amortization, computer equipment

.......................................2,250201 Accounts payable..................... 2,310210 Wages payable......................... 800236 Unearned computer fees.......... 3,000301 Mary Graham, capital............... 145,860

Totals......................................$155,720$155,720


Documents

Chapter 1 - WordPress.com€¦ · Web viewApex Architectural Designs. Income Statement. For Year Ended June 30, 2011 Revenues: ... March 31 Assets 2011 2010 Current assets Cash