SOLUTIONS TO EXERCISES—SET B
EXERCISE 4-1B
GREEN COMPANY
Worksheet
For the Month Ended June 30, 2008
Account Titles
Trial Balance
Dr.
Cash
Adjustments
Cr.
Dr.
Cr.
Adj. Trial Balance
Dr.
Cr.
Income Statement
Dr.
Cr.
Balance Sheet
Dr.
1,760
1,760
1,760
2,100
2,100
2,100
Cr.
Accounts
Receivable
Supplies
1,320
Accounts Payable
1,070
250
1,080
250
1,080
1,080
120
120
Unearned
360
Revenue
Common Stock
2,280
Service Revenue
2,100
Salaries Expense
240
2,280
240
500
250
2,280
2,340
2,340
750
750
140
140
Miscellaneous
Expense
140
Totals
5,820
Supplies Expense
5,820
1,070
Totals
1,560
Net Income
1,560
1,070
250
6,070
6,070
250
1,960
2,340
4,110
2,340
For Instructor Use Only
3,730
380
380
Totals
© 2008
1,070
250
Salaries Payable
2,340
4,110
4,110
4-1
EXERCISE 4-2B
BAD COMPANY
(Partial) Worksheet
For the Month Ended April 30, 2008
Adjusted
Trial Balance
Account Titles
Cash
Accounts Receivable
Prepaid Rent
Equipment
Accum. Depreciation
Notes Payable
Accounts Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Salaries Expense
Rent Expense
Depreciation Expense
Interest Expense
Interest Payable
Totals
Net Income
Totals
© 2008
Dr.
11,400
7,000
2,000
20,000
Cr.
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
11,400
7,000
2,000
20,000
4,200
5,000
4,950
20,000
5,800
4,200
5,000
4,950
20,000
5,800
3,500
3,500
14,500
9,450
500
600
50
54,500
For Instructor Use Only
Cr.
14,500
9,450
500
600
50
50
54,500
10,600
3,900
14,500
14,500
43,900
14,500
43,900
50
40,000
3,900
43,900
4-2
EXERCISE 4-3B
BAD COMPANY
Income Statement
For the Month Ended April 30, 2008
Revenues
Service revenue..................................................................
Expenses
Salaries expense................................................................
Depreciation expense.......................................................
Rent expense ......................................................................
Interest expense.................................................................
Total expenses...........................................................
Net income ....................................................................................
$14,500
$9,450
600
500
50
10,600
$ 3,900
BAD COMPANY
Retained Earnings Statement
For the Month Ended April 30, 2008
Retained earnings, April 1 ..................................................................
Add: Net income ..................................................................................
Less: Dividends ....................................................................................
Retained earnings, April 30................................................................
$5,800
3,900
9,700
3,500
$6,200
BAD COMPANY
Balance Sheet
April 30, 2008
Assets
Current assets
Cash .......................................................................................
Accounts receivable .........................................................
Prepaid rent .........................................................................
Total current assets .................................................
Property, plant, and equipment
Equipment ............................................................................
Less: Accumulated depreciation.................................
Total assets.................................................................
© 2008
For Instructor Use Only
$11,400
7,000
2,000
20,400
$20,000
4,200
15,800
$36,200
4-3
EXERCISE 4-3B (Continued)
BAD COMPANY
Balance Sheet (Continued)
April 30, 2008
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable...................................................................
Accounts payable ...........................................................
Interest payable ...............................................................
Total current liabilities..........................................
Stockholders’ equity
Common stock.................................................................
Retained earnings...........................................................
Total liabilities and stockholders’ equity .......
$ 5,000
4,950
50
10,000
$20,000
6,200
26,200
$36,200
EXERCISE 4-4B
(a) Apr. 30
30
30
30
Service Revenue .............................................
Income Summary ...................................
14,500
Income Summary ............................................
Salaries Expense....................................
Rent Expense ..........................................
Depreciation Expense ..........................
Interest Expense.....................................
10,600
Income Summary ............................................
Retained Earnings .................................
3,900
Retained Earnings ..........................................
Dividends..................................................
3,500
14,500
9,450
500
600
50
3,900
3,500
(b)
(2)
(3)
© 2008
Income Summary
10,600 (1)
14,500
3,900
14,500
14,500
For Instructor Use Only
(4)
Retained Earnings
3,500
(3)
Bal.
5,800
3,900
6,200
4-4
EXERCISE 4-4B (Continued)
(c)
BAD COMPANY
Post-Closing Trial Balance
April 30, 2008
Cash ................................................................................
Accounts Receivable.................................................
Prepaid Rent.................................................................
Equipment .....................................................................
Accumulated Depreciation ......................................
Notes Payable ..............................................................
Accounts Payable.......................................................
Interest Payable...........................................................
Common Stock ............................................................
Retained Earnings ......................................................
Debit
$11,400
7,000
2,000
20,000
$40,400
Credit
$ 4,200
5,000
4,950
50
20,000
6,200
$40,400
EXERCISE 4-5B
(a) Accounts Receivable..................................................
Service Revenue .................................................
1,100
Insurance Expense......................................................
Prepaid Insurance...............................................
500
Depreciation Expense ................................................
Accumulated Depreciation ..............................
1,250
Salaries Expense .........................................................
Salaries Payable..................................................
650
© 2008
For Instructor Use Only
1,100
500
1,250
650
4-5
EXERCISE 4-5B (Continued)
(b)
Income Statement
Dr.
Accounts Receivable
Prepaid Insurance
Accum. Depreciation
Salaries Payable
Service Revenue
Salaries Expense
Insurance Expense
Depreciation Expense
Cr.
Balance Sheet
Dr.
X
X
Cr.
X
X
X
X
X
X
EXERCISE 4-6B
(a) Accounts Receivable—$23,000 ($35,000 – $12,000).
Supplies—$1,500 ($8,000 – $6,500).
Accumulated Depreciation—$36,000 ($24,000 + $12,000).
Salaries Payable—$0 No liability recorded until adjustments are made.
Insurance Expense—$4,000 ($28,000 – $24,000).
Salaries Expense—$46,000 ($52,000 – $6,000).
(b) Accounts Receivable .........................................................
Service Revenue.........................................................
12,000
Insurance Expense .............................................................
Prepaid Insurance ......................................................
4,000
Supplies Expense ...............................................................
Supplies.........................................................................
6,500
Depreciation Expense........................................................
Accumulated Depreciation......................................
12,000
Salaries Expense.................................................................
Salaries Payable .........................................................
6,000
© 2008
For Instructor Use Only
12,000
4,000
6,500
12,000
6,000
4-6
EXERCISE 4-7B
(a) Service Revenue .............................................................
Income Summary.....................................................
5,360
Income Summary............................................................
Salaries Expense .....................................................
Miscellaneous Expense.........................................
Supplies Expense....................................................
5,050
Income Summary............................................................
Retained Earnings...................................................
310
Retained Earnings ..........................................................
Dividends ...................................................................
400
(b)
5,360
1,650
350
3,050
310
400
KIMMIE MEISSNER COMPANY
Post-Closing Trial Balance
For the Month Ended June 30, 2008
Account Titles
Cash ....................................................................................
Accounts Receivable.....................................................
Supplies .............................................................................
Accounts Payable...........................................................
Salaries Payable..............................................................
Unearned Revenue.........................................................
Common Stock ................................................................
Retained Earnings ..........................................................
Debit
$ 4,650
5,200
640
$10,490
© 2008
For Instructor Use Only
Credit
$ 2,500
600
200
5,000
2,190
$10,490
4-7
EXERCISE 4-8B
(a)
General Journal
Date
Account Titles
Ref.
July 31 Commission Revenue .............................. 404
Rent Revenue .............................................. 429
Income Summary ............................ 350
Debit
42,400
5,100
31 Income Summary .......................................
Salaries Expense.............................
Utilities Expense..............................
Depreciation Expense....................
350
720
732
711
49,900
31 Retained Earnings .....................................
Income Summary ............................
320
350
2,400
31 Retained Earnings .....................................
Dividends ...........................................
320
332
11,000
J15
Credit
47,500
37,100
10,100
2,700
2,400
11,000
(b)
Retained Earnings
Date
Explanation
Ref.
Debit
July 31 Balance
31 Close net loss
J15
2,400
31 Close dividends
J15
11,000
Income Summary
Date
Explanation
Ref.
Debit
July 31 Close revenue
J15
31 Close expenses
J15
49,900
31 Close net loss
J15
© 2008
For Instructor Use Only
Credit
Credit
47,500
2,400
No. 320
Balance
20,700
18,300
7,300
No. 350
Balance
47,500
(2,400)
0
4-8
EXERCISE 4-8B (Continued)
(c)
COMMANCHE COMPANY
Post-Closing Trial Balance
July 31, 2008
Cash ................................................................................
Accounts Receivable.................................................
Equipment .....................................................................
Accumulated Depreciation ......................................
Accounts Payable.......................................................
Unearned Rent Revenue...........................................
Common Stock ............................................................
Retained Earnings ......................................................
Debit
$ 9,900
6,200
10,600
$26,700
Credit
$ 5,400
2,800
1,200
10,000
7,300
$26,700
EXERCISE 4-9B
(a)
COMMANCHE COMPANY
Income Statement
For the Year Ended July 31, 2008
Revenues
Commission revenue........................................
Rent revenue .......................................................
Total revenues ...........................................
Expenses
Salaries expense................................................
Utilities expense.................................................
Depreciation expense.......................................
Total expenses...........................................
Net loss ..........................................................................
$42,400
5,100
47,500
$37,100
10,100
2,700
49,900
($ 2,400)
COMMANCHE COMPANY
Retained Earnings Statement
For the Year Ended July 31, 2008
Retained earnings, August 1, 2007 .......................
Less: Net loss .............................................................
Dividends .........................................................
Retained earnings, July 31, 2008...........................
© 2008
For Instructor Use Only
$20,700
$ 2,400
11,000
13,400
$ 7,300
4-9
EXERCISE 4-9B (Continued)
(b)
COMMANCHE COMPANY
Balance Sheet
July 31, 2008
Assets
Current assets
Cash.................................................................................
Accounts receivable...................................................
Total current assets...........................................
Property, plant, and equipment
Equipment .....................................................................
Less: Accumulated depreciation ..........................
Total assets ..........................................................
$ 9,900
6,200
16,100
$10,600
5,400
5,200
$21,300
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ........................................................
$ 2,800
Unearned rent revenue...............................................
1,200
Total current liabilities.......................................
4,000
Stockholders’ equity
Common stock .............................................................. $10,000
Retained earnings ........................................................
7,300 17,300
Total liabilities and stockholders’ equity ....
$21,300
EXERCISE 4-10B
1.
True.
2.
True.
3.
False. If the accounting records are free of errors, no correcting entries
are needed.
4.
False. Some of the steps of the accounting cycle are incorporated into
the worksheet.
5.
True.
6.
False. Steps 1–3 may occur daily in the accounting cycle. Steps 4–7 are
performed on a periodic basis. Steps 8 and 9 are usually prepared only
at the end of a company’s annual accounting period.
7.
True.
8.
False. Closing entries are prepared after financial statements are prepared.
© 2008
For Instructor Use Only
4-10
EXERCISE 4-11B
(a) June 30
30
30
30
Service Revenue...........................................
Income Summary ................................
10,100
Income Summary .........................................
Salaries Expense.................................
Supplies Expense ...............................
Rent Expense .......................................
8,750
Income Summary .........................................
Retained Earnings ..............................
1,350
Retained Earnings .......................................
Dividends ...............................................
1,700
10,100
5,900
850
2,000
1,350
1,700
(b)
Income Summary
June 30
8,750 June 30
June 30
1,350
10,100
10,100
10,100
EXERCISE 4-12B
(a) 1.
2.
© 2008
Cash .............................................................................
Supplies ............................................................
700
Salaries Expense .....................................................
Cash ...................................................................
700
Service Revenue ......................................................
Cash ...................................................................
200
Cash .............................................................................
Accounts Receivable....................................
2,000
For Instructor Use Only
700
700
200
2,000
4-11
EXERCISE 4-12B (Continued)
3.
(b) 1.
2.
3.
Accounts Payable....................................................
Supplies.............................................................
Supplies ......................................................................
Accounts Payable ..........................................
680
Salaries Expense .....................................................
Supplies.............................................................
700
Service Revenue ......................................................
Cash .............................................................................
Accounts Receivable ....................................
200
1,800
Supplies ......................................................................
Accounts Payable ..........................................
180
680
860
860
700
2,000
180
EXERCISE 4-13B
1.
2.
3.
Accounts Payable ($720 – $270) ..................................
Cash..............................................................................
450
Supplies................................................................................
Inventory .....................................................................
Cash..............................................................................
650
Dividends .............................................................................
Salaries Expense......................................................
500
© 2008
For Instructor Use Only
450
65
585
500
4-12
EXERCISE 4-14B
(a)
ANTHONY BOWLING ALLEY
Balance Sheet
December 31, 2008
Assets
Current assets
Cash .....................................................
Accounts receivable .......................
Prepaid insurance............................
Total current assets ...............
Property, plant, and equipment
Land......................................................
Building...............................................
Less: Acc. depr.—building ..........
Equipment ..........................................
Less: Acc. depr.—equipment .....
Total assets...............................
© 2008
For Instructor Use Only
$ 10,840
9,000
2,700
22,540
$38,000
$77,000
26,000
37,500
11,000
51,000
26,500
115,500
$138,040
4-13
EXERCISE 4-14B (Continued)
ANTHONY BOWLING ALLEY
Balance Sheet (Continued)
December 31, 2008
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of note payable ..............................
$ 15,000
Accounts payable ........................................................
7,400
Interest payable ............................................................
1,600
Total current liabilities.......................................
24,000
Long-term liabilities
Note payable ..................................................................
45,000
Total liabilities ......................................................
69,000
Stockholders’ equity
Common stock .............................................................. $50,000
Retained earnings ($17,000 + $2,040*) ..................
19,040
69,040
Total liabilities and stockholders’ equity ....
$138,040
*Net income = $8,580 – $540 – $4,400 – $1,600 = $2,040
(b) Current assets exceed current liabilities by $1,460 ($24,000 – $22,540).
However, approximately 50% of current assets are in the form of cash.
The company’s liquidity appears to be adequate.
EXERCISE 4-15B
CL
CA
PPE
PPE
CA
SE
CL
IA
Accounts payable
Accounts receivable
Accumulated depreciation
Buildings
Cash
Common stock
Utilities payable
Trademarks
© 2008
For Instructor Use Only
LTI Investments
CA Inventories
PPE Land
LTL Long-term debt
CA Supplies
CA Prepaid insurance
PPE Equipment
4-14
EXERCISE 4-16B
CAT COMPANY
Balance Sheet
December 31, 2008
(in thousands)
Assets
Current assets
Cash ...................................................................
Short-term investments ...............................
Accounts receivable .....................................
Inventories .......................................................
Prepaid expenses ..........................................
Total current assets .............................
Long-term investments.........................................
Property, plant, and equipment
Property, plant, and equipment ................
Less: Accumulated depreciation..............
Total assets ..............................................................
$ 1,800
2,500
1,100
880
620
$ 6,900
185
8,100
(4,000)
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable in 2009 ..................................
$ 340
Accounts payable ..........................................
1,010
Total current liabilities ........................
Long-term liabilities
Long-term debt ...............................................
660
Notes payable (after 2009) ..........................
250
Total long-term liabilities .....................
Total liabilities..........................................................
Stockholders’ equity
Common stock................................................
$ 7,000
Retained earnings..........................................
1,925
Total liabilities and stockholders’ equity........
© 2008
For Instructor Use Only
4,100
$11,185
$ 1,350
910
2,260
8,925
$11,185
4-15
EXERCISE 4-17B
(a)
LUOL DENG COMPANY
Income Statement
For the Year Ended July 31, 2008
Revenues
Commission revenue ....................................
Rent revenue....................................................
Total revenues........................................
Expenses
Salaries expense ............................................
Depreciation expense ...................................
Utilities expense .............................................
Total expense .........................................
Net Income.................................................................
$63,000
7,600
$ 70,600
39,000
16,200
3,600
58,800
$ 11,800
LUOL DENG COMPANY
Retained Earnings Statement
For the Year Ended July 31, 2008
Retained earnings, August 1, 2007 ...................
Plus: Net Income...................................................
Less: Dividends......................................................
Retained earnings, July 31, 2008 .......................
© 2008
For Instructor Use Only
$10,000
$11,800
(3,600)
8,200
$18,200
4-16
EXERCISE 4-17B (Continued)
(b)
LUOL DENG COMPANY
Balance Sheet
July 31, 2008
Assets
Current assets
Cash ...........................................................................
Accounts receivable .............................................
Total current assets .....................................
Property, plant, and equipment
Equipment ................................................................
Less: Accumulated depreciation .....................
Total assets ...................................................
$18,300
21,200
$39,500
26,500
5,400
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ..................................................
$ 3,600
Salaries payable .....................................................
1,800
Total current liabilities ................................
Long-term liabilities
Note payable............................................................
Total liabilities................................................
Stockholders’ equity
Common stock........................................................
$35,000
Retained earnings..................................................
18,200
Total liabilities and stockholders’
equity.............................................................
© 2008
For Instructor Use Only
21,100
$60,600
$ 5,400
2,000
7,400
53,200
$60,600
4-17
*EXERCISE 4-18B
(a) Dec. 31
Jan. 6
(b) Dec. 31
Jan. 1
Jan. 6
Salaries Expense ($20,000 X 3/5) ............
Salaries Payable...................................
12,000
Salaries Payable............................................
Salaries Expense ($20,000 X 2/5) ............
Cash .........................................................
12,000
8,000
Salaries Expense ..........................................
Salaries Payable...................................
12,000
Salaries Payable............................................
Salaries Expense .................................
12,000
Salaries Expense ..........................................
Cash .........................................................
20,000
12,000
20,000
12,000
12,000
20,000
*EXERCISE 4-19B
(a) Dec. 31
31
(b) Jan. 1
1
© 2008
Commission Revenue .................................
Income Summary.................................
100,000
Income Summary..........................................
Interest Expense ..................................
11,000
Commission Revenue .................................
Accounts Receivable..........................
6,000
Interest Payable ............................................
Interest Expense ..................................
2,500
For Instructor Use Only
100,000
11,000
6,000
2,500
4-18
*EXERCISE 4-19B (Continued)
(c) & (e)
Accounts Receivable
Dec. 31 Balance
*29,000
31 Adjusting
6,000
35,000
Jan. 1 Reversing
6,000
*($35,000 – $6,000)
Commission Revenue
Dec. 31 Closing
100,000 Dec. 31 Balance
31 Adjusting
100,000
Jan. 1 Reversing
6,000 Jan. 10
94,000*
6,000
100,000
6,000
*($100,000 – $6,000)
Jan. 1
Reversing
Dec. 31 Balance
31 Adjusting
Jan. 15
Interest Payable
Dec. 31 Adjusting
2,500
Interest Expense
*8,500 Dec. 31 Closing
2,500
11,000
3,000 Jan. 1 Reversing
2,500
11,000
11,000
2,500
*($11,000 – $2,500)
(d)
Jan. 10
15
© 2008
(1)
Cash..........................................................................
Commission Revenue................................
6,000
(2)
Interest Expense...................................................
Cash.................................................................
3,000
For Instructor Use Only
6,000
3,000
4-19
© 2008
Account Titles
For Instructor Use Only
1,300
400
23,500
1,100
4,500
3,200
2,000
11,000
Dr.
23,500
6,300
1,250
2,500
550
12,900
Cr.
Trial Balance
600
380
2,580
(a) 1,350
(b)
250
(d)
(c)
Dr.
(d)
(c)
(b)
600
2,580
380
250
(a) 1,350
Cr.
Adjustments
24,350
1,350
250
1,900
400
1,100
4,500
3,200
650
11,000
Dr.
600
24,350
6,680
1,500
2,500
170
12,900
Cr.
Adjusted
Trial Balance
SASSE ROOFING
Worksheet
For the Month Ended March 31, 2008
3,900
2,780
6,680
1,350
250
1,900
400
20,450
20,450
6,680
1,100
4,500
3,200
650
11,000
Dr.
600
17,670
2,780
20,450
1,500
2,500
170
12,900
Cr.
Balance Sheet
6,680
6,680
Cr.
Income
Statement
Dr.
Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Service Revenue Earned; (d) Salaries Accrued.
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
Common Stock
Dividends
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Net Income
Totals
(a)
PROBLEM 4-1C
4-20
PROBLEM 4-1C (Continued)
(b)
SASSE ROOFING
Income Statement
For the Month Ended March 31, 2008
Revenues
Service revenue...........................................................
Expenses
Salaries expense.........................................................
Supplies expense .......................................................
Depreciation expense................................................
Miscellaneous expense ............................................
Total expenses....................................................
Net income .............................................................................
$6,680
$1,900
1,350
250
400
3,900
$2,780
SASSE ROOFING
Retained Earnings Statement
For the Month Ended March 31, 2008
Retained earnings, March 1.................................................................
Add: Net income ...................................................................................
Less: Dividends .....................................................................................
Retained earnings, March 31 ..............................................................
$
0
2,780
2,780
1,100
$1,680
SASSE ROOFING
Balance Sheet
March 31, 2008
Assets
Current assets
Cash ................................................................................
Accounts receivable ..................................................
Roofing supplies.........................................................
Total current assets ..........................................
Property, plant, and equipment
Equipment .....................................................................
Less: Accum. depreciation—equipment ...........
Total assets..........................................................
© 2008
For Instructor Use Only
$ 4,500
3,200
650
8,350
$11,000
1,500
9,500
$17,850
4-21
PROBLEM 4-1C (Continued)
SASSE ROOFING
Balance Sheet (Continued)
March 31, 2008
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ............................................................
$ 2,500
Salaries payable ...............................................................
600
Unearned revenue............................................................
170
Total current liabilities...........................................
3,270
Stockholders’ equity
Common stock .................................................................. $12,900
Retained earnings ............................................................
1,680 14,580
Total liabilities and stockholders’ equity ........
$17,850
(c) Mar. 31
31
31
31
(d) Mar. 31
31
31
31
© 2008
Supplies Expense .................................................
Roofing Supplies..........................................
1,350
Depreciation Expense .........................................
Accumulated Depreciation .......................
250
Unearned Revenue ...............................................
Service Revenue...........................................
380
Salaries Expense...................................................
Salaries Payable ...........................................
600
Service Revenue ...................................................
Income Summary .........................................
6,680
Income Summary ..................................................
Salaries Expense..........................................
Supplies Expense ........................................
Depreciation Expense ................................
Miscellaneous Expense .............................
3,900
Income Summary ..................................................
Retained Earnings .......................................
2,780
Retained Earnings ................................................
Dividends........................................................
1,100
For Instructor Use Only
1,350
250
380
600
6,680
1,900
1,350
250
400
2,780
1,100
4-22
PROBLEM 4-2C
(a)
RACHEL COMPANY
Partial Worksheet
For the Year Ended December 31, 2008
Adjusted
Trial Balance
Account
No.
101
112
126
130
151
152
200
201
212
230
311
320
332
400
610
631
711
722
726
905
Titles
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Acc. Depr.—Off. Equip.
Notes Payable
Accounts Payable
Salaries Payable
Interest Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Advertising Expense
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries Expense
Interest Expense
Totals
Net Income
Totals
© 2008
For Instructor Use Only
Dr.
8,100
10,800
1,500
2,000
24,000
Cr.
Income
Statement
Dr.
Cr.
Balance
Sheet
Dr.
8,100
10,800
1,500
2,000
24,000
5,600
15,000
6,100
2,400
600
10,000
5,800
5,600
15,000
6,100
2,400
600
10,000
5,800
7,000
7,000
61,000
8,400
4,000
5,600
3,500
31,000
600
106,500
Cr.
106,500
61,000
8,400
4,000
5,600
3,500
31,000
600
53,100
7,900
61,000
61,000
53,400
61,000
53,400
45,500
7,900
53,400
4-23
PROBLEM 4-2C (Continued)
(b)
RACHEL COMPANY
Income Statement
For the Year Ended December 31, 2008
Revenues
Service revenue .....................................................
Expenses
Salaries expense ...................................................
Advertising expense ............................................
Depreciation expense ..........................................
Supplies expense..................................................
Insurance expense................................................
Interest expense ....................................................
Total expenses ..............................................
Net income........................................................................
$61,000
$31,000
8,400
5,600
4,000
3,500
600
53,100
$ 7,900
RACHEL COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2008
Retained Earnings, January 1.........................................................
Add: Net income ...............................................................................
Less: Dividends..................................................................................
Retained earnings, December 31...................................................
© 2008
For Instructor Use Only
$ 5,800
7,900
13,700
7,000
$ 6,700
4-24
PROBLEM 4-2C (Continued)
RACHEL COMPANY
Balance Sheet
December 31, 2008
Assets
Current assets
Cash ..........................................................................
Accounts receivable ............................................
Supplies ...................................................................
Prepaid insurance.................................................
Total current assets ....................................
Property, plant, and equipment
Office equipment...................................................
Less: Accumulated depreciation....................
Total assets....................................................
$ 8,100
10,800
1,500
2,000
22,400
$24,000
5,600
18,400
$40,800
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable ........................................................
Accounts payable .................................................
Salaries payable ....................................................
Interest payable.....................................................
Total current liabilities ...............................
Long-term liabilities
Notes payable ........................................................
Total liabilities...............................................
Stockholders’ equity
Common stock.......................................................
Retained earnings.................................................
Total liabilities and stockholders’
equity...........................................................
© 2008
For Instructor Use Only
$ 9,000
6,100
2,400
600
18,100
6,000
24,100
$10,000
6,700
16,700
$40,800
4-25
PROBLEM 4-2C (Continued)
(c)
General Journal
Date
Account Titles and Explanation
Ref.
Dec. 31 Service Revenue ........................................ 400
Income Summary ............................ 350
Debit
61,000
J14
Credit
61,000
31 Income Summary .......................................
Advertising Expense......................
Supplies Expense ...........................
Depreciation Expense....................
Insurance Expense .........................
Salaries Expense.............................
Interest Expense..............................
350
610
631
711
722
726
905
53,100
31 Income Summary .......................................
Retained Earnings...........................
350
320
7,900
31 Retained Earnings .....................................
Dividends ...........................................
320
332
7,000
8,400
4,000
5,600
3,500
31,000
600
7,900
7,000
(d)
Date
Jan. 1
Dec. 31
31
Date
Explanation
Balance
Closing entry
Closing entry
Explanation
Dec. 31 Balance
31 Closing entry
© 2008
For Instructor Use Only
Retained Earnings
Ref.
Debit
J14
J14
7,000
Dividends
Ref.
J14
Debit
Credit
5,800
7,900
No. 320
Balance
5,800
13,700
6,700
Credit
No. 332
Balance
7,000
7,000
0
7,000
4-26
PROBLEM 4-2C (Continued)
Explanation
Closing entry
Closing entry
Closing entry
Income Summary
Ref.
Debit
J14
J14
53,100
J14
7,900
Explanation
Balance
Closing entry
Service Revenue
Ref.
Debit
J14 61,000
Explanation
Balance
Closing entry
Advertising Expense
Ref.
Debit
8,400
J14
Date
Dec. 31
31
Explanation
Balance
Closing entry
Supplies Expense
Ref.
Debit
4,000
J14
Date
Dec. 31
31
Depreciation Expense
Explanation
Ref.
Debit
Balance
5,600
Closing entry
J14
Date
Dec.
Date
Dec.
Date
Dec.
Date
Dec.
© 2008
31
31
31
31
31
31
31
31
31
Explanation
Balance
Closing entry
For Instructor Use Only
Insurance Expense
Ref.
Debit
3,500
J14
Credit
61,000
No. 350
Balance
61,000
7,900
0
Credit
61,000
No. 400
Balance
61,000
0
Credit
8,400
Credit
4,000
Credit
5,600
Credit
3,500
No. 610
Balance
8,400
0
No. 631
Balance
4,000
0
No. 711
Balance
5,600
0
No. 722
Balance
3,500
0
4-27
PROBLEM 4-2C (Continued)
Date
Dec. 31
31
Date
Dec. 31
31
(e)
Explanation
Balance
Closing entry
Salaries Expense
Ref.
Debit
31,000
J14
Explanation
Balance
Closing entry
Interest Expense
Ref.
Debit
600
J14
Credit
31,000
Credit
600
No. 726
Balance
31,000
0
No. 905
Balance
600
0
RACHEL COMPANY
Post-Closing Trial Balance
December 31, 2008
Cash.................................................................................
Accounts Receivable .................................................
Supplies..........................................................................
Prepaid Insurance.......................................................
Office Equipment.........................................................
Accumulated Depreciation—Office
Equipment.................................................................
Notes Payable...............................................................
Accounts Payable .......................................................
Salaries Payable ..........................................................
Interest Payable ...........................................................
Common Stock ............................................................
Retained Earnings ......................................................
Totals......................................................................
© 2008
For Instructor Use Only
Debit
$ 8,100
10,800
1,500
2,000
24,000
$46,400
Credit
$ 5,600
15,000
6,100
2,400
600
10,000
6,700
$46,400
4-28
PROBLEM 4-3C
(a)
MUDDY COMPANY
Income Statement
For the Year Ended December 31, 2008
Revenues
Service revenue.....................................................
Expenses
Salaries expense...................................................
Depreciation expense..........................................
Insurance expense ...............................................
Repair expense......................................................
Utilities expense....................................................
Total expenses..............................................
Net income .......................................................................
$56,000
$30,000
2,100
1,800
1,600
1,400
36,900
$19,100
MUDDY COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2008
Retained earnings, January 1...................................................
Add: Net income .........................................................................
Less: Dividends ...........................................................................
Retained earnings, December 31 ............................................
$ 8,500
19,100
27,600
11,000
$16,600
MUDDY COMPANY
Balance Sheet
December 31, 2008
Assets
Current assets
Cash ..........................................................................
Accounts receivable ............................................
Prepaid insurance.................................................
Total current assets ....................................
Property, plant, and equipment
Equipment ...............................................................
Less: Accumulated depreciation....................
Total assets....................................................
© 2008
For Instructor Use Only
$17,900
10,800
2,800
31,500
$21,000
4,500
16,500
$48,000
4-29
PROBLEM 4-3C (Continued)
MUDDY COMPANY
Balance Sheet (Continued)
December 31, 2008
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable .....................................................
Salaries payable ........................................................
Total current liabilities....................................
Stockholders’ equity
Common stock ...........................................................
Retained earnings .....................................................
Total liabilities and stockholders’
equity ...............................................................
$ 9,000
2,400
11,400
$20,000
16,600
36,600
$48,000
(b)
Date
Dec. 31
31
31
31
© 2008
General Journal
Account Titles and Explanation
Service Revenue.........................................
Income Summary.............................
Ref.
400
350
Debit
56,000
Income Summary .......................................
Repair Expense ................................
Depreciation Expense....................
Insurance Expense .........................
Salaries Expense .............................
Utilities Expense ..............................
350
622
711
722
726
732
36,900
Income Summary .......................................
Retained Earnings...........................
350
320
19,100
Retained Earnings .....................................
Dividends ...........................................
320
332
11,000
For Instructor Use Only
Credit
56,000
1,600
2,100
1,800
30,000
1,400
19,100
11,000
4-30
PROBLEM 4-3C (Continued)
(c)
12/31
Retained Earnings
No. 320
11,000 1/1 Bal.
8,500
12/31
19,100
12/31 Bal. 16,600
Repair Expense
1,600 12/31
12/31 Bal.
No. 622
1,600
Depreciation Expense No. 711
12/31 Bal.
2,100 12/31
2,100
12/31 Bal.
12/31
12/31
12/31
(d)
Dividends
11,000 12/31
No. 332
11,000
Income Summary
36,900 12/31
19,100
56,000
Insurance Expense
12/31 Bal.
1,800 12/31
No. 722
1,800
Salaries Expense
12/31 Bal. 30,000 12/31
No. 726
30,000
Utilities Expense
1,400 12/31
No. 732
1,400
No. 350
56,000
56,000
Service Revenue
No. 400
56,000 12/31 Bal. 56,000
12/31 Bal.
MUDDY COMPANY
Post-Closing Trial Balance
December 31, 2008
Cash ................................................................................
Accounts Receivable.................................................
Prepaid Insurance.......................................................
Equipment .....................................................................
Accumulated Depreciation ......................................
Accounts Payable.......................................................
Salaries Payable..........................................................
Common Stock ............................................................
Retained Earnings ......................................................
Totals .....................................................................
© 2008
For Instructor Use Only
Debit
$17,900
10,800
2,800
21,000
$52,500
Credit
$ 4,500
9,000
2,400
20,000
16,600
$52,500
4-31
© 2008
Account Titles
For Instructor Use Only
42,000
20,500
19,000
402,200
22,000
13,800
28,300
3,600
67,000
127,000
59,000
Dr.
402,200
90,700
29,000
12,500
6,000
120,000
100,000
44,000
Cr.
Trial Balance
4,700
(c)
23,900
(e) 11,000
1,200
3,000
4,000
(a)
(b)
(d)
Dr.
4,700
3,000
4,000
(e) 11,000
23,900
(c)
(b)
(d)
(a) 1,200
Cr.
Adjustments
420,900
11,000
4,700
1,200
3,000
42,000
20,500
19,000
22,000
13,800
28,300
2,400
67,000
127,000
59,000
Dr.
11,000
420,900
4,700
3,000
90,700
33,000
12,500
2,000
120,000
100,000
44,000
Cr.
Adjusted
Trial Balance
ROCKFORD MANAGEMENT SERVICES
Worksheet
For the Year Ended December 31, 2008
101,400
22,300
123,700
11,000
4,700
1,200
3,000
42,000
20,500
19,000
Dr.
319,500
319,500
123,700
22,000
13,800
28,300
2,400
67,000
127,000
59,000
11,000
297,200
22,300
319,500
4,700
3,000
12,500
2,000
120,000
100,000
44,000
Cr.
Balance Sheet
Dr.
123,700
90,700
33,000
Cr.
Income
Statement
Key: (a) Expired Insurance; (b) Depreciation Expense—Building; (c) Depreciation Expense—Equipment; (d) Rent Revenue Earned;
(e) Accrued Interest Payable.
Cash
Accounts Receivable
Prepaid Insurance
Land
Building
Equipment
Accounts Payable
Unearned Rent Revenue
Mortgage Note Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Rent Revenue
Salaries Expense
Advertising Expense
Utilities Expense
Totals
Insurance Expense
Depr. Expense—Building
Accum. Depr.—Building
Depr. Expense—Equipment
Accum. Depr.—Equipment
Interest Expense
Interest Payable
Totals
Net Income
Totals
(a)
PROBLEM 4-4C
4-32
PROBLEM 4-4C (Continued)
(b)
ROCKFORD MANAGEMENT SERVICES
Balance Sheet
December 31, 2008
Assets
Current assets
Cash ...................................................
Accounts receivable .....................
Prepaid insurance..........................
Total current assets .............
Property, plant, and equipment
Land....................................................
Building.............................................
Less: Accumulated
depreciation—building ............
Equipment ........................................
Less: Accumulated
depreciation—equipment .......
Total assets.............................
$ 13,800
28,300
2,400
44,500
$ 67,000
$127,000
3,000
59,000
124,000
4,700
54,300
245,300
$289,800
Liabilities and Stockholders’ Equity
Current liabilities
Current maturity of mortgage note payable .....
$ 20,000
Accounts payable ......................................................
12,500
Interest payable..........................................................
11,000
Unearned rent revenue ............................................
2,000
Total current liabilities ....................................
45,500
Long-term liabilities
Mortgage note payable ............................................
100,000
Total liabilities....................................................
145,500
Stockholders’ equity
Common stock............................................................ $100,000
Retained earnings
($44,000 – $22,000 + $22,300) ................................
44,300 144,300
Total liabilities and stockholders’
equity.................................................................
$289,800
© 2008
For Instructor Use Only
4-33
PROBLEM 4-4C (Continued)
(c) Dec. 31
31
31
31
31
(d) Dec. 31
31
31
31
© 2008
Insurance Expense......................................
Prepaid Insurance ..............................
1,200
Depreciation Expense—Building ...........
Accumulated Depreciation—
Building .............................................
3,000
Depreciation Expense—Equipment ......
Accumulated Depreciation—
Equipment ........................................
4,700
Unearned Rent Revenue ...........................
Rent Revenue.......................................
4,000
Interest Expense ..........................................
Interest Payable...................................
11,000
Service Revenue ..........................................
Rent Revenue................................................
Income Summary................................
90,700
33,000
Income Summary.........................................
Salaries Expense ................................
Advertising Expense .........................
Interest Expense .................................
Utilities Expense .................................
Depreciation Expense—
Equipment ........................................
Depreciation Expense—
Building .............................................
Insurance Expense.............................
101,400
Income Summary.........................................
Retained Earnings ..............................
22,300
Retained Earnings.......................................
Dividends...............................................
22,000
For Instructor Use Only
1,200
3,000
4,700
4,000
11,000
123,700
42,000
20,500
11,000
19,000
4,700
3,000
1,200
22,300
22,000
4-34
PROBLEM 4-4C (Continued)
(e)
ROCKFORD MANAGEMENT SERVICES
Post-Closing Trial Balance
December 31, 2008
Cash ............................................................................
Accounts Receivable.............................................
Prepaid Insurance ..................................................
Land.............................................................................
Building......................................................................
Accumulated Depreciation—Building .............
Equipment .................................................................
Accumulated Depreciation—Equipment.........
Accounts Payable...................................................
Interest Payable.......................................................
Unearned Rent Revenue.......................................
Mortgage Note Payable.........................................
Common Stock ........................................................
Retained Earnings ..................................................
Debit
$ 13,800
28,300
2,400
67,000
127,000
$
For Instructor Use Only
3,000
59,000
$297,500
© 2008
Credit
4,700
12,500
11,000
2,000
120,000
100,000
44,300
$297,500
4-35
PROBLEM 4-5C
(a)
Date
July 1
1
3
5
12
18
20
21
25
31
31
© 2008
General Journal
Account Titles and Explanation
Cash ..............................................................
Common Stock ...............................
Ref.
101
311
Debit
20,000
Equipment...................................................
Cash....................................................
Accounts Payable ..........................
157
101
201
9,000
Cleaning Supplies ....................................
Accounts Payable ..........................
128
201
2,100
Prepaid Insurance ....................................
Cash....................................................
130
101
1,800
Accounts Receivable...............................
Service Revenue.............................
112
400
4,500
Accounts Payable.....................................
Cash....................................................
201
101
2,900
Salaries Expense ......................................
Cash....................................................
726
101
2,000
Cash ..............................................................
Accounts Receivable ....................
101
112
3,400
Accounts Receivable...............................
Service Revenue.............................
112
400
9,000
Gas & Oil Expense ...................................
Cash....................................................
633
101
350
Dividends ....................................................
Cash....................................................
332
101
1,600
For Instructor Use Only
J1
Credit
20,000
4,000
5,000
2,100
1,800
4,500
2,900
2,000
3,400
9,000
350
1,600
4-36
© 2008
Account Titles
For Instructor Use Only
350
2,000
37,700
1,600
10,750
10,100
2,100
1,800
9,000
Dr.
37,700
13,500
4,200
20,000
Cr.
Trial Balance
500
1,000
2,700
5,750
(c)
150
(d) 1,400
(b)
(e)
(a)
Dr.
(e)
(b)
(a)
1,000
5,750
500
2,700
(d) 1,400
(c)
150
Cr.
Adjustments
41,900
150
1,400
500
350
3,000
1,600
10,750
12,800
700
1,650
9,000
Dr.
1,000
41,900
500
16,200
4,200
20,000
Cr.
Adjusted
Trial Balance
CHANG’S CLEANING SERVICES
Worksheet
For the Month Ended July 31, 2008
5,400
10,800
16,200
150
1,400
500
350
3,000
Dr.
36,500
36,500
16,200
1,600
10,750
12,800
700
1,650
9,000
Dr.
1,000
25,700
10,800
36,500
500
4,200
20,000
Cr.
Balance Sheet
16,200
16,200
Cr.
Income
Statement
Key: (a) Service Revenue Earned; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.
Cash
Accounts Receivable
Cleaning Supplies
Prepaid Insurance
Equipment
Accounts Payable
Common Stock
Dividends
Service Revenue
Gas & Oil Expense
Salaries Expense
Totals
Depreciation Expense
Accum. Depr.—Equipment
Insurance Expense
Cleaning Supplies Expense
Salaries Payable
Totals
Net Income
Totals
(b) & (c)
PROBLEM 4-5C (Continued)
4-37
PROBLEM 4-5C (Continued)
(a), (e) & (f)
Cash
Ref.
J1
J1
J1
J1
J1
J1
J1
J1
Date
Explanation
July 1
1
5
18
20
21
31
31
Date
Explanation
July 12
21
25
31 Adjusting
Date
July 3
31
Explanation
Adjusting
© 2008
3,400
350
1,600
Explanation
For Instructor Use Only
Cleaning Supplies
Ref.
Debit
J1
2,100
J2
Prepaid Insurance
Ref.
Debit
J1
1,800
J2
Equipment
Ref.
J1
Credit
4,000
1,800
2,900
2,000
Accounts Receivable
Ref.
Debit
J1
4,500
J1
J1
9,000
J2
2,700
Date
Explanation
July 5
31 Adjusting
Date
July 1
Debit
20,000
Debit
9,000
Credit
3,400
Credit
1,400
Credit
150
Credit
No. 101
Balance
20,000
16,000
14,200
11,300
9,300
12,700
12,350
10,750
No. 112
Balance
4,500
1,100
10,100
12,800
No. 128
Balance
2,100
700
No. 130
Balance
1,800
1,650
No. 157
Balance
9,000
4-38
PROBLEM 4-5C (Continued)
Date
July 31
Date
July 1
3
18
Date
July 31
Date
July 1
Date
July 31
31
Date
July 31
31
Date
July 31
31
31
© 2008
Accumulated Depreciation—Equipment
Explanation
Ref.
Debit
Credit
Adjusting
J2
500
Explanation
Explanation
Adjusting
Explanation
Explanation
Closing
Closing
Explanation
Closing
Explanation
Closing
Closing
Closing
For Instructor Use Only
Accounts Payable
Ref.
Debit
J1
J1
J1
2,900
Salaries Payable
Ref.
Debit
J2
Common Stock
Ref.
Debit
J1
Retained Earnings
Ref.
Debit
J3
J3
1,600
Dividends
Ref.
J1
J3
Debit
1,600
Income Summary
Ref.
Debit
J3
J3
5,400
J3
10,800
Credit
5,000
2,100
No. 158
Balance
500
No. 201
Balance
5,000
7,100
4,200
Credit
1,000
No. 212
Balance
1,000
Credit
20,000
No. 311
Balance
20,000
Credit
10,800
No. 320
Balance
10,800
9,200
Credit
No. 332
Balance
1,600
0
1,600
Credit
16,200
No. 350
Balance
16,200
10,800
0
4-39
PROBLEM 4-5C (Continued)
Date
July 12
25
31
31
Date
July 31
31
Date
July 31
31
Date
July 31
31
Date
July 31
31
Date
July 20
31
31
© 2008
Service Revenue
Ref.
Debit
J1
J1
J2
J3
16,200
Explanation
Adjusting
Closing
Gas & Oil Expense
Ref.
Debit
J1
350
J3
Explanation
Closing
Cleaning Supplies Expense
Explanation
Ref.
Debit
Adjusting
J2
1,400
Closing
J3
Explanation
Adjusting
Closing
Depreciation Expense
Ref.
Debit
J2
500
J3
Explanation
Adjusting
Closing
Insurance Expense
Ref.
Debit
J2
150
J3
Explanation
Adjusting
Closing
For Instructor Use Only
Salaries Expense
Ref.
Debit
J1
2,000
J2
1,000
J3
Credit
4,500
9,000
2,700
No. 400
Balance
4,500
13,500
16,200
0
Credit
No. 633
Balance
350
0
350
Credit
1,400
Credit
500
Credit
150
Credit
3,000
No. 634
Balance
1,400
0
No. 711
Balance
500
0
No. 722
Balance
150
0
No. 726
Balance
2,000
3,000
0
4-40
PROBLEM 4-5C (Continued)
(d)
CHANG’S CLEANING SERVICE
Income Statement
For the Month Ended July 31, 2008
Revenues
Service revenue.......................................................
Expenses
Salaries expense.....................................................
Cleaning supplies expense .................................
Depreciation expense............................................
Gas & oil expense...................................................
Insurance expense .................................................
Total expenses................................................
Net income .........................................................................
$16,200
$3,000
1,400
500
350
150
5,400
$10,800
CHANG’S CLEANING SERVICE
Retained Earnings Statement
For the Month Ended July 31, 2008
Retained earnings, July 1 .............................................
Add: Net income ............................................................
Less: Dividends ..............................................................
Retained earnings, July 31 ...........................................
$
0
10,800
10,800
1,600
$ 9,200
CHANG’S CLEANING SERVICE
Balance Sheet
July 31, 2008
Assets
Current assets
Cash ..................................................................................................
Accounts receivable ....................................................................
Cleaning supplies .........................................................................
Prepaid insurance.........................................................................
Total current assets ............................................................
© 2008
For Instructor Use Only
$10,750
12,800
700
1,650
25,900
4-41
PROBLEM 4-5C (Continued)
CHANG’S CLEANING SERVICE
Balance Sheet (Continued)
July 31, 2008
Assets (Continued)
Property, plant, and equipment
Equipment ......................................................................
Less: Accumulated depreciation ...........................
Total assets ...........................................................
$9,000
500
8,500
$34,400
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ........................................................
Salaries payable ...........................................................
Total current liabilities.......................................
Stockholders’ equity
Common stock .............................................................. $20,000
Retained earnings ........................................................
9,200
Total liabilities and stockholders’ equity ....
$ 4,200
1,000
5,200
29,200
$34,400
(e)
Date
July 31
31
31
31
31
© 2008
General Journal
Account Titles and Explanation
Accounts Receivable..............................
Service Revenue............................
Ref.
112
400
Debit
2,700
Depreciation Expense ............................
Accumulated Depreciation—
Equipment...................................
711
500
Insurance Expense..................................
Prepaid Insurance.........................
722
130
150
Cleaning Supplies Expense .................
Cleaning Supplies.........................
634
128
1,400
Salaries Expense .....................................
Salaries Payable ............................
726
212
1,000
For Instructor Use Only
J2
Credit
2,700
158
500
150
1,400
1,000
4-42
PROBLEM 4-5C (Continued)
(f)
Date
July 31
31
31
31
(g)
General Journal
Account Titles and Explanation
Service Revenue .......................................
Income Summary ...........................
Ref.
400
350
Debit
16,200
Income Summary......................................
Salaries Expense............................
Depreciation Expense ..................
Insurance Expense........................
Cleaning Supplies Expense........
Gas & Oil Expense.........................
350
726
711
722
634
633
5,400
Income Summary......................................
Retained Earnings .........................
350
320
10,800
Retained Earnings ....................................
Dividends..........................................
320
332
1,600
J3
Credit
16,200
3,000
500
150
1,400
350
10,800
1,600
CHANG’S CLEANING SERVICE
Post-Closing Trial Balance
July 31, 2008
Cash ................................................................................
Accounts Receivable.................................................
Cleaning Supplies ......................................................
Prepaid Insurance ......................................................
Equipment .....................................................................
Accumulated Depreciation—Equipment.............
Accounts Payable.......................................................
Salaries Payable..........................................................
Common Stock ............................................................
Retained Earnings ......................................................
Debit
$10,750
12,800
700
1,650
9,000
$
$34,900
© 2008
For Instructor Use Only
Credit
500
4,200
1,000
20,000
9,200
$34,900
4-43