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12
Completion of the
2. Beginning Inventory
+ Net Purchases
3. Selling and Administrative Expenses
4. Current Assets—Cash and assets converted into cash or used during normal
6. To bring ledger up to date.
7. A) Debit all the balances of accounts on the income statement credit column of the
worksheet, except Income Summary, and credit the Income Summary account.
9. Reversing entries are not mandatory. Reversing entries helps avoid potential errors
10. Answers will vary from student to student. Be sure they back up their key points.
Copyright © 2016 Pearson Education, Inc.
12-2
SOLUTIONS TO CONCEPT CHECKS
1.
Gross Sales
–
Sales Ret. and Allow.
–
Sales Discounts
=
Net Sales
$179
–
$13
–
$15
=
$151
2.
Beginning Inventory
$ 6
+ Net Purchases
65
+ Freight-In
3
– Ending Inventory
–2
= Cost of Goods Sold
$ 72
3.
Net Sales
$140
– Cost of Goods Sold
–84
= Gross Profit
56
(a)
– Operating Expenses
–46
= Net Income
$10
(b)
4.
a.
1
b.
1
c.
1
d.
3
e.
1
f.
3
g.
3
h.
2
i.
2
j.
3
5. a.
Jan.
1
Salaries Payable
3
8
0
00
Salaries Expense
3
8
0
00
Jan.
8
Salaries Expense
7
6
0
00
Cash
7
6
0
00
b.
$380
SOLUTIONS TO SET A EXERCISES
12A-1.
Merchandise Inv. 12/01/1X
$ 4,000
Purchases
$62,000
Less:
Purchases Disc.
$ 920
Purch. R. & A.
970
$ 1,890
Net Purchases
60,110
Add: Freight-in
250
Net Cost of Purchases
60,360
Cost of Goods Available for Sale
64,360
Less:
Merchandise Inv. 12/31/1X
9,000
Cost of Goods Sold
$55,360
12A-2.
A
Salaries Payable: Liability, Current Liability, Balance Sheet
b.
Accounts Payable: Liability, Current Liability, Balance Sheet
c.
Mortgage Payable: Liability, Long-term Liability*, Balance Sheet
d.
Unearned Legal Fees: Liability, Current Liability, Balance Sheet
e.
SIT Payable: Liability, Current Liability, Balance Sheet
f.
Office Equipment: Asset, Plant and Equipment, Balance Sheet
g.
Land: Asset, Plant and Equipment, Balance Sheet
*Current portion of mortgage payable is current liability.
EXERCISES (CONTINUED)
12A-3.
Dec.
31
Sales
5
5
0
4
00
Purchase Returns & Allowances
3
6
00
Purchases Discount
5
4
00
Income Summary
5
5
9
4
00
31
Income Summary
4
8
8
0
00
Sales Returns & Allowances
2
2
8
00
Sales Discount
1
0
6
00
Purchases
2
6
2
2
00
Salaries Expense
1
0
8
7
00
Insurance Expense
6
9
5
00
Utilities Expense
4
2
00
Plumbing Expense
5
9
00
Advertising Expense
1
6
00
Depreciation Expense, Office Equip.
2
5
00
31
Income Summary
8
0
7
00
F. Henry, Capital
8
0
7
00
EXERCISES (CONTINUED)
12A-4.
F. HENRY COMPANY
PARTIAL BALANCE SHEET
DECEMBER 31, 201X
Current Assets:
Cash
$
1
8
9
00
Merchandise Inventory
4
4
9
00
Prepaid Advertising
5
6
3
00
Prepaid Insurance
3
2
00
Total Current Assets
$1
2
3
3
00
Plant and Equipment:
Office Equipment
$1
0
7
9
00
Less: Acc. Dep., Office Equipment
(2
0
6
00)
8
7
3
00
Total Assets
$2
1
0
6
00
12A-5.
(a)
Dec.
31
Salaries Expense
2
9
0
00
Salaries Payable
2
9
0
00
Salaries Expense
Salaries Payable
Bal. 24,500
290
290
(b)
Jan.
1
Salaries Payable
2
9
0
00
Salaries Expense
2
9
0
00
Salaries Expense
Salaries Payable
290
290
290
(c)
Feb.
3
Salaries Expense
6
2
0
0
00
Cash
6
2
0
0
00
Salaries Expense
Cash
6,200
290
Bal. 15,500
6,200
Bal. 5,910
Bal. 9,300
SOLUTIONS TO SET B EXERCISES
12B-1.
Merchandise Inv. 12/01/1X
$ 4,100
Purchases
$62,000
Less:
Purchases Disc.
$ 920
Purch. R. & A.
960
$ 1,880
Net Purchases
60,120
Add: Freight-in
320
Net Cost of Purchases
60,440
Cost of Goods Available for Sale
64,540
Less:
Merchandise Inv. 12/31/1X
8,950
Cost of Goods Sold
$55,590
12B-2.
a.
Wages Payable: Liability, Current Liability, Balance Sheet
b.
Accounts Payable: Liability, Current Liability, Balance Sheet
c.
Notes Payable: Liability, Long-term Liability*, Balance Sheet
d.
Unearned Revenue: Liability, Current Liability, Balance Sheet
e.
FIT Payable: Liability, Current Liability, Balance Sheet
f.
Office Furniture: Asset, Plant and Equipment, Balance Sheet
g.
Land: Asset, Plant and Equipment, Balance Sheet
12B-3.
Dec.
31
Sales
5
5
0
7
00
Purchase Returns & Allowances
3
1
00
Purchases Discount
4
9
00
Income Summary
5
5
8
7
00
31
Income Summary
4
8
7
8
00
Sales Returns & Allowances
2
2
4
00
Sales Discount
1
0
3
00
Purchases
2
6
2
5
00
Salaries Expense
1
0
8
7
00
Insurance Expense
6
9
6
00
Utilities Expense
4
9
00
Plumbing Expense
5
7
00
Advertising Expense
8
00
Depreciation Expense, Office Equip.
2
9
00
31
Income Summary
8
0
6
00
C. Blossom, Capital
8
0
6
00
EXERCISES (CONTINUED)
12B-4.
C. BLOSSOM COMPANY
PARTIAL BALANCE SHEET
DECEMBER 31, 201X
Current Assets:
Cash
$
1
9
6
00
Merchandise Inventory
4
5
3
00
Prepaid Advertising
5
5
9
00
Prepaid Insurance
2
6
00
Total Current Assets
$1
2
3
4
00
Plant and Equipment:
Office Equipment
$1
0
8
6
00
Less: Acc. Dep., Office Equipment
(2
0
8
00)
8
7
8
00
Total Assets
$2
1
1
2
00
12A-5.
(a)
Dec.
31
Salaries Expense
3
0
0
00
Salaries Payable
3
0
0
00
Salaries Expense
Salaries Payable
Bal. 24,000
300
300
(b)
Jan.
1
Salaries Payable
3
0
0
00
Salaries Expense
3
0
0
00
Salaries Expense
Salaries Payable
300
300
300 Bal.
(c)
Feb.
3
Salaries Expense
6
3
0
0
00
Cash
6
3
0
0
00
Salaries Expense
Cash
6,300
300 Bal.
Bal. 12,500
6,300
Bal. 6,000
Bal. 6,200
Copyright © 2016 Pearson Education, Inc.
12-9
SOLUTIONS TO SET A PROBLEMS
PROBLEM 12A-1
NELSON CO.
INCOME STATEMENT
FOR YEAR ENDED DECEMBER 31, 201X
Revenue:
Gross Sales
$2
9
0
0
00
Less: Sales Ret. & Allow.
$
1
1
5
00
Sales Discount
7
0
00
1
8
5
00
Net Sales
$2
7
1
5
00
Cost of Goods Sold:
Merch, Inventory, 1/1/1X
$
3
6
0
00
Purchases
$
8
9
0
00
Less: Purch. Ret & Allow.
$
1
6
5
00
Purch. Discount
1
2
3
00
2
8
8
00
Net Purchases
6
0
2
00
Add: Freight-In
1
0
8
00
Net Cost of Purchases
7
1
0
00
Cost of Goods Avail. for Sale
$1
0
7
0
00
Less: Merch. Inv., 12/31/1X
2
7
0
00
Cost of Goods Sold
8
0
0
00
Gross Profit
$1
9
1
5
00
Operating Expenses:
Salaries Expense
$
3
5
0
00
Insurance Expense
1
8
0
00
Advertising Expense
1
4
5
00
Rent Expense
2
2
5
00
Depreciation Exp., Store Equip.
2
2
0
00
Total Operating Expenses
1
1
2
0
00
Net Income from Operations
$
7
9
5
00
Other Income:
Rental Income:
2
4
0
00
Net Income
$1
0
3
5
00
PROBLEM 12A-2
JAMES CO.
STATEMENT OF OWNER'S EQUITY
