Chapter 04 – The Accounting Cycle
(5)
Balance Sheet
For the Year Ended December 31
Assets
Current assets:
Cash
$ 7,170
Accounts payable
7,500
Supplies
2,590
Prepaid insurance
800
Land
24,000
Total current assets
$42,060
Property, plant, and equipment:
Building
$43,700
Equipment
29,250
Total property, plant, and
equipment
72,950
Total assets
$131,510
Liabilities
Current liabilities:
Accounts receivable
$10,000
Accum. depr.—building
12,525
Accum. depr.—equipment
7,340
Net income
11,500
Total liabilities
$ 41,365
Stockholders‘ Equity
Wages payable
$ 1,500
Common stock
86,645
Retained earnings
2,000
Total stockholders’ equity
90,145
Total liabilities and stockholders’
equity
$131,510
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
ANSWER:
(a)
(1)
Date of statement should be “December 31″ not “For the
Year Ended December 31.”
(2)
Accounts payable should be a current liability.
(3)
Land is a fixed asset and should be listed as property,
Chapter 04 – The Accounting Cycle
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(2)
Unearned Fees
(6)
Prepaid Insurance
(3)
Prepaid Advertising
(7)
Accounts Payable
(4)
Advertising Expense
(8)
Fees Earned
ANSWER:
(1)
current asset
(2)
current liability
(3)
current asset
(4)
expense
(5)
expense
(6)
current asset
(7)
current liability
(8)
revenue
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-02 – LO: 04–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
171. The following accounts were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet for
April 30, for Finnegan Co.:
Accumulated Depreciation
$32,000
Fees Earned
78,000
Depreciation Expense
7,250
Rent Expense
34,000
Prepaid Insurance
6,000
Supplies
400
Supplies Expense
1,800
Prepare an income statement.
ANSWER:
Finnegan Co.
Income Statement
For the Period Ended April 30
Fees earned
$78,000
Expenses:
Rent expense
$34,000
Depreciation expense
7,250
Supplies expense
1,800
Total expenses
43,050
Net income
$34,950
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
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Page 80
1. Utilities Payable
2. Utilities Expense
3. Supplies
4. Supplies Expense
5. Fees Earned
6. Unearned Fees
7. Accounts Receivable
8. Dividends
9. Retained Earnings
10. Accumulated Depreciation—Equipment
11. Depreciation Expense—Equipment
12. Equipment
13. Prepaid Insurance
14. Insurance Expense
ANSWER:
1.
Utilities Payable
n/a
2.
Utilities Expense
debit
3.
Supplies
n/a
4.
Supplies Expense
debit
5.
Fees Earned
credit
6.
Unearned Fees
n/a
7.
Accounts Receivable
n/a
8.
Dividends
n/a
9.
Retained Earnings
n/a
10.
Accumulated Depreciation—Equipment
n/a
11.
Depreciation Expense—Equipment
debit
12.
Equipment
n/a
13.
Prepaid Insurance
n/a
14.
Insurance Expense
debit
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
Debit
Credit
Cash
1,500
Accounts Receivable
2,000
Interest Receivable
100
Prepaid Insurance
1,600
Notes Receivable (long-term)
2,800
Equipment
15,000
Accumulated Depreciation
3,000