Use this information to answer the following questions:
The December 31, 2018 (pre-closing) adjusted trial balance for Kline Enterprises was as follows:
Account Title
Debits
Credits
Accounts payable
90,000
Accounts receivable
170,000
Accumulated depreciation —
equipment
260,000
Common stock
490,000
Cash
26,000
Cost of goods sold
480,000
Depreciation expense
60,000
Equipment
700,000
Interest expense
4,000
Inventory
150,000
Note payable (due in six months)
60,000
Rent expense
30,000
Retained earnings
62,000
Salaries and wages payable
8,000
Sales revenue
770,000
Salaries expense
120,000
TOTALS
1,740,000
1,740,000
164) Assuming no income taxes, compute the following, and place your answer in the space
provided:
Kline’s 2018 net income (or loss).
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165) Assuming no income taxes, compute the following, and place your answer in the space
provided:
Kline’s 12/31/18 total current assets.
166) Assuming no income taxes, compute the following, and place your answer in the space
provided.
Kline’s 12/31/18 total current liabilities:
167) Assuming no income taxes, compute the following, and place your answer in the space
provided:
Kline’s 12/31/18 total shareholders’ equity.
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168) Presented below is income statement information of the Nebraska Corporation for the year
ended December 31, 2018.
Sales revenue
$620,000
Cost of goods sold
Salaries expense
90,000
Insurance expense
Dividend revenue
3,000
Depreciation
expense
Miscellaneous
expense
12,000
Income tax expense
Loss on sale of
investments
8,000
Rent expense
Required:
Prepare the necessary closing entries at December 31, 2018.
Sales revenue
620,000
Dividend revenue
Income summary
540,000
Income summary ($615,000 – 540,000)
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169) Raintree Corporation maintains its records on a cash basis. At the end of each year the
company’s accountant obtains the necessary information to prepare accrual basis financial
statements. The following cash flows occurred during the year ended December 31, 2018:
Cash receipts:
From customers
$450,000
Interest on note
3,000
Issue of common stock
50,000
Total cash receipts
$503,000
Cash disbursements:
Purchase of merchandise
$220,000
Annual insurance payment
9,000
Payment of salaries
180,000
Dividends paid to shareholders
6,000
Annual rent payment
12,000
Total cash disbursements
$427,000
Selected balance sheet information:
12/31/17
12/31/18
Cash
$25,000
$101,000
Accounts receivable
42,000
70,000
Inventory
60,000
82,000
Prepaid insurance
2,000
?
Prepaid rent
7,000
?
Interest receivable
1,500
?
Note receivable
50,000
50,000
Equipment
150,000
150,000
Accumulated depreciation—equipment
(40,000)
(55,000)
Accounts payable (for merchandise)
50,000
62,000
Salaries payable
20,000
28,000
Common stock
200,000
250,000
Additional information:
1. On June 30, 2017, Raintree lent a customer $50,000. Interest at 6% is payable annually on
each June 30. Principal is due in 2021.
2. The annual insurance payment is made in advance on March 31.
3. Annual rent on the company’s facilities is paid in advance on September 30.
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Required:
1. Prepare an accrual basis income statement for 2018 (ignore income taxes).
2. Determine the following balance sheet amounts on December 31, 2018:
a. Interest receivable
b. Prepaid insurance
c. Prepaid rent
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170) Silicon Chip Company’s fiscal year-end is December 31. At the end of 2018, it owed
employees $22,000 in salaries and wages that will be paid on January 7, 2019.
Required:
1. Prepare an adjusting entry to record accrued salaries and wages, a reversing entry on January
1, 2019, and an entry to record the payment of salaries and wages on January 7, 2019.
2. Prepare journal entries to record the accrued salaries and wages on December 31, 2018 and the
payment of salaries and wages on January 7, 2019, assuming a reversing entry is not recorded.
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171) Describe the difference between external events and internal events, and provide two
examples of each.
172) Describe what is meant by deferred revenue and provide two examples.
173) Describe what is meant by prepaid expenses and provide two examples.
174) What is an accrued liability?
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175) What is the difference between permanent accounts and temporary accounts, and why does
an accounting system have both types of accounts?
176) What is the purpose of the statement of cash flows? List the three major categories of cash
flows and give an example of a cash transaction for each category.
177) What is the purpose of the closing process?
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178) Claymore Corporation maintains its book on a cash basis. During 2018, the company
collected $825,000 in fees from its clients and paid $512,000 in expenses. You are able to
determine the following information about accounts receivable, supplies, prepaid rent, salaries
payable, and interest payable:
January 1, 2018
December 31, 2018
Accounts receivable
$110,000
$120,000
Supplies
15,000
18,000
Prepaid rent
12,000
11,000
Salaries and wages
payable
16,500
14,200
Interest payable
4,000
5,500
In addition, 2018 depreciation expense on office equipment and furniture is $55,000.
Required:
Determine accrual basis net income for 2018.
Accrual basis net income
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179) The accounting system of Carlton and Sons consists of a general journal (GJ), a cash
receipts journal (CR), a cash disbursements journal (CD), a sales journal (SJ), and a purchases
journal (PJ). For each of the following, indicate which journal should be used to record the
transaction.
Transaction
Journal
1. Received interest on a loan.
________
2. Received cash for services to be provided next
month.
________
3. Purchased equipment for cash.
________
4. Purchased merchandise on account.
________
5. Sold merchandise on credit (the sale only, not the
cost of the merchandise).
________
6. Sold merchandise for cash (the sale only, not the cost
of the merchandise).
________
7. Paid advertising bill.
________
8. Recorded accrued salaries and wages payable.
________
9. Paid utility bill.
________
10. Recorded depreciation expense.
________
11. Sold equipment for cash.
________
12. Collected cash from customers on account.
________
13. Paid employee salaries and wages.
________
14. Paid interest on a loan.
________
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