90. Exhibit 4-2
Short Company has the following income statement for 2012:
Revenue
s:
Sales revenue
$630,000
Interest revenue
21,000
$651,000
Expense
s:
Interest expense
$ 10,500
Rent expense
126,000
Utilities expense
42,000
Salaries expense
483,000
661,500
Net Loss
$ (10,500)
Refer to Exhibit 4-2. Given the information above, the entry to close revenues and expenses would include a
91. Exhibit 4-2
Short Company has the following income statement for 2012:
Revenues:
Sales revenue
$630,000
Interest revenue
21,000
$651,000
Expenses:
Interest expense
$ 10,500
Rent expense
126,000
Utilities expense
42,000
Salaries expense
483,000
661,500
Net Loss
$ (10,500)
Refer to Exhibit 4-2. Given the information above, the entry to close expenses would include a
92. Exhibit 4-3
The December 31, 2012, adjusted account balances taken from the Adjusted Trial Balance of Cajon Corporation
are as follows:
Debit
Credit
Cash
$150
Store Supplies
300
Service Fees Revenue
$600
Retained Earnings
50
Accounts Payable
70
Dividends
200
Unearned Service Fees Revenue
180
Wage Expense
200
Store Supplies Expense
50
Refer to Exhibit 4-3. Given the information above, after all closing entries have been made, the balance in Cajon’s Retained Earnings account would
be
93. Exhibit 4-3
The December 31, 2012, adjusted account balances taken from the Adjusted Trial Balance of Cajon Corporation
are as follows:
Debit
Credit
Cash
$150
Store Supplies
300
Service Fees Revenue
$600
Retained Earnings
50
Accounts Payable
70
Dividends
200
Unearned Service Fees Revenue
180
Wage Expense
200
Store Supplies Expense
50
Refer to Exhibit 4-3. Given the information above, after all closing entries have been made, the balance in Cajon’s Cash account would be
94. The December 31, 2012 closing entries for Smith Corp. are as follows:
Debit
Credit
Sales Revenue
12,500
Interest Revenue
1,250
Cost of Goods Sold
7,000
Wages Expense
2,250
Supplies Expense
1,575
Retained Earnings
2,925
Retained Earnings
1,000
Dividends
1,000
Smith Corp. had net income in 2012 of
95. On December 31, 2011, the balance in the Retained Earnings account is $18,500. On December 31, 2012,
the balance of Retained Earnings is $17,100. During 2012, dividends of $4,200 were declared and paid. Based
on this information, net income for 2012 is
96. On December 31, 2011, the balance in Pacino Company’s retained earnings account is $21,500. On
December 31, 2012, the balance is $22,000. During 2012, net income was $5,700. Based on this information,
dividends declared and paid for 2012 were
97. Which of the following is the correct sequence of the accounting cycle
98. In the course of your examination of the books and records of Andelin Company for the year ending
December 31, 2012, you find the following data:
Cost of goods sold
$550,000
Salaries earned by employees
95,000
Rent paid
50,000
Salaries paid to employees
110,000
Total sales revenue
945,000
Cash paid for advertising
4,000
Taxes paid
12,000
Cash collected from sales
800,000
Cash paid on inventory purchases
600,000
Interest expense incurred
3,000
Advertising expense
5,000
Tax assessment for the year
10,000
Interest paid
4,500
Rent expense
45,000
Compute Andelin Company’s net income for 2012 using cash-basis accounting.
99. In the course of your examination of the books and records of Andelin Company for the year ending
December 31, 2012, you find the following data:
Cost of goods sold
$550,000
Salaries earned by employees
95,000
Rent paid
50,000
Salaries paid to employees
110,000
Total sales revenue
945,000
Cash paid for advertising
4,000
Taxes paid
12,000
Cash collected from sales
800,000
Cash paid on inventory purchases
600,000
Interest expense incurred
3,000
Advertising expense
5,000
Tax assessment for the year
10,000
Interest paid
4,500
Rent expense
45,000
Cash collected from sales
$800,000
Cash expenses:
Cash paid on inventory purchases
$600,000
Salaries paid
110,000
Cash paid on advertising
4,000
Taxes paid
12,000
Interest paid
4,500
Rent paid
50,000
Total cash expenses
780,500
Net cash income
$ 19,500
Compute Andelin Company’s net income for 2012 using accrual-basis accounting.
100. In the course of your examination of the books and records of Griffin Company for the year ending
December 31, 2012, you find the following data:
Salaries earned by employees
$ 40,000
Salaries paid to employees
50,000
Total sales revenue
700,000
Cash collected from sales
750,000
Utility expense incurred
4,500
Utility bills paid
4,200
Cost of goods sold
400,000
Cash paid on inventory purchases
370,000
Tax assessment for the year
5,000
Taxes paid
3,500
Rent expense
30,000
Rent paid
25,000
a.
Compute Griffin Company’s net income for 2012 using cash-basis accounting.
b.
Compute Griffin Company’s net income for 2012 using accrual-basis accounting.
Net Income on Cash Basis:
Cash collected from sales
$750,000
Cash expenses:
Cash paid on inventory purchases
$370,000
Salaries paid
50,000
Utility bills paid
4,200
Taxes paid
3,500
Rent paid
25,000
Total cash expenses
452,700
b.
Net Income on Accrual Basis:
Total sales revenue
$700,000
Expenses:
Cost of goods sold
$400,000
Salaries expense
40,000
Utility expense
4,500
Tax assessment
5,000
Rent expense
30,000
Expenses:
Cost of goods sold
$550,000
Salaries expense
95,000
Advertising expense
5,000
Tax assessment
10,000
Interest expense
3,000
Rent expense
45,000
Total expenses
708,000
Net income
$237,000
101. Griesbach, Inc., prepares monthly financial statements. The September 30, 2012, trial balance reveals the
following:
Debit
Credit
Supplies on Hand
$1,200
Unearned Rent Revenue
$ 1,800
Notes Payable
45,000
An inventory of supplies reveals that only $675 are on hand at the end of the month. Of the unearned rent revenue, $600 remains unearned. The note
payable was taken out on September 1, 2012, for 12 months, at 10%. Lastly, the weekly payroll is $3,600. Employees are paid each Friday for a 5-
day work week, and September 30 is a Wednesday.
102. Jennifer, the bookkeeper of Mariners Inc., thinks that the following journal entries may lead to adjusting
entries at December 31, 2012.
2012
March 1
Prepaid Insurance
2,304
Cash
2,304
February 28
Cash
18,000
Rent Revenue
18,000
June 1
Legal Service Expense
5,400
Cash
5,400
September 1
Property Tax Expense
14,400
Cash
14,400
Jennifer has gathered the following information:
a.
The insurance premium is for the 12-month period ending March 1, 2013.
b.
The rent revenue represents rent received from a tenant for the period February 28, 2012, to August 31, 2012.
c.
The prepaid legal services is for the services of Dewey Cheatham, attorney–at-law, for the 12-month period ending May 31, 2013.
d.
The property tax expense is for the county’s fiscal year, which ends August 31, 2013.
Supplies Expense
525
Supplies on Hand
($1,200 – $675 = $525)
Unearned Rent Revenue
1,200
Rent Revenue
1,200
($1,800 – $600 = $1,200)
Interest Expense
375
Interest Payable
375
($45,000 ´ 10% ´ 1/12 = $375)
Wages Expense
2,160
Wages Payable
2,160
($3,600 ´ 3/5 = $2,160)
103. Mycro Corporation, a computer service company, had the following transactions during 2012.
a.
George Hale, a salesman with Mycro, signed Datum Sales to a two-year service contract for $48,000. The contract was signed on June 1,
2012, with Datum paying the full amount on that date.
b.
Mycro hired Mighty Maid Cleaning for general cleaning services. The contract was signed on October 1 and Mycro paid for the full year
($2,400) on that date.
c.
Fire insurance on Mycro’s office building was purchased with cash on April 1. The insurance expires March 31, 2014, and costs $4,000.
d.
Mycro rented a floor of the office building to Gates Company for one year. Gates paid $12,000 on August 1, the rent for 12 months.
e.
Mycro paid Space Savers $1,800 to rent a storage facility for one year on December 1, 2012.
1.
Journalize these transactions.
2.
Make any adjusting entries necessary for the year ended December 31, 2012.
1.
a.
Insurance Expense
1,920
b.
No adjusting entry required.
Prepaid Legal Expense
2,250
Legal Service Expense
2,250
d.
Prepaid Property Tax
9,600
Property Tax Expense
9,600
2.
Unearned Service Revenue
14,000
Service Revenue
14,000
b.
Cleaning Expense
600
Prepaid Cleaning
600
Insurance Expense
1,500
Prepaid Insurance
1,500
d.
Unearned Rent Revenue
5,000
Rent Revenue
5,000
Rent Expense
150
Prepaid Rent
150
104. Mancheski and Sons Inc. reported net income of $45,600 in 2012. Carl, the company bookkeeper,
neglected to make the necessary adjusting entries. The necessary adjustments are given below:
a.
Supplies at the beginning of the year were $4,000. Supply purchases during the year totaled $2,500 and Supplies was debited for this
amount. Ending inventory was $1,000.
b.
Insurance purchased during the year was $3,500, of which $1,000 remained unexpired at year end. Prepaid Insurance was debited to record
the purchase of this policy.
c.
Rent revenue collected for the year was $15,000. Only $5,000 of this was earned in 2012. The company credited Unearned Rent to record
the $15,000 rent collection.
d.
The company rents storage space from a local firm. Mancheski paid the rent for September 1, 2012, to August 31, 2013, a total of $1,500,
in advance on September 1. This was recorded as a prepaid expense.
1.
Prepare the necessary adjusting entries for December 31, 2012.
2.
Determine Mancheski’s corrected net income for 2012.
1.
Cash
48,000
b.
Prepaid Cleaning
2,400
Cash
2,400
Prepaid Insurance
4,000
Cash
4,000
d.
Cash
12,000
Unearned Rent Revenue
12,000
Prepaid Rent
1,800
Cash
1,800
105. Lincoln Company’s adjusted trial balance as of August 31, 2012, is shown below:
Lincoln Company
Adjusted Trial Balance
August 31, 2012
Debits
Credits
Cash
$30,500
Accounts Receivable
7,400
Supplies
800
Prepaid Rent
3,500
Inventory
5,000
Land
16,200
Accounts Payable
$15,300
Capital Stock (10,000 shares outstanding as of 8/31/12)
45,400
Retained Earnings (9/1/11)
900
Dividends
800
Sales Revenue
37,800
Cost of Goods Sold
16,600
Advertising Expense
1,800
Salaries Expense
15,000
______
$98,500
$98,500
Prepare a balance sheet for the year ended August 31, 2012.
Current assets:
Accounts receivable
7,400
Supplies
800
Prepaid Rent
3,500
Inventory
5,000
Total current assets
$47,200
Property, plant and equipment:
Land
16,200
Total property, plant and equipment
$16,200
Total assets
$63,400
Current liabilities:
Accounts payable
$15,300
Total current liabilities
$15,300
Owners’ equity:
Capital stock
$45,400
Retained earnings
2,700*
Total owners’ equity
$48,100
Total liabilities and owners’ equity
$63,400
106. Palmer Pen Co. has the following adjusted trial balance:
Palmer Pen Co.
Adjusted Trial Balance
December 31, 2012
Debit
Credit
Cash
$ 50,000
Accounts Receivable
40,500
Supplies
4,000
Inventory
74,580
Buildings
100,000
Machinery and Equipment
30,000
Land
20,000
Accounts Payable
$ 37,400
Notes Payable
49,180
Capital Stock (100,000 shares outstanding as of 12/31/12)
150,000
Retained Earnings (1/1/2012)
76,000
Sales Revenue
480,750
Salaries Expense
125,000
Insurance Expense
6,000
Dividends
20,000
Cost of Goods Sold
290,900
Utilities Expense
12,000
Income Tax Expense
20,350
_______
$793,330
$793,330
Prepare an income statement and a balance sheet in good form for Palmer Pen Co.
Sales revenue
$480,750
Less expenses:
Cost of goods sold
$290,900
Salaries expense
125,000
Utilities expense
12,000
Insurance expense
6,000
433,900
Income before taxes
$ 46,850
Income tax expense
20,350
Net income
$ 26,500
Earnings per share ($26,500 / 100,000)
$0.265
107. Roosevelt Company’s adjusted trial balance as of August 31, 2012, is shown below:
Roosevelt Company
Adjusted Trial Balance
August 31, 2012
Debits
Credits
Cash
$ 61,000
Accounts Receivable
14,800
Supplies
1,600
Prepaid Rent
7,000
Inventory
10,000
Land
32,400
Accounts Payable
30,600
Capital Stock (10,000 shares outstanding as of 8/31/12)
90,800
Retained Earnings (9/1/11)
1,800
Dividends
1,600
Sales Revenue
75,600
Cost of Goods Sold
33,200
Advertising Expense
3,600
Salaries Expense
30,000
_______
$197,000
$197,000
Sales revenue
$75,600
Less expenses:
Advertising expense
3,600
Salaries expense
30,000
66,800
Net income
$ 8,800
Earnings per share ($8,800 / 10,000)
$0.88
Roosevelt Company
Beginning retained earnings
$(1,800)
Add: Net Income
8,800
Less: Dividends
1,600
108. Lincoln Company’s trial balance as of August 31, 2012, is shown below:
Lincoln Company
Trial Balance
August 31, 2012
Debits
Credits
Cash
$30,500
Accounts Receivable
7,400
Supplies
800
Prepaid Rent
3,500
Inventory
5,000
Land
16,200
Accounts Payable
$15,300
Capital Stock
45,400
Retained Earnings
900
Dividends
800
Sales Revenue
37,800
Cost of Goods Sold
16,600
Advertising Expense
1,800
Salaries Expense
15,000
______
$98,500
$98,500
Prepare the closing entries for the year ended August 31, 2012.
Retained Earnings
4,400
Cost of Goods Sold
16,600
Advertising Expense
1,800
Salaries Expense
15,000
Dividends
800
109. Lincoln Company’s trial balance as of August 31, 2012, is shown below:
Lincoln Company
Trial Balance
August 31, 2012
Debits
Credits
Cash
$30,500
Accounts Receivable
7,400
Supplies
800
Prepaid Rent
3,500
Inventory
5,000
Land
16,200
Accounts Payable
$15,300
Capital Stock
45,400
Retained Earnings
900
Dividends
800
Sales Revenue
37,800
Cost of Goods Sold
16,600
Advertising Expense
1,800
Salaries Expense
15,000
______
$98,500
$98,500
Prepare the post-closing trial balance for the year ended August 31, 2012.
Debit
Credit
Cash
$30,500
Supplies
800
Prepaid Rent
3,500
Inventory
5,000
Land
16,200
Accounts Payable
$15,300
Capital Stock
45,400
Retained Earnings
______
2,700*
$63,400
$63,400
*
Net Income:
$37,800 – 16,600 – 1,800 – 15,000 = $4,400
Retained Earnings:
$(900) + 4,400 – 800 = $2,700
110. Palmer Pen Co. has the following adjusted trial balance:
Palmer Pen Co.
Adjusted Trial Balance
December 31, 2012
Debit
Credit
Cash
$ 50,000
Accounts Receivable
40,500
Supplies
4,000
Inventory
74,580
Buildings
100,000
Machinery and Equipment
30,000
Land
20,000
Accounts Payable
$ 37,400
Notes Payable
49,180
Capital Stock
150,000
Retained Earnings
76,000
Sales Revenue
480,750
Salaries Expense
125,000
Insurance Expense
6,000
Dividends
20,000
Cost of Goods Sold
290,900
Utilities Expense
12,000
Income Tax Expense
20,350
_______
$793,330
$793,330
a.
Prepare the necessary closing entries.
b.
Prepare the post-closing trial balance.
Sales Revenue
480,750
Retained Earnings
26,500
Cost of Goods Sold
290,900
Salaries Expense
125,000
Utilities Expense
12,000
Insurance Expense
6,000
Income Tax Expense
20,350
Retained Earnings
20,000
Dividends
20,000
Debit
Credit
Cash
$ 50,000
Accounts Receivable
40,500
Supplies
4,000
Inventory
74,580
Buildings
100,000
Machinery and Equipment
30,000
Land
20,000
Accounts Payable
$ 37,400
Notes Payable
49,180
111. For each account listed below, check whether it appears on the income statement or the balance sheet and
whether it would normally have a debit or a credit balance. (Note: This covers the entire accounting cycle.) The
first line has been completed as an example.
Balance
Income
Account
Sheet
Statement
Debit
Credit
Notes Payable
X
X
Prepaid Insurance
Cash
Land
Interest Revenue
Accounts Receivable
Inventory
Wages Payable
Tax Expense
Notes Receivable
Common Stock
Service Revenue
Supplies
Supplies Expense
Rent Revenue
Furniture
Short-Term Investments
Unearned Rent
Plant and Equipment
Retained Earnings
Selling Expense
Accounts Payable
Long-Term Debt
Miscellaneous Expense
Balance
Income
Account
Sheet
Statement
Debit
Credit
Notes Payable
X
X
Prepaid Insurance
X
X
Cash
X
X
Land
X
X
Interest Revenue
X
X
Accounts Receivable
X
X
Inventory
X
X
Wages Payable
X
X
Tax Expense
X
X
Notes Receivable
X
X
Common Stock
X
X
Supplies
X
X
Supplies Expense
X
X
Rent Revenue
X
X
Furniture
X
X
Short-Term Investments
X
X
Unearned Rent
X
X
Plant and Equipment
X
X
Retained Earnings
X
X
Selling Expense
X
X
112. For each account listed below, mark the column that BEST describes the correct classification of the
account and mark the column for the financial statement on which the account would appear. Assume that all
accounts have normal balances. (NOTE: This problem covers the entire accounting cycle.) The first line has
been completed as an example.
Owners’
Balance
Income
Account
Asset
Liability
Equity
Expense
Revenue
Sheet
Statement
Notes Payable
X
X
Prepaid Insurance
Cash
Land
Interest Revenue
Accounts Receivable
Inventory
Wages Payable
Tax Expense
Notes Receivable
Common Stock
Service Revenue
Supplies
Supplies Expense
Rent Revenue
Furniture
Short-Term Investment
Unearned Rent
Plant and Equipment
Retained Earnings
Selling Expense
Accounts Payable
Long-Term Debt
Miscellaneous Expense
Owners’
Balance
Income
Account
Asset
Liability
Equity
Expense
Revenue
Sheet
Statement
Notes Payable
X
X
Prepaid Insurance
X
X
Cash
X
X
Land
X
X
Interest Revenue
X
X
Accounts Receivable
X
X
Inventory
X
X
Wages Payable
X
X
Tax Expense
X
X
Notes Receivable
X
X
Common Stock
X
X
Service Revenue
X
X
Supplies
X
X
Supplies Expense
X
X
Rent Revenue
X
X
Furniture
X
X
Short-Term Investment
X
X
Unearned Rent
X
X
Plant and Equipment
X
X