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13) Airing & Spelling, Inc. began operations on January 1, 2011. The following amounts were
obtained from its information system on December 31, 2011. These amounts are before any
year-end adjustments have been made:
1.
Accounts receivable
$10,000
12.
Interest payable
0
2.
Accumulated
depreciation
0
13.
Notes payable
15,000
3.
Cash
5,000
14.
Prepaid insurance
9,000
4.
Cash collected from
customers
90,000
15.
Proceeds from
borrowing
15,000
5.
Cash paid for
insurance
(9,000)
16.
Purchase of truck
(20,000)
6.
Cash paid for
supplies
(6,000)
17.
Service revenue
100,000
7.
Cash paid for salaries
(70,000)
18.
Supplies
6,000
8.
Common stock
5,000
19.
Supplies expense
0
9.
Depreciation expense
0
20.
Truck
20,000
10.
Insurance expense
0
21.
Salaries expense
70,000
11.
Interest expense
0
22.
Salaries payable
0
Part A: In the worksheet below, record the effect of these five adjustments on the accounting
equation. Show the correct dollar amounts, and write in the titles of the accounts affected.
1. The truck, purchased on January 1, has a useful life of 5 years with no residual value. Record
the depreciation for the year.
2. The 6%, two-year notes payable were issued on January 1. Interest and principal are due
January 1, 2013.
3. Insurance coverage used during the year was $6,000.
4. $500 worth of supplies were on hand at December 31.
5. Additional salaries of $10,000 were earned and will be paid next month.
Part B: Fill in the missing information on the financial statements:
Part C: Calculate the profit margin on sales ratio. ______________________
14) Team instructions: Divide the class into teams of three or four people. Each team member
should work the following problem separately outside of class. Then give the students time in
class to compare answers with their teammates and put together a final, correct copy of the
problem. Each team should turn in only one copy of the problem for grading. All team members
will receive the same grade.
Part A: Record the effect on the accounting equation of the following events that occurred to
Quackers, Inc. Show the correct dollar amounts using parentheses for negative amounts, and
write in the titles of the accounts affected.
Part B: Fill in the missing information on the financial statements:
Part C: For each description listed below, WRITE IN THE AMOUNT in the column that
represents the December 31, 2011 financial statement where this information is reported.
Part D:
Calculate the profit margin on sales ratio. ________
Calculate the current ratio. ________
15) Team instructions: Provide students with copies of real merchandising companies’ annual
reports, or give students the Web addresses of real merchandising companies and ask them to
print out the annual reports.
Divide the class into teams of three or four people. All team members should work with the same
company’s annual report. Give the students time in class to answer the following questions for
their company. Each team should turn in only one copy of the answers for grading, along with a
copy of the annual report that they used. All team members will receive the same grade.
1.
What is the name of your company?
2.
What is the date of your company's most recent fiscal
yearend?
3.
Calculate the current ratio for the most recent year.
4.
List two assets on the balance sheet that will be expensed
in the future when used.
5.
List one liability that was most likely the result of
recording an accrued expense.
6.
Calculate the profit margin on sales ratio for the most
recent year.
