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Exercise 4-13 (15 minutes)
Current assets:
Cash............................................................................... $ 8,000
Current liabilities:
Interpretation: Wilson Trucking Company’s current ratio of 1.78 exceeds
the industry average of 1.5. This implies the company is in a slightly better
liquidity position than its competitors. Moreover, if we review the makeup
of the current ratio, we see that current assets consist primarily of cash
and accounts receivable. The existence of these more liquid assets is a
positive attribute for liquidity purposes.
Exercise 4-14 (10 minutes)
Dec. 31 Net Sales...................................................... 1,014,345
31 Income Summary......................................... 936,724
4-1
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Exercise 4-15 (15 minutes)
Current
Assets
Current
Liabilities
Current
Ratio
Case 1 $ 79,040 / $ 32,000 = 2.47
Analysis: Company 1 is in the strongest liquidity position. It has about
Exercise 4-16A (10 minutes)
Reversing entries are appropriate for accounting adjustments (a) and (e)
Sept. 1 Service Fees Earned.................................... 6,000
1 Salaries Payable.......................................... 3,400
4-2
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Exercise 4-17A (30 minutes)
1. Adjusting entries
2. Subsequent entries without reversing
Nov. 5 Rent Payable................................................ 2,800
8 Cash............................................................. 1,700
3. Reversing entries and subsequent entries
Nov. 1 Rent Payable................................................ 2,800
1 Rent Earned................................................. 850
5 Rent Expense............................................... 5,600
8 Cash............................................................. 1,700
4-3
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
PROBLEM SET A
Problem 4-1A (90 minutes)
INSTRUCTOR: Ledger accounts are shown after Part 7 as they would appear after all entries are
posted.
Part 2 — Transactions for April
April 1 Cash.............................................................101 30,000
2 Rent Expense...............................................640 1,800
3 Office Supplies.............................................124 1,000
10 Prepaid Insurance.........................................128 2,400
14 Salaries Expense..........................................622 1,600
24 Cash.............................................................101 8,000
28 Salaries Expense.........................................622 1,600
29 Repairs Expense..........................................684 350
30 Telephone Expense.....................................688 750
4-4
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Education.
Owner withdrew cash.
4-5
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 4-1A (Continued)
Part 3
ADVENTURE TRAVEL
Unadjusted Trial Balance
April 30, 2015
No. Account Title Debit Credit
101 Cash......................................................... $27,000
106 Accounts receivable............................... 0
124 Office supplies........................................ 1,000
128 Prepaid insurance................................... 2,400
4-6
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 4-1A (Continued)
Part 4
Adjusting entries
(a) Apr 30 Insurance Expense.............................................. 637 133
Prepaid Insurance......................................... 128 133
To record expired insurance ($2,400/12 x2/3).
(b) 30 Office Supplies Expense...................................... 650 400
Office Supplies.............................................. 124 400
To record cost of supplies used ($1,000 - $600).
4-7
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 4-1A (Continued)
Part 4
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30, 2015
No. Account Title Debit Credit
101 Cash......................................................... $27,000
106 Accounts receivable............................... 1,750
124 Office supplies........................................ 600
128 Prepaid insurance................................... 2,267
167 Computer equipment.............................. 20,000
4-8
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 4-1A (Continued)
Part 5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30, 2015
Commissions earned................................................. $9,750
Expenses
Depreciation expense—Computer equipment........ $ 500
Salaries expense...................................................... 3,620
ADVENTURE TRAVEL
Statement of Owner’s Equity
For Month Ended April 30, 2015
J. Nozomi, Capital, April 1, 2015.................... $ 0
Add: Owner investments.............................. $50,000
4-9
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Education.
Problem 4-1A (Continued)
Part 5—continued
ADVENTURE TRAVEL
Balance Sheet
April 30, 2015
Assets
Cash................................................................................ $27,000
Accounts receivable...................................................... 1,750
Office supplies............................................................... 600
Liabilities
Equity
4-10
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Education.
Problem 4-1A (Continued)
Part 6
Closing entries
April 30 Commissions Earned.................................405 9,750
Income Summary.................................901 9,750
To close the revenue account.
30 Income Summary.........................................901 2,197
Part 7
ADVENTURE TRAVEL
Post-Closing Trial Balance
April 30, 2015
Debit Credit
Cash......................................................... $27,000
Accounts receivable............................... 1,750
Office supplies........................................ 600
4-11
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
4-12
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
