Problem 4-3B (Continued)
3. Multiple-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2015
Sales ………………………………………………………….. $332,650
Less: Sales discounts ……………………………….. $ 5,875
Sales returns and allowances …………… 20,000 25,875
Net sales ……………………………………………………. 306,775
Cost of goods sold * …………………………………… 115,600
Gross profit ……………………………………………….. 191,175
Expenses
*Cost of goods sold (alternative computation):
Problem 4-3B (Concluded)
4. Single-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2015
Net sales ………………………………………………………. $306,775
*From Part 3.
Problem 4-4B (30 minutes)
Part 1
Closing entries
March 31 Sales ………………………………………………………… 332,650
Income Summary …………………………………… 332,650
To close temporary accounts with credit balances.
March 31 Income Summary ……………………………………….. 277,475
Sales Discounts ……………………………………. 5,875
Sales Returns and Allowances ………………. 20,000
Cost of Goods Sold ……………………………….. 115,600
To close the dividends account.
Problem 4-4B (Concluded)
Part 2
The first step is to determine the amount of purchases that were subject to
a discount during the year:
Invoice cost of merchandise purchases ……………………… $138,500
Part 3
First, we compute this year’s sales returns and allowances rate:
Sales …………………………………………………………………………. $332,650
Problem 4-5B (60 Minutes)
Part 1
Adjustment (a)
Oct. 31 Store Supplies Expense …………………………..… 6,000
Store Supplies …………………………………….. 6,000
Problem 4-5B (Continued)
Part 2 Multiple-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2015
Gross profit …………………………………………………….. 142,600
Expenses
Selling expenses
Depreciation expense—Store equipment ……… 3,000
Sales salaries expense** ……………………………… 31,500
Rent expense—Selling space**…………………….. 13,000
Store supplies expense ……………………………….. 6,000
* $78,500 = $75,800 + $2,700 (shrinkage)
** Salaries and rent expenses are equally divided between selling and general and administrative.
Part 3 Single–step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2015
Problem 4-5B (Concluded)
Part 4
Current assets
Cash ………………………………………………………………… $ 7,400
Merchandise inventory …………………………………….. 21,300
Problem 4-6BB (50 minutes)
FOSTER PRODUCTS COMPANY
Work Sheet
For Year Ended October 31, 2015
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash …………………………………….
7,400
7,400
7,400
Merchandise inventory ………...
24,000
(d)
2,700
21,300
21,300
Store supplies ……………………...
9,700
(a)
6,000
3,700
3,700
Prepaid insurance ………………..
6,600
(b)
2,800
3,800
3,800
Store equipment …………………..
81,800
81,800
81,800
Accum. depreciation—Store eq …..
32,000
(c)
3,000
35,000
35,000
Accounts payable ………………..
18,000
18,000
18,000
Common stock …………………….
3,000
3,000
3,000
Retained earnings ………………..
40,000
40,000
40,000
Dividends …………………………….
2,000
2,000
2,000
Sales …………………………………...
227,100
227,100
227,100
Sales discounts …………………...
1,000
1,000
1,000
Sales returns and allowances
5,000
5,000
5,000
Cost of goods sold ……………….
75,800
(d)
2,700
78,500
78,500
Depreciation expense—Store eq ...
0
(c)
3,000
3,000
3,000
Salaries expense ………………….
63,000
63,000
63,000
Insurance expense ……………….
0
(b)
2,800
2,800
2,800
Rent expense ……………………….
26,000
26,000
26,000
Store supplies expense ………..
0
(a)
6,000
6,000
6,000
Advertising expense …………….
17,800
______
_____
_____
17,800
______
17,800
______
______
______
Totals …………………………………..
320,100
320,100
14,500
14,500
323,100
323,100
203,100
227,100
120,000
96,000
Net income …………………………..
24,000
______
______
24,000
Totals …………………………………..
227,100
227,100
120,000
120,000
SERIAL PROBLEM — SP 4
Serial Problem — SP 4, Business Solutions (150 minutes) Part 1
Journal entries
Jan. 4 Wages Expense ……………………………………….623 125
Additional investment by owner for stock.
7 Merchandise Inventory …………………………….119 5,800
Accounts Payable ……………………………..201 5,800
Purchased merchandise on credit.
9 Cash ………………………………………………………..101 2,668
Completed work on project.
13 Accounts Receivable—Liu Corp. ……………….106.5 5,200
Sales …………………………………………………413 5,200
Sold merchandise on credit.
13 Cost of Goods Sold ………………………………….502 3,560
16 Cash ………………………………………………………..101 4,000
Computer Services Revenue ……………..403 4,000
Collected cash revenue from customer.
Serial Problem — SP 4 (Continued)
Jan. 17 Accounts Payable ……………………………………201 5,800
Accounts Receivable—Liu Corp. ………..106.5 500
Customer returned defective goods.
* Business Solutions leaves the cost of defective
products in its costs of goods sold. If it did not,
the following entry would have been recorded:
Collected accounts receivable.
January 13 sale ………………………………. $5,200
January 20 return …………………………….. 500
Amount due from Liu ……………………….. $4,700
Discount at 1% ………………………………… 47
Accounts Payable ……………………………..201 9,000
Purchased merchandise for resale.
26 Accounts Receivable—KC, Inc ………………….106.8 5,800
Sales …………………………………………………413 5,800
Sold merchandise on credit.
Paid employee wages.
Serial Problem — SP 4 (Continued)
Feb. 1 Prepaid Rent ……………………………………………131 2,475
Cash …………………………………………………101 2,475
Paid three months’ rent in advance.
Less credit allowed …………………….. (496)
Accounts payable to Kansas Corp. $8,504
Less discount at 1% x $9,000 ………. (90)
Amount due to Kansas Corp. ………. $8,414
5 Advertising Expense ………………………………..655 600
15 Dividends …………………………………………………319 4,800
Cash …………………………………………………101 4,800
Paid cash for dividends.
23 Accounts Receivable—Delta Co. ……………….106.7 3,220
Sales …………………………………………………413 3,220
Cash …………………………………………………101 1,000
Paid employee.
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Financial Accounting Fundamentals, 5th Edition
288
Serial Problem — SP 4 (Continued)
Mar. 8 Computer Supplies ………………………………….126 2,730
Accounts Payable ……………………………..201 2,730
Purchased supplies on credit.
9 Cash …………………………..…………………………...101 3,220
Accounts Rec.—Delta Co. ………………….106.7 3,220
Collected accounts receivable.
11 Repairs Expense–Computer …………………….684 960
Cash …………………………………………………101 960
Paid for computer repairs.
Paid accounts payable ($1,100 + $2,730).
24 Accounts Receivable—Easy Leasing ………..106.3 9,047
Computer Services Revenue ……………..403 9,047
Billed customer for services.
25 Accounts Receivable—Wildcat Services ……….. 106.2 2,800
30 Accounts Receivable—IFM Co. …………………106.4 2,220
Sales …………………………………………………413 2,220
Sold merchandise on credit.
30 Cost of Goods Sold ………………………………….502 1,048
Merchandise Inventory ………………………119 1,048
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 4
289
Serial Problem — SP 4 (Continued)
Part 2
Ledger accounts as of March 31 before posting of March 31 adjusting entries
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 48,372
Jan. 4 625 47,747
22 4,653 77,726
31 1,250 76,476
Feb. 1 2,475 74,001
3 8,414 65,587
5 600 64,987
Accounts Receivable—Alex’s Engineering Co. Acct. No. 106.1
Date Explanation PR Debit Credit Balance
Accounts Receivable—Wildcat Services Acct. No. 106.2
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Accounts Receivable—Easy Leasing Acct. No. 106.3
Date Explanation PR Debit Credit Balance
Accounts Receivable—IFM Co. Acct. No. 106.4
Date Explanation PR Debit Credit Balance
Accounts Receivable—Liu Corporation Acct. No. 106.5
Date Explanation PR Debit Credit Balance
Accounts Receivable—Gomez Co. Acct. No. 106.6
Date Explanation PR Debit Credit Balance
Accounts Receivable—Delta Co. Acct. No. 106.7
Date Explanation PR Debit Credit Balance
Accounts Receivable—KC, Inc. Acct. No. 106.8
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Accounts Receivable—Dream, Inc. Acct. No. 106.9
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Merchandise Inventory Acct. No. 119
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Jan. 7 5,800 5,800
13 3,560 2,240
Computer Supplies Acct. No. 126
Date Explanation PR Debit Credit Balance
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Accumulated Depreciation—Office Equipment Acct. No. 164
Accumulated Depreciation—Computer Equipment Acct. No. 168
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 1,250
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 1,100
Wages Payable Acct. No. 210
Date Explanation PR Debit Credit Balance
Jan. 11 1,500 0