978-0078025754 Chapter 4 Solution Manual Part 4

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

Merchandise inventory ............

24,000

(d)

2,700

21,300

Store supplies ...........................

9,700

(a)

6,000

3,700

Dividends ..................................

2,000

Sales ..........................................

227,100

Sales discounts ........................

1,000

Sales returns and allowances

5,000

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.

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

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

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