3-1–5
PROBLEM 3-33B g. (cont.)
Anchor Machining
T-Accounts for Closing Entries, 2017
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
Bal. 92,000
Bal. 9,200
Bal. 100,000
Salaries Payable
Retained Earnings
Accounts Rec.
Bal. 7,000
cl 198,100
Bal. 11,400
Bal. 28,000
cl 10,000
cl 251,400
Bal. 54,700
Prepaid Rent
Dividends
Bal. 900
Bal. 10,000
cl 10,000
Bal. -0-
Land
Service Revenue
Bal. 50,000
cl 251,400
Bal. 251,400
Bal. -0-
Operating Expenses
Bal. 98,200
cl 98,200
Bal. -0-
Salaries Expense
Bal. 89,000
cl 89,000
Bal. -0-
Rent Expense
Bal. 10,900
cl 10,900
Bal. -0-
3-1–6
PROBLEM 3-33B g. (cont.)
Anchor Machining
Post-Closing Trial Balance
December 31, 2017
Account Titles
Debit
Credit
Cash
$ 92,000
Accounts Receivable
28,000
Prepaid Rent
900
Land
50,000
Accounts Payable
$ 9,200
Salaries Payable
7,000
Common Stock
100,000
Retained Earnings
54,700
Totals
$170,900
$170,900
3-1–7
PROBLEM 3-34B
a. Debt to Assets Ratio: Total debt ÷ Total assets
Delaware $ 93,000 ÷ $127,000 = 73.2%
Florida $452,000 ÷ $753,000 = 60.0%
3-1–8
PROBLEM 3-35B
Black, Inc.
General Journal
Event
Account Titles
Debit
Credit
2016
a. 11/1
Cash
10,000
Notes Payable
10,000
b. 12/31
Interest Expense ($10,000 x 9% x 2/12)
150
Interest Payable
150
2017
c. 10/31
Interest Expense ($10,000 x 9% x 10/12)
750
Interest Payable
750
d. 10/31
Interest Payable
900
Cash
900
e. 10/31
Notes Payable
10,000
Cash
10,000
3-1–9
PROBLEM 3-36B
Vox Company
General Journal, 2016
Event
Account Titles
Debit
Credit
1. 1/1
Computer
7,500
Cash
7,500
2. 2/1
Prepaid Rent
6,600
Cash
6,600
3.
Supplies
1,100
Cash
1,100
4.
Cash
56,000
Service Revenue
56,000
5.
Salaries Expense
18,000
Cash
18,000
6. 5/1
Cash
9,000
Unearned Revenue
9,000
7.
Depreciation Expense*
1,700
Accumulated Depreciation
1,700
8.
Rent Expense ($6,600 x 11/12)
6,050
Prepaid Rent
6,050
9.
Supplies Expense
980
Supplies ($1,100 – $120)
980
10.
Unearned Revenue ($9,000 x 8/12)
6,000
Service Revenue
6,000
3-1–10
PROBLEM 3-36B a. (cont.)
Vox Company
T-Accounts – 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Unearned Revenue
Common Stock
Bal. 22,000
6. 9,000
Bal. 12,000
4. 56,000
1. 7,500
10. 6,000
6. 9,000
2. 6,600
Bal. 3,000
3. 1,100
5. 18,000
Retained Earnings
Bal. 53,800
Bal. 10,000
Service Revenue
Prepaid Rent
4. 56,000
2. 6,600
8. 6,050
10. 6,000
Bal. 550
Bal. 62,000
Salaries Expense
Supplies
5. 18,000
3. 1,100
9. 980
Bal. 18,000
Bal. 120
Depreciation Expense
7. 1,700
Computer
Bal. 1,700
1. 7,500
Bal. 7,500
Rent Expense
81. 6,050
Accumulated Depr.
Bal. 6,050
7. 1,700
Bal. 1,700
Supplies Expense
9. 980
Bal. 980
3-1–11
PROBLEM 3-36B b. (cont.)
Vox Company
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Service Revenue
$62,000
Expenses
Salaries Expense
$18,000
Depreciation Expense
1,700
Rent Expense
6,050
Supplies Expense
980
Total Expenses
(26,730)
Net Income
$35,270
3-1–12
PROBLEM 3-36B b. (cont.)
Vox Company
Balance Sheet
As of December 31, 2016
Assets
Cash
$53,800
Prepaid Rent
550
Supplies
120
Computer
7,500
Accumulated Depreciation
(1,700)
Total Assets
$60,270
Liabilities
Unearned Revenue
$ 3,000
Total Liabilities
$ 3,000
Stockholders’ Equity
Common Stock
$12,000
Retained Earnings
45,270
Total Stockholders’ Equity
57,270
Total Liabilities and Stockholders’ Equity
$60,270
3-1–13
PROBLEM 3-36B b. (cont.)
Vox Company
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Received Cash from Customers1
$65,000
Paid Cash for Expenses2
(25,700)
Net Cash Flow from Operating Activities
$39,300
Cash Flows From Investing Activities
Purchased Computer
(7,500)
Net Cash Flow from Financing Activities
(7,500)
Cash Flows From Financing Activities:
-0-
Net Change in Cash
31,800
Plus: Beginning Cash Balance
22,000
Ending Cash Balance
$53,800
1(4) $56,000 + (6) $9,000 = $65,000
2(2) $6,600 + (3) $1,100 + (5) $18,000 = $25,700
3-1–14
1. The two fundamental equality requirements of the double-entry
2.
Debit
means left side of an account and
credit
means right side of an
account.
Debits Credits
3. The balance of an account is the difference between total debits and total
4. The three primary asset sources are (1) assets acquired from owners, (2)
5. The three primary asset uses are (1) assets used by a business in the
6. Some examples of assets exchange transactions include:
7. A debit to an expense account increases the expense. Since expenses
3-1–15
expense account ultimately reduces retained earnings and stockholders’
equity.
8. Debit Balance Credit Balance
Assets Liabilities
9. The ledger accounts are used to prepare financial statements. (These
10. The purpose of a journal is to maintain a chronological record of all
11. Special journals are used to record only specific types of transactions
12. The ledger is a collection of all accounts of the organization. It is the
13. Closing entries transfer the balances of the temporary (nominal)
14. A company closes its books at its accounting year-end but not all
companies end their year on December 31. Some companies choose a
15. The information recorded in the general journal includes the date,
16. The trial balance is a listing of all accounts and amounts in a
3-1–16
17. The trial balance should be prepared when there is a need to test the
18. The process of copying information from journals to ledgers is called
posting
.
19. The return on assets ratio, net income divided by total assets, is used to
20. The debt to assets ratio, total debt divided by total assets, helps to
21. Financial leverage is using borrowed money to increase stockholders’
equity.
22. Return on equity is computed by dividing net income by stockholders’
equity. When net income increases as a result of borrowing money and
3-1–17
ATC 3-1
(All dollar amounts are in millions.)
a. Debt to assets:
2013 $28,322* ÷ $44,553 = 63.6%
2012 $31,605* ÷ $48,163 = 65.6%
3-1–18
ATC 3-2
a.
Miller Company
T-Accounts, 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Pay.
Common Stock
Bal. 12,000
2. 6,000
5. 19,000
Bal. 12,300
Bal. 10,000
4. 32,000
5. 19,000
3. 18,000
Bal. 19,000
Bal. 11,300
Retained Earnings
Bal. 4,700
Accounts Receivable
Bal. 6,000
4. 32,000
Service Revenue
1. 36,000
1. 36,000
Bal. 10,000
Bal. 36,000
Prepaid Rent
Operating Expenses
2. 6,000
5.* 5,000
3. 18,000
Bal. 1,000
Bal. 18,000
Land
Rent Expense
Bal. 9,000
5. 5,000
Bal. 5,000
*$6,000 x 10/12 = $5,000
3-1–19
ATC 3-2 a. (cont.)
Miller Company
T-Accounts, 2017
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Pay.
Common Stock
Bal. 19,000
2a. 8,400
5. 20,000
Bal. 11,300
Bal. 10,000
4. 52,000
5. 20,000
3. 24,000
Bal. 42,600
Bal. 15,300
Retained Earnings
Salaries Payable
Bal. 17,700
Accounts Receivable
7. 2,100
Bal. 10,000
4. 52,000
Bal. 2,100
Service Revenue
1. 48,000
1. 48,000
Bal. 6,000
Bal. 48,000
Prepaid Rent
Operating Expenses
Bal. 1,000
2b.* 1,000
3. 24,000
2a. 8,400
6.** 7,000
Bal. 24,000
Bal. 1,400
Rent Expense
2b. 1,000
Land
6. 7,000
Bal. 9,000
Bal. 8,000
Salaries Expense
7. 2,100
Bal. 2,100
3-1–20
3-1–21
ATC 3-2 a. (cont.)
Miller Company
T-Accounts, 2018
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Pay.
Common Stock
Bal. 42,600
1. 2,100
6. 33,000
Bal. 15,300
Bal. 10,000
5. 55,000
3a. 9,000
4. 32,000
7. 5,000
6. 33,000
Bal. 14,300
Bal. 58,500
Retained Earnings
Salaries Payable
Bal. 31,600
Accounts Receivable
1. 2,100
Bal. 2,100
Bal. 6,000
5. 55,000
Bal. -0-
Service Revenue
2. 56,000
2. 56,000
Bal. 7,000
Bal. 56,000
Prepaid Rent
Operating Expenses
Bal. 1,400
3b.* 1,400
4. 32,000
3a. 9,000
8.** 7,500
Bal. 32,000
Bal. 1,500
Rent Expense
3b. 1,400
Land
8. 7,500
Bal. 9,000
7. 5,000
Bal. 8,900
Bal. 4,000
3-1–22
ATC 3-2 a. (cont.)
Miller Company
Income Statements
2016
2017
2018
Service Revenue
$36,000
$48,000
$56,000
Total Revenue
36,000
48,000
56,000
Expenses
Operating Expenses
(18,000)
(24,000)
(32,000)
Rent Expense
(5,000)
(8,000)
(8,900)
Salaries Expense
-0-
(2,100)
-0-
Total Expenses
(23,000)
(34,100)
(40,900)
Operating Income
$13,000
$13,900
$15,100
3-1–23
ATC 3-2 a. (cont.)
Miller Company
Balance Sheets
2016
2017
2018
Assets
Cash
$ 19,000
$42,600
$58,500
Accounts Receivable
10,000
6,000
7,000
Prepaid Rent
1,000
1,400
1,500
Land
9,000
9,000
4,000
Total Assets
$39,000
$59,000
$71,000
Liabilities
Accounts Payable
$11,300
$15,300
$14,300
Salaries Payable
-0-
2,100
-0-
Total Liabilities
11,300
17,400
14,300
Stockholders’ Equity
Common Stock
10,000
10,000
10,000
Retained Earnings
17,700
31,600
46,700
Total Stockholders’ Equity
27,700
41,600
56,700
Total Liab. and Stockholders’ Equity
$39,000
$59,000
$71,000
3-1–24
ATC 3-2 a. (cont.)
Miller Company
Statements of Cash Flows
2016
2017
2018
Cash Flow from Operating Act.
Cash received from customers
$32,000
$52,000
$55,000
Cash paid for rent
(6,000)
(8,400)
(9,000)
Cash paid for operating expenses
(19,000)
(20,000)
(33,000)
Cash paid for salaries
-0-
-0-
(2,100)
Net Cash Flow from Operating Act.
7,000
23,600
10,900
Cash Flow From Investing Act.
Cash from sale of land
-0-
-0-
5,000
Net Cash Flow from Investing Act.
-0-
-0-
5,000
Cash Flow From Financing Act.
Net Change in Cash
7,000
23,600
15,900
Add Beginning Cash
12,000
19,000
42,600
Ending Cash Balance
$19,000
$42,600
$58,500