4-95
Net Cash Flow from Operating Activities $ 4,500
4-96
EXERCISE 4-3B (cont.)
f. Net income is $11,000 and net cash flow from operating activities is
4-97
EXERCISE 4-4B
a.
Jones Shoe Shop
General Journal for 2016
Date
Account Titles
Debit
Credit
1.
Cash
25,000
Common Stock
25,000
2.
Merchandise Inventory
32,000
Cash
32,000
3a.
Cash
36,000
Sales Revenue
36,000
3b.
Cost of Goods Sold
19,000
Merchandise Inventory
19,000
4.
Advertising Expense
3,100
Cash
3,100
b.
Assets
=
Stockholders’ Equity
Cash
Common Stock
Sales Revenue
1. 25,000
2. 32,000
1. 25,000
3a. 36,000
3a. 36,000
4. 3,100
Bal. 25,000
Bal. 36,000
Bal. 25,900
Cost of Goods Sold
Mdse. Inventory
3b. 19,000
2. 32,000
3b. 19,000
Bal. 19,000
Bal. 13,000
Advertising Expense
4. 3,100
Bal. 3,100
4-98
EXERCISE 4-4B (cont.)
c.
Jones Shoe shop
Trial Balance
December 31, 2016
Account Titles
Debit
Credit
Cash
$25,900
Merchandise Inventory
13,000
Common Stock
$25,000
Sales Revenue
36,000
Cost of Goods Sold
19,000
Advertising Expense
3,100
Totals
$61,000
$61,000
4-99
EXERCISE 4-5B
d. buyer
4-100
EXERCISE 4-6B
a.
Calculation of Ending Inventory
Beginning balance in inventory
$ 8,500
From item 1:
Cost of inventory
45,000
Transportation-in
700
Purchase discount ($45,000 x .01)
(450)
From item 2
Cost of inventory
40,000
Total cost of inventory
93,750
Cost of inventory sold
(56,000)
Ending balance in inventory
$37,750
Net Sales
$94,000
Cost of goods sold
(56,000)
Gross Margin
$38,000
4-101
EXERCISE 4-7B
a.
The Bolt Co.
General Journal for 2016
Date
Account Titles
Debit
Credit
1.
Merchandise Inventory
8,200
Accounts Payable
8,200
2.
Merchandise Inventory
600
Cash
600
3.
Accounts Payable
800
Merchandise Inventory
800
4.
Accounts Payable
400
Merchandise Inventory
400
5a.
Cash
9,500
Sales Revenue
9,500
5b.
Cost of Goods Sold
5,500
Merchandise Inventory
5,500
6.
Transportation-out
300
Cash
300
7.
Accounts Payable
5,000
Cash
5,000
4-102
EXERCISE 4-7B (cont.)
b.
The Bolt Co.
T-Accounts 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
Bal. 12,000
3. 800
1. 8,200
Bal. 15,000
5a. 9,500
2. 600
4. 400
6. 300
7. 5,000
Retained Earnings
7. 5,000
Bal. 2,000
Bal. 3,000
Bal. 15,600
Sales Revenue
Mdse. Inventory
5a. 9,500
Bal. 6,000
Bal. 9,500
1. 8,200
3. 800
2. 600
4. 400
Cost of Goods Sold
5b. 5,500
5b. 5,500
Bal. 8,100
Bal. 5,500
Transportation-out
6. 300
Bal. 300
4-103
EXERCISE 4-7B (cont.)
c.
The Bolt Co.
Income Statement
For the Year Ended December 31, 2016
Net Sales
$9,500
Cost of Goods Sold
(5,500)
Gross Margin
4,000
Operating Expenses
Transportation-out
(300)
Net Income
$3,700
The Bold Co.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Inflow from Customers
$9,500
Outflow for Merchandise Inventory
(5,600)
Outflow for Expenses
(300)
Net Cash Flow from Operating Activities
$ 3,600
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities
-0-
Net Change in Cash
3,600
Plus: Beginning Cash Balance
12,000
Ending Cash Balance
$15,600
d. The difference between net income and net cash flow from operating
activities is caused by the shop not selling all the inventory that it
purchased during the period. The cash payment for inventory is
included in the statement of cash flows, but only the portion of that
4-104
payment allocated to goods actually sold is included on the income
4-105
EXERCISE 4-8B
Transaction
Debited to Inventory
a. Transportation-in
Yes
b. Allowance for damaged inventory
No
c. Purchase of inventory
Yes
d. Purchase of office supplies
No
e. Transportation-out
No
f. Cash discount on goods sold
No
4-106
EXERCISE 4-9B
a.
Transaction
Period Costs
Product Costs
Not
Applicable
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
4-107
EXERCISE 4-9B (cont.)
b.
Wild Rose Co. Horizontal Statements Model for 2016
Balance Sheet
Income Statement
Statement of
Assets
=
Liab.
+
Stkholders’ Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Cash
+
A. Rec.
+
Mdse. Inv.
=
A. Pay.
+
C. Stk.
+
Ret. Ear.
1. Stock
20,000
+
NA
+
NA
=
NA
+
20,000
+
NA
NA
−
NA
=
NA
20,000 FA
2. Pur Inv.
NA
+
NA
+
36,000
=
36,000
+
NA
+
NA
NA
−
NA
=
NA
NA
3. Freight
(900)
+
NA
+
900
=
NA
+
NA
+
NA
NA
−
NA
=
NA
(900) OA
4. Ret. Inv.
NA
+
NA
+
(4,000)
=
(4,000)
+
NA
+
NA
NA
−
NA
=
NA
NA
5a. Sold Inv.
NA
+
82,000
+
NA
=
NA
+
NA
+
82,000
82,000
−
NA
=
82,000
NA
5b. Cost
NA
+
NA
+
(28,000)
=
NA
+
NA
+
(28,000)
NA
−
28,000
=
(28,000)
NA
6. Pd. Frt.
(200)
+
NA
+
NA
=
NA
+
NA
+
(200)
NA
−
200
=
(200)
(200) OA
7. Coll. AR
33,000
+
(33,000)
+
NA
=
NA
+
NA
+
NA
NA
−
NA
=
NA
33,000 OA
8. Pd. AP
(27,000)
+
NA
+
NA
=
(27,000)
+
NA
+
NA
NA
−
NA
=
NA
(27,000) OA
9. Pd. Exp.
(4,500)
+
NA
+
NA
=
NA
+
NA
+
(4,500)
NA
−
4,500
=
(4,500)
(4,500) OA
10. Pd. Exp.
(7,200)
+
NA
+
NA
=
NA
+
NA
+
(7,200)
NA
−
7,200
=
(7,200)
(7,200) OA
End. Bal.
13,200
+
49,000
+
4,900
=
5,000
+
20,000
+
42,100
82,000
−
39,900
=
42,100
13,200 NC
EXERCISE 4-10B
a. Purchase $19,000
Less: return (8,500)
Gross due (subject to discount) 10,500
4-109
EXERCISE 4-10B (cont.)
c. $10,500; he would not be eligible for the discount.
d.
Salon Imports Effect of Events on the Financial Statements
Events
Balance Sheet
Income Statement
Stmt. Of Cash Flows
Assets
=
Liab.
+
Stkholders’
Equity
Rev.
−
Exp.
=
Net Inc.
Cash
+
Mdse. Inv.
=
A. Pay.
+
C. Stk.
+
Ret. Ear.
3. Pd. AP
(10,500)
+
NA
=
(10,500)
+
NA
+
NA
−
NA
=
NA
(10,500) OA
4-110
EXERCISE 4-11B
Event
No.
Event
Type
Assets
=
Liab.
+
S.
Equity
Rev.
−
Exp.
=
Net Inc.
Statement
of
Cash Flows
1.
AE
+−
NA
NA
NA
NA
NA
− OA
2a.
AS
+
NA
+
+
NA
+
NA
2b.
AU
−
NA
−
NA
+
−
NA
3.
AU
−
−
NA
NA
NA
NA
NA
4.
AS
+
+
NA
NA
NA
NA
NA
5.
AU
−
−
NA
NA
NA
NA
− OA
6.
AU
−
NA
−
NA
+
−
− OA
7a.
AS
+
NA
+
+
NA
+
+ OA
7b.
AU
−
NA
−
NA
+
−
NA
8.
AU
−
NA
−
NA
+
−
− OA
9.
AE
+−
NA
NA
NA
NA
NA
− OA
10.
AE
+/−
NA
NA
NA
NA
NA
+ OA
4-111
EXERCISE 4-12B
a.
Rabbe Sales
T-Accounts for 2016
Assets
=
Stockholders’ Equity
Cash
Common Stock
Sales Revenue
1. 80,000
2. 35,000
1. 80,000
3a. 40,500
3a. 40,500
Bal. 80,000
Bal. 40,500
Bal. 85,500
Cost of Goods Sold
Mdse. Inventory
3b. 21,000
2. 35,000
3b. 21,000
4. 500
Bal. 14,000
Bal. 21,500
4. 500
(14,000 − 13,500)
Bal. 13,500
b.
Rabbe Sales
Income Statement
For the Year Ended December 31, 2016
Net Sales
$40,500
Cost of Goods Sold
(21,500)
Gross Margin
19,000
Operating Expenses
-0-
Net Income
$19,000
4-112
EXERCISE 4-12B b. (cont.)
Rabbe Sales
Balance Sheet
As of December 31, 2016
Assets
Cash
$85,500
Merchandise Inventory
13,500
Total Assets
$99,000
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$80,000
Retained Earnings
19,000
Total Stockholders’ Equity
99,000
Total Liab. And Stockholders’ Equity
$99,000
4-113
EXERCISE 4-13B
a.
Image Incorporated
Income Statement
For the year ended December 31, 2016
Sales Revenue
$265,000
Cost of Goods Sold
(176,000)
Gross Margin
89,000
Expenses
Operating Expenses
(41,000)
Operating Income
48,000
Non-Operating Items
Gain on the Sale of Land
32,000
Net Income
$80,000
Image Incorporated
Income Statement
For the year ended December 31, 2017
Sales Revenue
$291,500
Cost of Goods Sold
(193,600)
Gross Margin
97,900
Expenses
Operating Expenses
(45,100)
Operating Income
52,800
Non-Operating Items
-0-
Net Income
$52,800
4-114