7-120
EXERCISE 7-12B
a. $18,000 x 5% x 10/12 = $750
b. Total Receivables at December 31, 2016:
Notes Receivable $18,000
7-121
EXERCISE 7-13B
a.
Advanced Carpet Cleaning
Horizontal Statements Model
Income Statement
Statement
of
Assets
=
Liab
.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Event
Cash
+
Acc. Rec.
=
+
Ret. Ear
1.
NA
+
73,720
=
NA
+
73,720
76,000
−
2,280*
=
73,720
NA
2.
73,720
+
(73,720)
=
NA
+
NA
NA
−
NA
=
NA
73,720 OA
*$76,000 x 3% = $2,280
b. (1) Total assets: Cash $73,720
7-122
EXERCISE 7-14B
a. & b.
Event
Account Titles
Debit
Credit
a.
Accounts Receivable
8,304
Credit Card Expense ($8,650 x 4%)
346
Sales Revenue
8,650
b.
Cash
8,304
Accounts Receivable
8,304
c. Net Income Sales $8,650
Credit Card Expense (346)
Net Income $8,304
7-123
EXERCISE 7-15B a.
Southern Timber Co.
Journal Entries for 2016
Event
Account Titles
Debit
Credit
1.
Cash
20,000
Common Stock
20,000
2.
Merchandise Inventory
80,000
Accounts Payable
80,000
3a.
Accounts Receivable
98,000
Sales Revenue
98,000
3b.
Cost of Goods Sold
61,000
Merchandise Inventory
61,000
4.
Allowance for Doubtful Accounts
1,500
Accounts Receivable
1,500
5. 9/1
Notes Receivable
10,000
Cash
10,000
6.
Salaries Expense
24,500
Cash
24,500
7.
Cash
99,000
Accounts Receivable
99,000
8.
Accounts Payable
78,000
Cash
78,000
9.
Dividends
5,000
Cash
5,000
10a.
Accounts Receivable – Credit Cards
4,800
Credit Card Expense
200
Sales Revenue
5,000
10b.
Cost of Goods Sold
3,500
Merchandise Inventory
3,500
7-124
EXERCISE 7-15B a. (cont.)
Southern Timber Company
Journal Entries for 2016
Event
Account Titles
Debit
Credit
11.
Uncollectible Accounts Expense1
980
Allowance for Doubtful Accounts
980
12.
Interest Receivable2
200
Interest Revenue
200
7-125
EXERCISE 7-15B b.
Southern Timber Co. T-Accounts, 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
Bal. 16,000
Bal. 9,200
Bal. 30,000
1. 20,000
5. 10,000
8. 78,000
2. 80,000
1. 20,000
7. 99,000
6. 24,500
Bal. 11,200
Bal. 50,000
8. 78,000
9. 5,000
Retained Earnings
Bal. 17,500
Bal. 17,800
Dividends
Accounts Receivable
9. 5,000
Bal. 18,000
Bal. 5,000
3a. 98,000
4. 1,500
7. 99,000
Sales Revenue
Bal. 15,500
3a. 98,000
10. 5,000
Bal. 103,000
Allow. For Doubt. Acct.
Bal. 2,000
Cost of Goods Sold
4. 1,500
11. 980
3b. 61,000
Bal. 1,480
10b. 3,500
Bal. 64,500
Merchandise Inventory
Salaries Expense
Bal. 25,000
6. 24,500
2. 80,000
3b. 61,000
Bal. 24,500
10b. 3,500
Bal. 40,500
Uncollectible Accts. Exp.
Notes Receivable
11. 980
5. 10,000
Bal. 980
Bal. 10,000
Credit Card Expense
Interest Receivable
10. 200
12. 200
Bal. 200
Bal. 200
Interest Revenue
Accts Rec. Credit Card
12. 200
10. 4,800
Bal. 200
Bal. 4,800
EXERCISE 7-15B (cont.)
7-126
c.
Southern Timber Co.
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Sales Revenue
$103,000
Cost of Goods Sold
(64,500)
Gross Margin
38,500
Operating Expenses
Salaries Expense
$24,500
Credit Card Expense
200
Uncollectible Accounts Exp.
980
Total Operating Expenses
(25,680)
Operating Income
12,820
Interest Revenue
200
Net Income
$13,020
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$30,000
Plus: Stock Issued
20,000
Ending Common Stock
$50,000
Beginning Retained Earnings
$17,800
Plus: Net Income
13,020
Less: Dividends
(5,000)
Ending Retained Earnings
25,820
Total Stockholders’ Equity
$75,820
7-127
EXERCISE 7-15B c. (cont.)
Southern Timber Co.
Balance Sheet
As of December 31, 2016
Assets
Cash
$17,500
Accounts Receivable
$15,500
Less: Allowance for Doubtful Accounts
(1,480)
14,020
Accounts Receivable Credit Cards
4,800
Interest Receivable
200
Notes Receivable
10,000
Merchandise Inventory
40,500
Total Assets
$87,020
Liabilities
Accounts Payable
$11,200
Total Liabilities
11,200
Stockholders’ Equity
Common Stock
$50,000
Retained Earnings
25,820
Total Stockholders’ Equity
75,820
Total Liabilities and Stockholders’ Equity
$87,020
7-128
EXERCISE 7-15B c. (cont.)
Southern Timber Co.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Inflow from Customers
$99,000
Outflow for Inventory
(78,000)
Outflow for Expenses
(24,500)
Net Cash Flow from Operating Activities
$ (3,500)
Cash Flows From Investing Activities:
Outflow for Note Receivable
$(10,000)
Net Cash Flow from Investing Activities
(10,000)
Cash Flows From Financing Activities:
Inflow from Stock Issue
$20,000
Outflow for Dividend
(5,000)
Net Cash Flow from Financing Activities
15,000
Net Change in Cash
1,500
Plus: Beginning Cash Balance
16,000
Ending Cash Balance
$17,500
7-129
EXERCISE 7-16B
a. Accounts Receivable Turnover:
Calculate net accounts receivables:
Bradford: $ 92,500 – $3,250 = $ 89,250
7-130
PROBLEM 7-17B a.
Event Number
Type of Transaction
2016
1.
Asset Source
2.
Asset Source
3.
Asset Exchange
4.
Asset Use
2017
1.
Asset Source
2.
Asset Exchange
3.
Asset Exchange
4a.*
Asset Exchange
4b.*
Asset Exchange
5.
Asset Use
6.
Asset Use
b. 2016 and 2017
Effect of Transactions on Financial Statements
No.
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
2016
1.
+
NA
+
NA
NA
NA
+ FA
2.
+
NA
+
+
NA
+
NA
3.
+−
NA
NA
NA
NA
NA
+ OA
4.
−
NA
−
NA
+
−
NA
2017
1.
+
NA
+
+
NA
+
NA
2.
+−
NA
NA
NA
NA
NA
+ OA
3.
+−
NA
NA
NA
NA
NA
NA
4a.*
+−
NA
NA
NA
NA
NA
NA
4b.*
+−
NA
NA
NA
NA
NA
+ OA
5.
−
NA
−
NA
+
−
− OA
6.
−
NA
−
NA
+
−
NA
*4a. is reinstatement of the receivable previously written off; 4b is the collection of
PROBLEM 7-17B (cont.)
7-132
PROBLEM 7-17B (cont.)
d. (2016)
Sports Consulting
Financial Statements
For the Year Ended 2016
Income Statement
Service Revenue
$70,000
Uncollectible Accounts Expense
(1,400)
Net Income
$68,600
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
5,000
Ending Common Stock
$ 5,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
68,600
Ending Retained Earnings
68,600
Total Stockholders’ Equity
$73,600
7-133
PROBLEM 7-17B d. (cont.)
(2016)
Sports Consulting
Financial Statements
Balance Sheet
As of December 31, 2016
Assets
Cash
$67,000
Accounts Receivable
$ 8,000
Less: Allowance for Doubtful Accounts
(1,400)
6,600
Total Assets
$73,600
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$ 5,000
Retained Earnings
68,600
Total Stockholders’ Equity
73,600
Total Liabilities and Stockholders’ Equity
$73,600
Statement of Cash Flows
For the Year Ended 2016
Cash Flows From Operating Activities:
Inflow from Customers
$62,000
Net Cash Flow from Operating Activities
$62,000
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities
Inflow for Stock Issue
5,000
Net Change in Cash
67,000
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$67,000
7-134
PROBLEM 7-17B (cont.) e. (2016)
Sports Consulting
Date
Account Titles
Debit
Credit
2016
Closing Entries
1.
Service Revenue
70,000
Retained Earnings
70,000
2.
Retained Earnings
1,400
Uncollectible Accounts Expense
1,400
Sports Consulting
T-Accounts 2016 Closing Entries
Assets
=
Stockholders’ Equity
Cash
Accounts Receivable
Common Stock
Bal. 67,000
Bal. 8,000
Bal. 5,000
Retained Earnings
2. 1,400
1. 70,000
Bal 68,600
Allowance for
Doubtful Accounts
Service Revenue
Bal. 1,400
1. 70,000
Bal. 70,000
Bal. -0-
Uncoll. Accounts Exp.
Bal. 1,400
2. 1,400
Bal. -0-
7-135
PROBLEM 7-18B e. (Cont.)
Sports Consulting
Post-Closing Trial Balance
December 31, 2016
Account Title
Debit
Credit
Cash
$67,000
Accounts Receivable
8,000
Allowance for Doubtful Accounts
$ 1,400
Common Stock
5,000
Retained Earnings
68,600
Totals
$75,000
$75,000
PROBLEM 7-17B (cont.)
7-137
PROBLEM 7-17B c. (cont.)
(2017)
Expert Consulting
T-Accounts 2017
Assets
=
Stockholders’ Equity
Common Stock
Cash
Accounts Receivable
Bal. 5,000
Bal. 67,000
Bal. 8,000
2. 70,000
5. 51,200
1. 84,000
2. 70,000
Retained Earnings
4b. 200
4a. 200
3. 1,100
Bal. 68,600
Bal. 86,000
4b. 200
Bal. 20,900
Service Revenue
1. 84,000
Bal. 84,000
Allow. For Doubtful
Accounts
Uncoll. Accounts Exp.
Bal. 1,400
6. 840
3. 1,100
4a. 200
Bal. 840
6. 840
Bal. 1,340
Operating Expenses
5. 51,200
Bal. 51,200
7-138
PROBLEM 7-17B
d. (2017)
Sports Consulting
Financial Statements
For the Year Ended 2017
Income Statement
Service Revenue
$84,000
Expenses
Operating Expenses
$51,200
Uncollectible Accounts Expense
840
Total Expenses
(52,040)
Net Income
$31,960
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ 5,000
Plus: Stock Issued
-0-
Ending Common Stock
$ 5,000
Beginning Retained Earnings
$68,600
Plus: Net Income
31,960
Ending Retained Earnings
100,560
Total Stockholders’ Equity
$105,560
7-139
PROBLEM 7-17B d. (cont.)
(2017)
Sports Consulting
Financial Statements
Balance Sheet
As December 31, 2017
Assets
Cash
$ 86,000
Accounts Receivable
$20,900
Less: Allowance for Doubtful Accounts
(1,340)
19,560
Total Assets
$105,560
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$ 5,000
Retained Earnings
100,560
Total Stockholders’ Equity
105,560
Total Liabilities and Stockholders’ Equity
$105,560
Statement of Cash Flows
For the Year Ended 2017
Cash Flows From Operating Activities:
Inflow from Customers
$70,200
Outflow for Expenses
(51,200)
Net Cash Flow from Operating Activities
$19,000
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities
-0-
Net Change in Cash
19,000
Plus: Beginning Cash Balance
67,000
Ending Cash Balance
$86,000