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7-140
PROBLEM 7-17B (cont.)
e. (2017)
Expert Consulting
Date
Account Titles
Debit
Credit
2017
Closing Entries
1.
Service Revenue
84,000
Retained Earnings
84,000
2.
Retained Earnings
52,040
Operating Expenses
51,200
Uncollectible Accounts Expense
840
Expert Consulting
T-Accounts 2017 Closing Entries
Assets
=
Stockholders’ Equity
Cash
Accounts Receivable
Common Stock
Bal. 86,000
Bal. 20,900
Bal. 5,000
Retained Earnings
Bal. 68,600
2. 52,040
1. 84,000
Bal. 100,560
Allow. For Doubtful
Accounts
Service Revenue
Bal. 1,340
1. 84,000
Bal. 84,000
Bal. -0-
Uncoll. Accounts. Exp.
Bal. 840
2. 840
Bal. -0-
Operating Expenses
Bal. 51,200
2. 51,200
Bal. -0-
7-141
PROBLEM 7-17B e. (cont.)
(2017)
Sports Consulting
Post-Closing Trial Balance
December 31, 2017
Account Title
Debit
Credit
Cash
$ 86,000
Accounts Receivable
20,900
Allowance for Doubtful Accounts
$ 1,340
Common Stock
5,000
Retained Earnings
100,560
Totals
$106,900
$106,900
PROBLEM 7-18B
a.
Kee Cabinet Company
General Journal, 2016
Event
Account Title
Debit
Credit
1a.
Accounts Receivable
726,000
Sales Revenue
726,000
1b.
Cost of Goods Sold
473,000
Merchandise Inventory
473,000
2.
Cash
715,000
Accounts Receivable
715,000
3.
Allowance for Doubtful Accounts
3,100
Accounts Receivable
3,100
4.
Uncoll. Accts. Expense ($726,000 x .5%)
3,630
Allowance for Doubtful Accounts
3,630
PROBLEM 7-19B
7-144
PROBLEM 7-19B
e.
Assets
=
Liab.
+
Equity
Event
Cash
+
Acc. Rec.
−
Allow.
=
Rev.
−
Exp.
=
Net Inc.
Cash Flows
1.
NA
261,000
NA
NA
261,000
261,000
NA
261,000
NA
2.
214,700
(214,700)
NA
NA
NA
NA
NA
NA
214,700 OA
3.
NA
NA
1,852
NA
(1,852)
NA
1,852
(1,852)
NA
7-145
PROBLEM 7-20B
a.
Thorne Inc.
General Journal, 2016
Event
Account Titles
Debit
Credit
1.
Cash
60,000
Common Stock
60,000
2.
Merchandise Inventory
210,000
Accounts Payable
210,000
3a.
Accounts Receivable
310,000
Sales Revenue
310,000
3b.
Cost of Goods Sold
165,000
Merchandise Inventory
165,000
4.
Cash
288,000
Accounts Receivable
288,000
5.
Accounts Payable
190,000
Cash
190,000
6.
Salaries Expense
46,000
Cash
46,000
7.
Operating Expenses
62,000
Cash
62,000
8.
Uncollectible Accounts Expense*
2,102
Allowance for Doubtful Accts.
2,102
*
Number of Days
Past Due
Amount
Percent Likely to Be
Uncollectible
Allowance
Balance
Current
$15,700
.01
$ 157
0-30
8,500
.05
425
31-60
4,000
.10
400
61-90
2,600
.20
520
Over 90 days
1,200
.50
600
Total
$2,102
7-146
PROBLEM 7-20B a. (cont.)
Thorne Inc.
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
1. 60,000
5. 190,000
5. 190,000
2. 210,000
1. 60,000
4. 288,000
6. 46,000
Bal. 20,000
Bal. 60,000
7. 62,000
Bal. 50,000
Sales Revenue
3a. 310,000
Accounts Receivable
Bal. 310,000
3a. 310,000
4. 288,000
Bal. 22,000
Cost of Goods Sold
3b. 165,000
Allow. Doubt. Accts.
Bal. 165,000
8. 2,102
Bal. 2,102
Operating Expenses
7. 62,000
Bal. 62,000
Merchandise Inventory
2. 210,000
3b. 165,000
Salaries Expense
Bal. 45,000
6. 46,000
Bal. 46,000
Uncoll. Accounts Exp.
8. 2,102
Bal. 2,102
7-147
PROBLEM 7-20B (cont.)
b.
Thorne Inc.
Financial Statements
For the Year Ended 2016
Income Statement
Sales Revenue
$310,000
Cost of Goods Sold
(165,000)
Gross Margin
145,000
Operating Expenses
Operating Expenses
$62,000
Salaries Expense
46,000
Uncollectible Accts. Expense
2,102
Total Operating Expenses
(110,102)
Net Income
$ 34,898
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
60,000
Ending Common Stock
$60,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
34,898
Ending Retained Earnings
34,898
Total Stockholders’ Equity
$94,898
7-148
PROBLEM 7-20B b. (cont.)
Thorne Inc.
Balance Sheet
As of the End of the Year 2016
Assets
Cash
$ 50,000
Accounts Receivable
$22,000
Less, Allowance for Doubtful Accounts
(2,102)
19,898
Merchandise Inventory
45,000
Total Assets
$114,898
Liabilities
Accounts Payable
$ 20,000
Stockholders’ Equity
Common Stock
$60,000
Retained Earnings
34,898
Total Stockholders’ Equity
94,898
Total Liabilities and Stockholders’ Equity
$114,898
7-149
PROBLEM 7-20B b. (cont.)
Thorne Inc.
Statement of Cash Flows
For the Year Ended 2016
Cash Flows From Operating Activities:
Inflow from Customers
$288,000
Outflow for Inventory
(190,000)
Outflow for Expenses1
(108,000)
Net Cash Flow from Operating Activities
($10,000)
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issued
$ 60,000
Net Cash Flow from Financing Activities
60,000
Net Change in Cash
50,000
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$50,000
1Salaries Paid $ 46,000
Other Operating Expenses 62,000
Outflow for Expenses $108,000
c. Net Realizable Value:
Accounts Receivable $22,000
Less: Allowance for Doubtful Accounts (2,102)
Net Realizable Value $19,898
7-150
PROBLEM 7-21B
a.
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
NA
NA
− OA
3a.
+
NA
+
+
NA
+
+ OA
3b.
+
NA
+
+
+
+
NA
3c.
+
NA
+
+
NA
+
NA
3d.
−
NA
−
NA
+
−
NA
4.
+−
NA
NA
NA
NA
NA
+ OA
5.
+−
NA
NA
NA
NA
NA
+ OA
6.
−
NA
−
NA
+
−
− OA
7.
−
NA
−
NA
+
−
NA
Legend:
3a. Cash Sales
3b. Credit Card Sales (remember that credit card expense is recorded).
7-151
PROBLEM 7-21B (cont.)
b.
Diamond Supply Company
General Journal, 2016
Date
Account Titles
Debit
Credit
1.
Cash
50,000
Common Stock
50,000
2.
Merchandise Inventory
120,000
Cash
120,000
3a.
Cash
50,000
Sales Revenue
50,000
3b.
Accounts Receivable - Credit Card Co.
111,550
Credit Card Expense ($115,000 x 3%)
3,450
Sales Revenue
115,000
3c.
Accounts Receivable
15,000
Sales Revenue
15,000
3d.
Cost of Goods Sold
95,000
Merchandise Inventory
95,000
4.
Cash
111,550
Accounts Receivable - Credit Card Co.
111,550
5.
Cash
11,300
Accounts Receivable
11,300
6.
Selling and Administrative Exp.
51,500
Cash
51,500
7.
Uncollectible Accounts Expense
185
Allowance for Doubtful Accounts
185
7-152
PROBLEM 7-21B b. (cont.)
Diamond Supply Company
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Common Stock
1. 50,000
2. 120,000
1. 50,000
3a. 50,000
6. 51,500
Bal. 50,000
4. 111,550
5. 11,300
Sales Revenue
Bal. 51,350
3a. 50,000
3b. 115,000
Accounts Receivable
3c. 15,000
3c. 15,000
5. 11,300
Bal. 180,000
Bal. 3,700
Cost of Goods Sold
Accounts Receivable - CC
3d. 95,000
3b. 111,550
4. 111,550
Bal. 95,000
Bal. -0-
Credit Card Expense
Allow. for Doubt. Accts
3b. 3,450
7. 185
Bal. 3,450
Bal. 185
Selling & Adm. Expense
Merchandise Inventory
6. 51,500
2. 120,000
3d. 95,000
Bal. 51,500
Bal. 25,000
Uncoll. Accts. Expense
7. 185
Bal. 185
7-153
PROBLEM 7-21B (cont.)
c.
Diamond Supply Company
Financial Statements
For the Year Ended 2016
Income Statement
Sales Revenue
$180,000
Cost of Goods Sold
(95,000)
Gross Margin
85,000
Operating Expenses
Credit Card Expense
$ 3,450
Selling & Adm. Expenses
51,500
Uncoll. Accts. Expense
185
Total Operating Expenses
(55,135)
Net Income
$ 29,865
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
50,000
Ending Common Stock
$50,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
29,865
Ending Retained Earnings
29,865
Total Stockholders’ Equity
$79,865
7-154
PROBLEM 7-21B c. (cont.)
Diamond Supply Company
Balance Sheet
As of the End of the Year 2016
Assets
Cash
$51,350
Accounts Receivable
$3,700
Less, Allowance for Doubtful Accounts
(185)
3,515
Merchandise Inventory
25,000
Total Assets
$79,865
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$50,000
Retained Earnings
29,865
Total Stockholders’ Equity
79,865
Total Liabilities and Stockholders’ Equity
$79,865
7-155
PROBLEM 7-21B c. (cont.)
Diamond Supply Company
Statement of Cash Flows
For the Year Ended 2016
Cash Flows From Operating Activities:
Inflow from Customers1
$172,850
Outflow for Inventory
(120,000)
Outflow for Expenses
(51,500)
Net Cash Flow from Operating Activities
$ 1,350
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Outflow from Stock Issued
$ 50,000
Net Cash Flow from Financing Activities
50,000
Net Change in Cash
51,350
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$51,350
1Cash Sales $50,000
Collection of Accounts Receivable 11,300
Cash from Credit Card Sales 111,550
Inflow from Customers $172,850
