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7-156
PROBLEM 7-22B
a.
Cheng Company
General Journal, 2016
Date
Account Titles
Debit
Credit
1.
Cash
60,000
Common Stock
60,000
2.
Accounts Receivable
94,000
Service Revenue
94,000
3.
Cash
84,500
Accounts Receivable
84,500
4.
Notes Receivable
10,000
Cash
10,000
5.
Salaries Expense
41,000
Cash
41,000
6.
Dividends
3,000
Cash
3,000
7.
Interest Receivable*
150
Interest Revenue
150
8.
Uncollectible Accounts Expense
990
Accounts Receivable
990
7-157
PROBLEM 7-22B b. (cont.)
Cheng Co.
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Common Stock
1. 60,000
1. 60,000
3. 84,500
4. 10,000
Bal. 60,000
5. 41,000
6. 3,000
Dividends
Bal. 90,500
6. 3,000
Bal. 3,000
Accounts Receivable
2. 94,000
3. 84,500
Service Revenue
8. 990
2. 94,000
Bal. 8,510
Bal. 94,000
Notes Receivable
Salaries Expense
4. 10,000
5. 41,000
Bal. 10,000
Bal. 41,000
Interest Receivable
Uncollectible Accts. Expense
7. 150
8. 990
Bal. 150
Bal. 990
Interest Revenue
7. 150
Bal. 150
7-158
PROBLEM 7-22B (cont.)
c.
Cheng Co.
Financial Statements
For the Year Ended 2016
Income Statement
Service Revenue
$94,000
Operating Expenses
Salaries Expense
$41,000
Uncoll. Accounts Expense
990
Total Operating Expenses
(41,990)
Net Operating Income
52,010
Non-Operating Items
Interest Revenue
150
Net Income
$52,160
7-159
PROBLEM 7-22B c. (cont.)
Cheng Co.
Balance Sheet
As of the End of the Year 2016
Assets
Cash
$ 90,500
Accounts Receivable
8,510
Notes Receivable
10,000
Interest Receivable
150
Total Assets
$109,160
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$60,000
Retained Earnings
49,160
Total Stockholders’ Equity
109,160
Total Liabilities and Stockholders’ Equity
$109,160
7-160
PROBLEM 7-22B c. (cont.)
Cheng Co.
Statement of Cash Flows
For the Year Ended 2016
Cash Flows From Operating Activities:
Inflow from Customers
$ 84,500
Outflow for Expenses
(41,000)
Net Cash Flow from Operating Activities
$43,500
Cash Flows From Investing Activities:
Outflow for Note Receivable
(10,000)
Cash Flows From Financing Activities:
Inflow from Stock Issued
$60,000
Outflow for Dividends
(3,000)
Net Cash Flow from Financing Activities
57,000
Net Change in Cash
90,500
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$90,500
7-161
PROBLEM 7-22B (cont.)
d.
Cheng Co. Horizontal Statement Model
Balance Sheet
Income Statement
Statement of
Event
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Cash
+
Accts.
Rec.
+
Notes
Rec.
+
Int.
Rec.
=
Com.
Stock
+
Ret.
Earn.
1.
60,000
60,000
60,000 FA
2.
94,000
94,000
94,000
94,000
NA
3.
84,500
(84,500)
84,500 OA
4.
(10,000)
10,000
(10,000) IA
5.
(41,000)
(41,000)
41,000
(41,000)
(41,000) OA
6.
(3,000)
(3,000)
(3,000) FA
7.
150
150
150
150
NA
8.
(990)
(990)
990
(990)
NA
Tot.
90,500
+
8,510
+
10,000
+
150
=
60,000
+
49,160
94,150
−
41,990
=
52,160
90,500 NC
7-162
PROBLEM 7-23B
Event
Type of
Event
Assets
Liabilities
Common
Stock
Retained
Earnings
Net
Income
Statement
of Cash
Flows
a1.*
AS
+
NA
NA
+
+
NA
a2.*
AU
−
NA
NA
−
−
NA
b.
AE
+−
NA
NA
NA
NA
+
c.
AU
−
−
NA
NA
NA
−
d.
AE
+−
NA
NA
NA
NA
+
e.
AE
+/−
NA
NA
NA
NA
−
f.
AU
−
−
NA
NA
NA
−
g.
AS
+
NA
NA
+
+
NA
h.
AS
+
NA
NA
+
+
+
i.
AU
−
NA
NA
−
−
−
j.
AS
+
NA
NA
+
+
NA
k.
AU
−
NA
NA
−
−
NA
l.
AE
+−
NA
NA
NA
NA
+
m.
AS
+
NA
NA
+
+
+
n.
AE
+−
NA
NA
NA
NA
−
o.
AU
−
NA
NA
−
−
−
7-163
PROBLEM 7-24B
Trias Company
Income Statement
For the Year Ended December 31, 2016
Sales Revenue
$350,000
Cost of Goods Sold
(225,000)
Gross Margin
125,000
Operating Expenses
Operating Expenses
$45,000
Salaries Expenses
61,200
Uncollectible Accounts Expense
9,600
Total Operating Expenses
(115,800)
Operating Income
9,200
Non-Operating Items
Interest Revenue
12,000
Net Income
$ 21,200
7-164
PROBLEM 7-24B (cont.)
Trias Company
Balance Sheet
As of December 31, 2016
Assets
Assets
Cash
$ 16,700
Accounts Receivable
$92,000
Less: Allow. for Doubtful Accounts
(6,500)
85,500
Inventory
105,000
Interest Receivable
2,100
Prepaid Rent
16,000
Supplies
4,500
Notes Receivable
15,000
Land
45,000
Total Assets
$289,800
Liabilities and Stockholders’ Equity
Liabilities
Accounts Payable
$ 48,000
Unearned Revenue
40,000
Salaries Payable
10,500
Total Liabilities
$ 98,500
Stockholders’ Equity
Common Stock
$ 60,000
Retained Earnings
131,300*
Total Stockholders’ Equity
191,300
Total Liabilities and Stockholders’ Equity
$289,800
*Must be computed: $120,100, Beg. Retained Earnings + $21,200, Net Income −
$10,000, Dividends = $131,300
PROBLEM 7-25B
T-Accounts provided for the use of the instructor.
Accounts Receivable
Bal. 36,000
Chg. Sales 160,000
Write-Offs 1,200
Coll 162,800
End. Bal. 32,000
7-166
PROBLEM 7-26B
Village Cycle Sales & Service
General Journal
Date
Account Titles
Debit
Credit
1.
Merchandise Inventory
260,000
Accounts Payable
260,000
2a.
Accounts Receivable
340,000
Sales Revenue
340,000
2b.
Cost of Goods Sold
243,000
Merchandise Inventory
243,000
3.
Cash
80,000
Service Revenue
80,000
4a.
Accounts Receivable - Credit Card Co.
57,000
Credit Card Expense ($60,000 x 5%)
3,000
Sales Revenue
60,000
4b.
Cost of Goods Sold
41,250
Merchandise Inventory
41,250
5.
Cash
348,000
Accounts Receivable
348,000
6.
Accounts Payable
265,000
Cash
265,000
7.
Selling and Administrative Expenses
115,000
Cash
115,000
8.
Cash
57,000
Accounts Receivable - Cr. Card Co.
57,000
9.
Notes Receivable
50,000
Cash
50,000
10.
Allowance for Doubtful Accounts
830
Accounts Receivable
830
7-167
PROBLEM 7-26B (cont.)
Village Cycle Sales & Service
General Journal
Date
Account Titles
Debit
Credit
Adjusting Entries
11a.
Interest Receivable1
1,125
Interest Revenue
1,125
11b.
Uncollectible Accounts Expense2
1,700
Allowance for Doubtful Accounts
1,700
1$50,000 x 9% = $4,500; $4,500 x 3/12 = $1,125
2$340,000 x .5% = $1,700
7-168
PROBLEM 7-26B (cont.)
Village Cycle Sales & Service
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
Bal. 46,200
Bal. 28,000
Bal. 80,000
3. 80,000
6. 265,000
6. 265,000
1. 260,000
5. 348,000
7. 115,000
Bal. 23,000
Retained Earnings
8. 57,000
9. 50,000
Bal. 43,750
Bal. 101,200
Bal. 43,750
Sales Revenue
Accounts Receivable
2a. 340,000
Bal. 21,300
4a. 60,000
2a. 340,000
5. 348,000
Bal. 400,000
10. 830
Bal. 12,470
Service Revenue
3. 80,000
Accounts Receivable-CC
Bal. 80,000
4a. 57,000
8. 57,000
Bal. -0-
Cost of Goods Sold
2b. 243,000
Allow. For Doubt. Accts
4b. 41,250
Bal. 1,350
Bal. 284,250
10. 830
11b. 1,700
Bal. 2,220
Credit Card Expense
4a. 3,000
Merchandise Inventory
Bal. 3,000
Bal. 85,600
2b. 243,000
1. 260,000
4b. 41,250
Selling & Adm. Exp.
Bal. 61,350
7. 115,000
Bal. 115,000
Interest Receivable
11a. 1,125
Uncollectible Accts. Exp.
Bal. 1,125
11b. 1,700
Bal. 1,700
Notes Receivable
9. 50,000
Interest Revenue
Bal. 50,000
11a. 1,125
Bal. 1,125
7-1
PROBLEM 7-26B (cont.)
Village Cycle Sales and Service
Financial Statements
For the Year Ended December 31, 2017
Income Statement
Revenue
Sales Revenue
$400,000
Service Revenue
80,000
Total Revenue
$480,000
Cost of Goods Sold
(284,250)
Gross Margin
195,750
Expenses
Credit Card Expense
$ 3,000
Selling & Adm. Expenses
115,000
Uncollectible Accts. Exp.
1,700
Total Operating Expenses
(119,700)
Operating Income
76,050
Non-Operating Items
Interest Revenue
1,125
Net Income
$ 77,175
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$80,000
Plus: Stock Issued
-0-
Ending Common Stock
$ 80,000
Beginning Retained Earnings
$43,750
Plus: Net Income
77,175
Ending Retained Earnings
120,925
Total Stockholders’ Equity
$200,925
7-2
PROBLEM 7-26B (cont.)
Village Cycle Sales and Service
Balance Sheet
As of December 31, 2017
Assets
Cash
$101,200
Accounts Receivable
$12,470
Less: Allow. for Doubtful Accts.
(2,220)
10,250
Merchandise Inventory
61,350
Interest Receivable
1,125
Notes Receivable
50,000
Total Assets
$223,925
Liabilities
Accounts Payable
$ 23,000
Total Liabilities
$ 23,000
Stockholders’ Equity
Common Stock
$ 80,000
Retained Earnings
120,925
Total Stockholders’ Equity
200,925
Total Liab. and Stockholders’ Equity
$223,925
7-3
PROBLEM 7-26B (cont.)
Village Cycle Sales and Service
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows From Operating Activities:
Cash Receipts from Revenue*
$485,000
Cash Payment for Accounts Pay. (Inv.)
(265,000)
Cash Payments for Expenses
(115,000)
Net Cash Flow from Operating Activities
$105,000
Cash Flows From Investing Activities:
Cash Outflow for Notes Receivable
$ (50,000)
Net Cash Flow from Investing Activities
(50,000)
Cash Flows From Financing Activities
-0-
Net Change in Cash
55,000
Plus: Beginning Cash Balance
46,200
Ending Cash Balance
$101,200
