9–110
EXERCISE 9-13B a.
Ritter Co.
General Journal for 2016
Event
Account Titles
Debit
Credit
1.
Cash
40,000
Common Stock
40,000
2.
Merchandise Inventory
128,000
Accounts Payable
128,000
3a.
Cash
210,000
Sales Revenue
200,000
Sales Tax Payable ($200,000 x 5%)
10,000
3b.
Cost of Goods Sold
110,000
Merchandise Inventory
110,000
4.
Cash
40,000
Notes Payable
40,000
5.
Accounts Payable
128,000
Cash
128,000
6.
Sales Tax Payable ($160,000 x 5%)
8,000
Cash
8,000
7.
Salaries Expense
45,000
Employee Income Tax Payable
5,600
FICA – Social Security Tax Pay.1
2,700
FICA – Medicare Tax Payable2
675
Cash
36,025
8.
Warranties Payable
3,200
Cash
3,200
9.
Operating Expenses
24,000
Cash
24,000
9–111
EXERCISE 9-13B a. (cont.)
Ritter Co.
General Journal for 2016
Event
Account Titles
Debit
10.
Dividends
5,000
Cash
11.
Warranty Expense ($200,000 x 3%)
6,000
Warranties Payable
12.
Interest Expense ($40,000 x 6% x 3/12)
600
Interest Payable
13.
Payroll Tax Expense
3,795
FICA Tax – Soc. Security Tax Payable1
FICA Tax – Med. Tax Payable2
Federal Unemploy. Tax Payable3
State Unemployment Tax Payable4
9–112
EXERCISE 9-13B (cont.)
b.
Ritter Co.
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Accounts Payable
Common Stock
1. 40,000
5. 128,000
5. 128,000
2. 128,000
1. 40,000
3a.210,000
6. 8,000
Bal. -0-
Bal. 40,000
4. 40,000
7. 36,025
8. 3,200
Employ. Inc. Tax
Payable
Dividends
9. 24,000
7. 5,600
10. 5,000
10. 5,000
Bal. 5,600
Bal. 5,000
Bal. 85,775
FICA − SS Tax Payable
7. 2,700
Sales Revenue
Merchandise Inventory
13. 2,700
3a. 200,000
2. 128,000
3b. 110,000
Bal. 5,400
Bal.200,000
Bal. 18,000
FICA − Med. Tax
Payable
7. 675
Cost of Goods Sold
13. 675
3b. 110,000
Bal. 1,350
Bal. 110,000
Fed. Unemp. Tax
Payable
Operating Expenses
13. 42
9. 24,000
Bal. 42
Bal. 24,000
State Unemp. Tax
Payable
Payroll Tax Expense
13. 378
13. 3,795
Bal. 378
Bal. 3,795
9–113
Sales Tax Payable
Salaries Expense
6. 8,000
3a. 10,000
7. 45,000
Bal. 2,000
Bal. 45,000
Warranties Payable
Warranty Expense
8. 3,200
11. 6,000
11. 6,000
Bal. 2,800
Bal. 6,000
9–114
EXERCISE 9-13B b. (cont.)
Ritter Co.
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Interest Payable
Interest Expense
12. 600
12. 600
Bal. 600
Bal. 600
Notes Payable
4. 40,000
Bal. 40,000
EXERCISE 9-13B (cont.)
c.
Ritter Co.
Income Statement
For the Year Ended December 31, 2016
Sales Revenue
$200,000
Cost of Goods Sold
(110,000)
Gross Margin
90,000
Expenses
Operating Expenses
$24,000
Payroll Tax Expense
3,795
Salaries Expense
45,000
Warranty Expense
6,000
Total Operating Expenses
(78,795)
Operating Income
11,205
Interest Expense
(600)
Net Income
$10,605
Beginning Common Stock
Add: Common Stock Issued
Ending Common Stock
Beginning Retained Earnings
Add: Net Income
Less: Dividends
Ending Retained Earnings
9–116
9–117
EXERCISE 9-13B c. (cont.)
Ritter Co.
Balance Sheet
As of December 31, 2016
Assets
Cash
$ 85,775
Merchandise Inventory
18,000
Total Assets
$103,775
Liabilities
Employee Income Tax Payable
$5,600
FICA – Social Security Tax Payable
5,400
FICA – Medicare Tax Payable
1,350
Federal Unemployment Tax Payable
42
State Unemployment Tax Payable
378
Sales Tax Payable
2,000
Warranties Payable
2,800
Interest Payable
600
Notes Payable
40,000
Total Liabilities
58,170
Stockholders’ Equity
Common Stock
$40,000
Retained Earnings
5,605
Total Stockholders’ Equity
45,605
Total Liabilities and Stockholders’ Equity
$103,775
9–118
EXERCISE 9-13B c. (cont.)
Ritter Co.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Inflow from Customers
$200,000
Inflow from Sales Tax
10,000
Outflow to Purchase Inventory
(128,000)
Outflow for Expenses1
(63,225)
Outflow for Sales Tax
(8,000)
Net Cash Flow from Operating Activities
$10,775
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
$40,000
Inflow from Loan
40,000
Outflow for Dividends
(5,000)
Net Cash Flow from Financing Activities
75,000
Net Change in Cash
85,775
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$85,775
1. $36,025 + $3,200 + $24,000 = $63,225
9–119
EXERCISE 9-14B
Latimer Co.
Classified Balance Sheet
As of December 31, 2016
Assets
Current Assets
Cash
$29,650
Accounts Receivable
36,200
Merchandise Inventory
38,300
Prepaid Insurance
3,600
Total Current Assets
$ 107,750
Property, Plant and Equipment
Office Equipment
36,400
Total Property, Plant and Equipment
36,400
Total Assets
$ 144,150
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$ 12,400
Long-Term Liabilities
Long-Term Notes Payable
45,500
Total Liabilities
57,900
Stockholders’ Equity
Common Stock
$50,000
Retained Earnings
36,250
Total Stockholders’ Equity
86,250
Total Liabilities and Stockholders’ Equity
$144,150
9–120
EXERCISE 9-15B
a. Augusta: 1.61 to 1 ($45,000 ÷ $28,000)
Reno: 1.33 to 1 ($72,000 ÷ $54,000)
EXERCISE 9-16B (Appendix)
9–122
EXERCISE 9-16B (cont.)
d.
Miller General Journal
Date
Account Titles
Debit
Credit
2016
3/1/16
Cash
70,400
Discount on Notes Payable
9,600
Notes Payable
80,000
12/31/16
Interest Expense
8,000
Discount on Notes Payable
8,000
2017
2/28/17
Interest Expense
1,600
Discount on Notes Payable
1,600
2/28/17
Notes Payable
80,000
Cash
80,000
9–123
EXERCISE 9-17B (Appendix)
a.
Balance Sheet
Income Statement
Statement of
Event
Assets
=
Liabilities
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
=
Notes Pay.
−
Disc. On NP
+
Ret. Ear.
1.
55,200
=
60,000
−
4,800
+
NA
NA
−
NA
=
NA
55,200 FA
Balance Sheet
Income Statement
Statement of
Event
Assets
=
Liabilities
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
=
Notes Pay.
+
Int. Pay.
+
Ret. Ear.
2.
60,000
=
60,000
+
NA
+
NA
NA
−
NA
=
NA
60,000 FA
b. Discount Note: $60,000 x 8% = $4,800
Interest-bearing Note: $60,000 x 8% = $4,800
9–124
EXERCISE 9-18B (Appendix)
Bricca Co.
General Journal
Date
Account Titles
Debit
Credit
a.
6/1/16
Cash1
56,400
Discount on Notes Payable
3,600
Notes Payable
60,000
b.
12/31/16
Interest Expense2
2,100
Discount on Notes Payable
2,100
c.
5/31/17
Interest Expense3
1,500
Discount on Notes Payable
1,500
5/31/17
Notes Payable
60,000
Cash
60,000
PROBLEM 9-19B
Note: The accounting equation is not required.
Ingals Co.
Effect of Events on the General Ledger
2016 and 2017
Assets
=
Liabilities
+
Stockholders’
Equity
Event
Cash
Accts.
Rec.
=
Notes
Pay.
Int.
Pay.
+
Com.
Stock
Retained
Earnings
Acct.
Title/RE
2016
1.
10,000
10,000
2.
20,000
20,000
3.
54,000
54,000
Rev.
4.
46,000
(46,000)
5.
(27,000)
(27,000)
Sal. Exp.
6.
1,2001
(1,200)
Int. Exp.
Bal.
49,000
8,000
=
20,000
1,200
+
10,000-
25,800
2017
B. Bal.
39,000
8,000
=
20,000
1,200
+
-0-
25,800
1.
65,000
65,000
Rev.
2.
63,000
(63,000)
3.
(36,000)
(36,000)
Sal. Exp.
4.
4002
(400)
Int. Exp.
5.
(21,600)
(20,000)
(1,600)
Bal.
54,400
10,000
=
-0-
-0-
+
10,000
54,400
1$20,000 x 8% x 9/12 = $1,200
PROBLEM 9-20B
a.
Barclay Co.
General Journal for 2016
Event
Account Title
Debit
Credit
1.
Cash
50,000
Notes Payable
50,000
2.
Cash ($140,000 x 1.06)
148,400
Sales Revenue
140,000
Sales Tax Payable
8,400
3.
Operating Expenses
84,000
Cash
84,000
4.
Sales Tax Payable ($110,000 x 6%)
6,600
Cash
6,600
5.
Interest Expense1
1,875
Interest Payable
1,875
Barclay Co.
9–127
Bal. 50,000
Bal. 1,875
9–128
PROBLEM 9-20B (cont.)
c.
Barclay Co.
Income Statement
For the Year Ended December 31, 2016
Service Revenue
$140,000
Expenses
Operating Expenses
$84,000
Total Operating Expenses
(84,000)
Operating Income
56,000
Interest Expense
(1,875)
Net Income
$54,125
Barclay Co.
Statement of Changes of Stockholders’ Equity
For the Year Ended December 31, 2016
Common Stock
$ -0-
Beginning Retained Earnings
$ -0-
Add: Net Income
54,125
Ending Retained Earnings
54,125
Total Stockholders’ Equity
$54,125
PROBLEM 9-20B c. (cont.)
Barclay Co.
Balance Sheet
As of December 31, 2017
Assets
Cash
$107,800
Total Assets
$107,800
Liabilities
Sales Tax Payable
$ 1,800
Interest Payable
1,875
Notes Payable
50,000
Total Liabilities
53,675
Stockholders’ Equity
Retained Earnings
$54,125
Total Stockholders’ Equity
54,125
Total Liabilities and Stockholders’ Equity
$107,800
Cash Flows From Operating Activities:
Inflow from Customers
$140,000
Inflow from Sales Tax
Outflow for Expenses
Outflow for Sales Tax
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Loan
Net Cash Flow from Financing Activities
Net Change in Cash