9-56
Bal. 50,000
Bal. 2,250
9-57
PROBLEM 9-20A (cont.)
c.
Walnut Enterprises
Income Statement
For the Year Ended December 31, 2016
Service Revenue
$130,000
Expenses
Operating Expenses
$62,000
Total Operating Expenses
(62,000)
Operating Income
68,000
Interest Expense
(2,250)
Net Income
$65,750
Walnut Enterprises
Statement of Changes of Stockholders’ Equity
For the Year Ended December 31, 2016
Common Stock
$ -0-
Beginning Retained Earnings
$ -0-
Add: Net Income
65,750
Ending Retained Earnings
65,750
Total Stockholders’ Equity
$65,750
PROBLEM 9-20A c. (cont.)
Walnut Enterprises
Balance Sheet
As of December 31, 2016
Assets
Cash
$119,200
Total Assets
$119,200
Liabilities
Sales Tax Payable
$ 1,200
Interest Payable
2,250
Notes Payable
50,000
Total Liabilities
53,450
Stockholders’ Equity
Retained Earnings
$65,750
Total Stockholders’ Equity
65,750
Total Liabilities and Stockholders’ Equity
$119,200
9-59
Ending Cash Balance
$119,200
9-60
PROBLEM 9-20A (cont.)
d.
Walnut Enterprises
General Journal for 2016
Event
Account Title
Debit
Credit
Closing Entries
cl
Service Revenue
130,000
Retained Earnings
130,000
cl
Retained Earnings
64,250
Operating Expenses
62,000
Interest Expense
2,250
Walnut Enterprises
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Sales Tax Payable
Retained Earnings
Bal.119,200
Bal. 1,200
cl 64,250
cl 130,000
Bal. 65,750
Interest Payable
Bal. 2,250
Service Revenue
cl 130,000
Bal.
130,000
Notes Payable
Bal. -0-
Bal. 50,000
Operating Expenses
Bal. 62,000
cl 62,000
Bal. -0-
Interest Expense
Bal. 2,250
cl 2,250
Bal. -0-
9-61
9-62
PROBLEM 9-20A (cont.)
e.
Walnut Enterprises
Post Closing Trial Balance
As of December 31, 2016
Cash
$119,200
Sales Tax Payable
$ 1,200
Interest Payable
2,250
Notes Payable
50,000
Retained Earnings
65,750
Totals
$119,200
$119,200
9-63
PROBLEM 9-20A (cont.)
f.
Walnut Enterprises
General Journal for 2017
Event
Account Title
Debit
Credit
1.
Sales Tax Payable
1,200
Cash
1,200
2.
Cash ($201,000 x 1.06)
213,060
Sales Revenue
201,000
Sales Tax Payable
12,060
3a.
Interest Expense1
750
Interest Payable
750
3b.
Interest Payable
3,000
Notes Payable
50,000
Cash
53,000
4.
Operating Expenses
102,500
Cash
102,500
5.
Sales Tax Payable ($185,000 x 6%)
11,100
Cash
11,100
9-64
PROBLEM 9-20A f. (cont.)
Walnut Enterprises
T-Accounts for 2017
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Sales Tax Payable
Retained Earnings
Bal.119,200
Bal. 1,200
Bal. 65,750
2. 213,060
1. 1,200
1. 1,200
2. 12,060
3b. 53,000
5. 11,100
Service Revenue
4. 102,500
Bal. 960
2. 201,000
5. 11,100
Bal.201,000
Bal.164,460
Interest Payable
Bal. 2,250
Operating Expenses
3b. 3,000
3a. 750
4. 102,500
Bal. -0-
Bal.102,500
Notes Payable
Interest Expense
Bal. 50,000
3a. 750
3b. 50,000
Bal. 750
Bal. -0-
9-65
PROBLEM 9-20A (cont.)
f.
Walnut Enterprises
Income Statement
For the Year Ended December 31, 2017
Service Revenue
$201,000
Expenses
Operating Expenses
$102,500
Total Operating Expenses
(102,500)
Operating Income
98,500
Interest Expense
(750)
Net Income
$97,750
Walnut Enterprises
Statement of Changes of Stockholders’ Equity
For the Year Ended December 31, 2017
Common Stock
$ -0-
Beginning Retained Earnings
$65,750
Add: Net Income
97,750
Ending Retained Earnings
163,500
Total Stockholders’ Equity
$163,500
PROBLEM 9-20A f. (cont.)
Walnut Enterprises
Balance Sheet
As of December 31, 2017
Assets
Cash
$164,460
Total Assets
$164,460
Liabilities
Sales Tax Payable
$ 960
Total Liabilities
960
Stockholders’ Equity
Retained Earnings
$163,500
Total Stockholders’ Equity
163,500
Total Liabilities and Stockholders’ Equity
$164,460
Cash Flows From Operating Activities:
Inflow from Customers
$201,000
Inflow from Sales Tax
Outflow for Expenses
Outflow for Sales Tax
Outflow for Interest
Net Cash Flow from Operating Activities
Cash Flows From Investing Activities
Outflow Loan
Net Cash Flow from Investing Activities
Cash Flows From Financing Activities
Net Change in Cash
Plus: Beginning Cash Balance
119,200
9-67
9-68
PROBLEM 9-20A (cont.)
f.
Walnut Enterprises
General Journal for 2017
Event
Account Title
Debit
Credit
Closing Entries
cl
Service Revenue
201,000
Retained Earnings
201,000
cl
Retained Earnings
103,250
Operating Expense
102,500
Interest Expense
750
Walnut Enterprises
T-Accounts for 2017
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Sales Tax Payable
Retained Earnings
Bal.164,460
Bal. 960
Bal. 65,750
cl 103,250
cl 201,000
Bal.
163,500
Service Revenue
cl 201,000
Bal.
201,000
Bal. -0-
Operating Expenses
Bal.102,500
cl 102,500
Bal. -0-
Interest Expense
Bal. 750
cl 750
9-69
Bal. -0-
9-70
PROBLEM 9-20A (cont.)
f.
Walnut Enterprises
Post Closing Trial Balance
As of Ended December 31, 2017
Cash
$164,460
Sales Tax Payable
$ 960
Retained Earnings
163,500
Totals
$164,460
$164,460
9-71
PROBLEM 9-21A
1. vacation pay
2. sick leave
3. warranty liability
4. legal judgments for a specific amount
These types of liabilities are recorded as liabilities and shown on the
1. legal challenges
2. environmental damages
3. government investigations
1. frivolous lawsuits
2. unfounded assessments by government agencies
3. potential storm damage
PROBLEM 9-22A
a. (1) Cash paid for interest: $70,000 x 6% x 4/12 = $1,400
(3) Warranty Expense: $240,000 x 1% = $2,400
b.
Interest Payable
Sales Tax Payable
6.1 200
4.3 14,700
2.2 16,800
Bal. 200
Bal. 2,100
Bal. 300
Bal. 20,000
Interest Payable
Sales Tax Payable
Warranty Payable
Notes Payable
Total Current Liabilities
9-73
PROBLEM 9-22A (cont.)
c.
Event
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
1.
+
+
NA
NA
NA
NA
+ FA
2.
+
+
+
+
NA
+
+ OA
3.
NA
+
−
NA
+
−
NA
4.
−
−
NA
NA
NA
NA
− OA
5.
−
−
−
NA
+
−
− OA
− FA
6.
+
+
NA
NA
NA
NA
+ FA
7.
−
−
NA
NA
NA
NA
− OA
8.
NA
NA
NA
NA
NA
NA
NA