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9-74
PROBLEM 9-23A
Electronics Services Co.
General Journal
Date
Account Title
Debit
Credit
a. 12/31
Administrative Salaries Expense
96,000
Sales Salaries Expense
57,000
Office Salaries Expense
38,000
Employee Fed. Income Tax Payable
21,500
Employee State Income Tax Pay.
11,200
FICA Tax Payable – Soc. Sec.1
10,770
FICA Tax Payable – Medicare2
2,865
Employee Savings Plan
4,000
Cash
140,665
b. 12/31
Payroll Tax Expense
13,635
FICA Tax Payable – Soc. Sec.
10,770
FICA Tax Payable – Medicare
2,865
1$96,000 − $11,500 + $57,000 + $38,000 = $179,500; $179,500x 6% = $10,770
2$96,000 + $57,000 + $38,000 = $191,000; $191,000 x 1.5% = $2,865
PROBLEM 9-24A
a.
Computation of Gross Earnings
Employee
Hours
Worked
x
Wage Rate
per Hour
=
Gross Pay
Kayla
Reg. 40
28.00
$1,120.00
OT 12
42.00
504.00
Total
52
$1,624.00
9-76
PROBLEM 9-24A (cont.)
c.
Webber Packing Company
General Journal Entries
Date
Account Titles
Debit
Credit
Jan.
Salaries Expense ($1,624 + $1,600)
3,224.00
Income Tax Payable ($243.60 + $288)
531.60
FICA Tax − SS Payable ($97.44 + $96)
193.44
FICA Tax − Med. Payable ($24.36 + $24.00)
48.36
Cash
2,450.60
d.
Webber Packing Company
General Journal Entries
Date
Account Titles
Debit
Credit
Jan.
Payroll Tax Expense
435.24
FICA Tax − SS Payable ($3,224 x 6%)
193.44
FICA Tax − Med. Payable ($3,224 x 1.5%)
48.36
Fed. Unemp. Tax Expense ($3,224 x .6%)
19.34
State Unemp. Tax Expense ($3,224 x 5.4%)
174.10
Jan.
Vacation Pay Expense1
116.00
Employee Medical Insurance Expense
130.00
Employee Pension Expense
150.00
Vacation Pay Payable
116.00
Employee Medical Insurance Payable
130.00
Employee Pension Payable
150.00
1$28 x 2 = $56; $56 + $60 = $116
e.
Total Compensation:
Salaries Expense
$3,224.00
Payroll Tax Expense
435.24
Vacation Pay, Medical Insurance, and Pension expense
396.00
Total Compensation Expense
$4,055.24
9-77
9-78
PROBLEM 9-25A
Eller Equipment Co.
Income Statement
For the Year Ending December 31, 2016
Sales Revenue
$510,000
Cost of Goods Sold
(310,000)
Gross Margin
200,000
Operating Expenses
Salaries Expense
$72,000
Operating Expenses
96,000
Warranty Expense
9,600
Uncollectible Accounts Expense
7,150
Depreciation Expense
1,000
Total Operating Expenses
(185,750)
Operating Income
14,250
Non-Operating Items
Interest Revenue
3,600
Interest Expense
(8,600)
Gain on Sale of Equipment
8,500
Total Non-Operating Items
3,500
Net Income
$ 17,750
9-79
PROBLEM 9-25A (cont.)
Eller Equipment Co.
Balance Sheet
As of December 31, 2016
Assets
Current Assets
Cash
$ 26,300
Accounts Receivable
$56,000
Less: Allow. for Doubtful
Accounts
(6,500)
49,500
Merchandise Inventory
110,500
Interest Receivable
600
Prepaid Rent
14,000
Supplies
1,800
Notes Receivable
10,000
Total Current Assets
$212,700
Property, Plant and Equipment
Equipment
97,500
Less: Accumulated Depreciation
(42,300)
55,200
Land
70,000
Total Property, Plant and
Equipment
125,200
Total Assets
$337,900
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$ 32,000
Unearned Revenue
26,300
Warranties Payable
2,500
Interest Payable
1,500
Salaries Payable
5,200
Total Current Liabilities
$ 67,500
Long-Term Liabilities
Notes Payable
80,000
Total Long-Term Liabilities
80,000
Total Liabilities
147,500
9-80
Stockholders’ Equity
Common Stock
50,000
Retained Earnings
140,400*
Total Stockholders’ Equity
190,400
Total Liabilities and Stockholders’
Equity
$337,900
*Must be computed: $134,150, Beg. Retained Earnings + $17,750, Net
Income − $11,500, Dividends= $140,400, Ending Retained Earnings
9-81
PROBLEM 9-26A
a. Current Assets Charles James
Cash $15,000 $ 25,000
Merchandise inventory 30,000 55,000
Accounts receivable 35,000 30,000
9-82
PROBLEM 9-27A (Appendix)
a.
Terry Company
Effect of Transactions on Financial Statements
No.
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
2016
1
+
+
NA
NA
NA
NA
+ FA
2.
+
NA
+
+
NA
+
+ OA
3.
−
NA
−
NA
+
−
− OA
4.
NA
+
−
NA
+
−
NA
2017
1.
+
NA
+
+
NA
+
+ OA
2.
−
NA
−
NA
+
−
− OA
3a.
NA
+
−
NA
+
−
NA
3b.
−
−
NA
NA
NA
NA
−
OA,FA
9-83
PROBLEM 9-27A (cont.) (Appendix)
b.
Terry Company
General Journal 2016 and 2017
Date
Account Titles
Debit
Credit
2016
1.
Cash
110,400
Discount on Notes Payable1
9,600
Notes Payable
120,000
2.
Cash
310,000
Service Revenue
310,000
3.
Operating Expenses
145,000
Cash
145,000
4.
Interest Expense2
4,800
Discount on Notes Payable
4,800
Closing Entries
cl.
Service Revenue
310,000
Retained Earnings
310,000
cl.
Retained Earnings
149,800
Operating Expenses
145,000
Interest Expense
4,800
2017
1.
Cash
346,000
Service Revenue
346,000
2.
Operating Expenses
178,000
Cash
178,000
3a.
Interest Expense3
4,800
Discount on Notes Payable
4,800
3b.
Notes Payable
120,000
Cash
120,000
1$120,000 x 8% = $9,600
9-84
2$9,600 x 6/12 = $4,800
9-85
PROBLEM 9-27A b. (cont.) (Appendix)
Terry Company
General Journal 2016 and 2017
Date
Account Titles
Debit
Credit
2017
Closing Entries
cl
Service Revenue
346,000
Retained Earnings
346,000
cl
Retained Earnings
182,800
Operating Expenses
178,000
Interest Expense
4,800
9-86
PROBLEM 9-27A b. (cont.) (Appendix)
Terry Company
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Notes Payable
Retained Earnings
2016
2016
2016
1. 110,400
3. 145,000
1. 120,000
cl 149,800
cl 310,000
2. 310,000
Bal. 120,000
Bal. 160,200
Bal. 275,400
2017
2017
2017
3b. 120,000
cl 182,800
cl 346,000
1. 346,000
2. 178,000
Bal. -0-
Bal. 323,400
3b. 120,000
Bal. 323,400
Discount on Notes Pay.
Service Revenue
2016
2016
1. 9,600
4. 4,800
cl 310,000
2. 310,000
Bal. 4,800
Bal. -0-
2017
2017
3a. 4,800
cl 346,000
1. 346,000
Bal. -0-
Bal. -0-
Operating Expenses
2016
3. 145,000
cl 145,000
Bal. -0-
2017
2. 178,000
cl 178,000
Bal. -0-
Interest Expense
2016
4. 4,800
cl 4,800
Bal. -0-
2017
3a. 4,800
cl 4,800
Bal. -0-
9-87
9-88
PROBLEM 9-27A (cont.) (Appendix)
c.
Terry Company
Financial Statements
For the Year Ended December 31
Income Statements
2016
2017
Service Revenue
$310,000
$346,000
Expenses
Operating Expenses
145,000
178,000
Interest Expense
4,800
4,800
Total Expenses
(149,800)
(182,800)
Net Income
$160,200
$163,200
Statements of Changes in Stockholders’ Equity
2016
2017
Beginning Common Stock
$ -0-
$ -0-
Plus: Stock Issued
-0-
-0-
Ending Common Stock
-0-
-0-
Beginning Retained Earnings
-0-
160,200
Plus: Net Income
160,200
163,200
Ending Retained Earnings
160,200
323,400
Total Stockholders’ Equity
$160,200
$323,400
9-89
PROBLEM 9-27A c. (cont.) (Appendix)
Terry Company
Balance Sheets
As of December 31
2016
2017
Assets
Cash
$275,400
$323,400
Total Assets
$275,400
$323,400
Liabilities
Notes Payable
$120,000
$ -0-
Less: Discount on Notes Payable
(4,800)
-0-
Total Liabilities
115,200
-0-
Stockholders’ Equity
Common Stock
-0-
-0-
Retained Earnings
160,200
323,400
Total Stockholders’ Equity
160,200
323,400
Total Liabilities and Stockholders’ Equity
$275,400
$323,400
9-134
PROBLEM 9-27A c. (cont.) (Appendix)
Terry Company
Statements of Cash Flows
For the Year Ended December 31
2016
2017
Cash Flows From Operating Activities:
Inflow from Customers
$310,000
$346,000
Outflow for Expenses
(145,000)
(178,000)
Outlfow for Interest
-0-
(9,600)
Net Cash Flow from Operating Activities
165,000
158,400
Cash Flows From Investing Activities
-0-
-0-
Cash Flows From Financing Activities:
Inflow from Loan
110,400
-0-
Outflow Loan
-0-
(110,400)
Net Cash Flow From Financing Activities
110,400
(110,400)
Net Change in Cash
275,400
48,000
Plus: Beginning Cash Balance
-0-
275,400
Ending Cash Balance
$275,400
$323,400
