Fundamentals of Financial Accounting, 5/e 4–51
PB4–1
Req. 1 REGIS CORPORATION
Adjusted Trial Balance
At June 30, 2013
(in millions)
Account Titles
Debit
Credit
Cash
$ 200
Accounts Receivable
70
Inventories
140
Prepaid Rent
80
Equipment
770
Accumulated Depreciation–Equipment
$ 90
Software
240
Accumulated Amortization
20
Accounts Payable
70
Salaries and Wages Payable
140
Notes Payable (short–term)
140
Notes Payable (long–term)
160
Common Stock
350
Retained Earnings
500
Service Revenue
2,040
Salaries and Wages Expense
900
Rent Expense
530
Office Expenses
230
Supplies Expense
230
Depreciation Expense
80
Interest Expense
20
Amortization Expense
10
10
Income Tax Expense
Totals
$ 3,510
$ 3,510
No. The amount to be reported for Retained Earnings on the balance sheet would be
the amount reported on the statement of retained earnings. The $500 in the adjusted
trial balance does not yet include the revenues and expenses for the year ended
June 30, 2013.
Fundamentals of Financial Accounting, 5/e 4–52
PB4–1 (continued)
Req. 2
Service Revenue (−R) ……………………………………………
2,040
Salaries and Wages Expense (−E) …………………..
900
Rent Expense (−E) ……………………………………….
530
Office Expenses (−E) …………………………………….
230
Supplies Expenses (−E) ………………………………..
230
Depreciation Expense (−E) …………………………….
80
Interest Expense (−E) ……………………………………
20
Amortization Expense (−E) …………………………….
10
Income Tax Expense (−E) ……………………………..
10
Retained Earnings (+SE) ……………………………….
30
Req. 3 REGIS CORPORATION
Post–Closing Trial Balance
At June 30, 2013
(in millions)
Account Titles
Debit
Credit
Cash
$ 200
Accounts Receivable
70
Inventories
140
Prepaid Rent
80
Equipment
770
Accumulated Depreciation–Equipment
$ 90
Software
240
Accumulated Amortization
20
Accounts Payable
70
Salaries and Wages Payable
140
Notes Payable (short–term)
140
Notes Payable (long–term)
160
Common Stock
350
Retained Earnings
530
Service Revenue
0
Salaries and Wages Expense
0
Rent Expense
0
Office Expenses
0
Supplies Expense
0
Depreciation Expense
0
Interest Expense
0
Amortization Expense
0
0
Income Tax Expense
Totals
$ 1,500
$ 1,500
PB4–2
Req. 1
Assets
=
Liabilities
+
Stockholders’ Equity
a.
Accounts
Receivable
+2,000
=
Service
Revenue
(+R)
+2,000
b.
Prepaid
Insurance
−1,600
=
Insurance
Expense (+E)
−1,600
c.
=
Salaries and
Wages
Payable
+900
Salaries and
Wages
Expense (+E)
−900
d.
=
Unearned
Revenue
−225
Service
Revenue
(+R)
+225
e.
Accumulated
Depreciation
–Equipment
(+xA)
−1,500
=
Depreciation
Expense (+E)
−1,500
f.
=
Unearned
Revenue
−700
Service
Revenue
(+R)
+700
g.
=
Interest
Payable
+600
Interest
Expense (+E)
−600
h.
=
Income Taxes
Payable
+6,000
*
Income Tax
Expense (+E)
−6,000
*$6,000 = $20,000 x 0.30
Req. 2
a.
Accounts Receivable (+A) …………………………………………..
2,000
Service Revenue (+R, +SE) ……………………………….
2,000
This entry records an asset for the amount due from customers and recognizes revenue
because it was earned during the fiscal year.
b.
Insurance Expense (+E, −SE) …………………………..…………
1,600
Prepaid Insurance (−A) ……………………………………..
1,600
$3,200 x 3/6 months of coverage. This entry reduces the asset (Prepaid Insurance)
because part of it has been used, and the remaining $1,600 represents future benefits
(an asset) to the company.
c.
Salaries and Wages Expense (+E, −SE) ……………………….
900
Salaries and Wages Payable (+L) ……………………….
900
Salaries and Wages Expense is increased (debited), because this expense was
incurred. A liability (Salaries and Wages Payable) is credited, because this amount is
owed to the employees.
PB4–2 (continued)
Req. 2 (continued)
d.
Unearned Revenue (−L) ……………………………………………..
225
Service Revenue (+R, +SE) ……………………………….
225
$450 x 1/2. This entry reduces (debits) the liability for the amount earned and records
the revenue.
e.
Depreciation Expense (+E, −SE) ………………………………….
1,500
Accumulated Depreciation–Equipment (+xA, −A) ….
1,500
To record depreciation for the truck for the year (amount is given).
f.
Unearned Revenue (−L) ……………………………………………..
700
Service Revenue (+R, +SE) …………………………..……
700
To recognize revenue earned during the year, $4,200 ÷ 12 months x 2 months.
g.
Interest Expense (+E, −SE) ………………………………………….
600
Interest Payable (+L) …………………………………………..
600
To accrue interest expense incurred but not paid.
h.
Income Tax Expense (+E, −SE) ……………………………………
6,000
Income Tax Payable (+L) …………………………………….
6,000
To accrue income tax expense incurred but not paid:
Income before income taxes 20,000
Income tax rate x 30%
Income tax expense $ 6,000
PB4–3
Transaction
Assets
Liabilities
Stockholders’ Equity
a.
+2,000
NE
Service Revenue (+R) +2,000
b.
–1,600
NE
Insurance Expense (+E) –1,600
c.
NE
+900
Salaries and Wages Expense (+E) –900
d.
NE
–225
Service Revenue (+R) +225
e.
–1,500
NE
Depreciation Expense (+E) –1,500
f.
NE
–700
Service Revenue (+R) +700
g.
NE
+600
Interest Expense (+E) –600
h.
NE
+6,000
Income Tax Expense (+E) –6,000
Fundamentals of Financial Accounting, 5/e 4–55
PB4–4
Req. 1
LEARN TO PLAY, INC.
Unadjusted Income Statement
For the Year Ended December 31, 2015
Service Revenue
$ 25,500
Salaries and Wages Expense
18,100
Supplies Expense
800
Interest Expense
0
Income Tax Expense
0
Total Expenses
18,900
Net Income
$ 6,600
Req. 2
The pairs of accounts that require adjustment include:
Adj.
Balance sheet account
Related income statement account
Amount
(1)
Supplies
Supplies Expense
-/+ $ 100
(2)
Unearned Revenue
Service Revenue
-/+ 500
(3)
Salaries and Wages Payable
Salaries and Wages Expense
+/+ 100
(4)
Interest Payable
Interest Expense
+/+ 100
(5)
Income Tax Payable
Income Tax Expense
+/+ 2,040
Adj.
Explanation
(1)
Based on supplies count ($300 recorded – $200 on hand = $100 used up).
(2)
$500 was earned in December so that amount is moved into Service Revenue.
(3)
Owe employee $50/day for two days of work ($100 = $50 x 2 days).
(4)
Interest owing on note payable (given).
(5)
Adjusted Income before Tax x Tax Rate =
($26,000 – 18,200 – 900 – 100) x 30% = $2,040
PB4–4 (continued)
Req. 3
a) Supplies Expense (+E, –SE) 100
Supplies (–A) 100
b) Unearned Revenue (–L) 500
Fundamentals of Financial Accounting, 5/e 4–57
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Education.
ANSWERS TO COMPREHENSIVE PROBLEMS
C4–1
Req. 1
1/3 Cash (+A) 10,000
Common Stock (+SE) 10,000
1/4 Equipment (+A) 10,000
Cash (–A) 2,000
Note Payable (long–term) (+L) 8,000
C4–1 (continued)
Req. 2
Cash (A)
Accounts
Receivable (A)
Equipment (A)
0
0
0
10,000
7,500
1,250
2,000
3,140
2,400
10,000
7,500
10,000
11,210
2,500
10,000
Accumulated
Depreciation–
Equipment (xA)
Unearned
Revenue (L)
0
0
100
1,250
100
1,250
0
0
0
800
525
800
525
Req. 3
RunHeavy Corporation
Trial Balance
January 31
Debits Credits
Cash 11,210
Accts Receivable 2,500
Equipment 10,000
Unearned Revenue 1,250
Salaries and Wages
Payable 800
Interest Payable 60
Income Tax Payable 525
Note Payable (long–term) 8,000
Common Stock 10,000
Service Revenue 10,000
Common Stock
0
0
0
8,000
10,000
8,000
10,000
0
0
0
0
10,000
3,140
Req. 3
RunHeavy Corporation
Balance Sheet
January 31
ASSETS
Current Assets
Cash 11,210
Accounts Receivable 2,500
Total Current Assets 13,710
Equipment 10,000
Accumulated Depreciation–Equipment (100)
Equipment, net of Accumulated Depreciation 9,900
TOTAL ASSETS $23,610
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Unearned Revenue $1,250
Salaries and Wages Payable 800
Interest Payable 60
Retained Earnings 2,975
Total Stockholders’ Equity 12,975
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $23,610
RunHeavy Corporation
Income Statement
For the Month Ended January 31
REVENUES
Service Revenue $10,000
Total Revenue 10,000
EXPENSES
Salaries and Wages
Expense 3,200
Travel Expenses 3,140
Depreciation Expense 100
Interest Expense 60
Income Tax Expense 525
Total Expenses 7,025
NET INCOME $2,975
C4–2
Req. 1, 3, 5, and 8 (T–accounts)
Cash (A)
Accounts
Receivable(A)
Supplies (A)
Bal. 3
Bal. 5
Bal. 12
3/1 12
3/2 9
12/8 40
12/10 24
10/5 18
4/3 23
7/4 10
30
12/8 120
11/6 13
12/31(12) 20
12/10 24
12/9 85
Bal. 65
Bal. 21
Bal. 10
Bal. 60
Bal. 6
12/31(13) 6
Bal. 9
Bal. 60
Bal. 12
Bal. 15
Bal. 5
12/31(11) 5
Bal. 25
Bal. 10
Beg. 0
11/6 13
3/1 12
Bal. 12
Bal. 12
Bal. 1
Bal. 8
Bal. 71
Bal. 8
4/3 23
Bal. 94
Bal. 31