Depreciation Expe
…………………………………………….
Equipment
Expense……………………………………………
120,00
0
Accumulated
12,00
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Cash …………………………………………………… € 30,536 €
2,559
Merchandise I
n
ve
n
t
or
y …………………………. 114,249 151,894
Other Current Assets ……………………………
10
9
,
99
2
13
4
, 91
6
Total Current A
ss
et
s
………………………… € 254,777 €
289,369
Property, Plant, and Equipment (Net)……. 98,130 149,990
Other Noncurrent Assets……………………….
5
6
,
45
9
8
8
, 95
5
Total A
ss
et
s
…………………………………….. €
40
9
,36
6
€
52
8
,31
4
3.20 a. continued.
Liabilities and Shareholders’ Equity
Accounts
P
ayab
l
e …………………………………. € 16,402 €
14,063
Notes Payable to
Banks
……………………….. 15,241 43,598
Other Current
Liabilities
………………………
8
4
,
33
4
10
9
, 33
5
Total Current Liabilities…………………… € 115,977 € 166,996
Long-Term
D
ebt …………………………………… 31,566 38,315
Other Noncurrent Liabilities …………………
1
9
,
85
9
2
7
, 94
7
Total Liabilities……………………………….. €
16
7
, 40
2
€
23
3
, 25
8
Common
S
t
ock
…………………………………….. € 72,325 €
72,325
Retained Ea
rnin
g
s
………………………………..
16
9
,
63
9
22
2
, 73
1
Total Shareholders’ Equity………………… €
24
1
, 96
4
€
29
5
, 05
6
Total Liabilities and Shareholders’
Equity………………………………………….. €
40
9
, 36
6 €
52
8
, 31
4
b. CALLEN INCORPORATED
Income Statement
For the Year Ended: Dec.
31, Year 8
S
a
l
e
s
……………………………………………………………………… €
695,623
Cost of Goods
S
o
l
d …………………………………………………..
(382,349) Selling Expe
ns
e
s
…………………………………………………….. (72,453)
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Administrative Expe
ns
e
s
…………………………………………
(141,183) Interest Expense
…………………………………………………….. (2,744) Income
Taxes…………………………………………………………..
(
2
4
, 32
4
)
Net Income …………………………………………………………….. €
7
2
, 57
0
c. Retained Earnings, December 31, Year 7
…………………..
€
222,731
Plus Net Income for Year 8
……………………………………….
72,570
Less Dividends Declared during Year 8
(Plug)
……………
(
12
5
, 66
2
)
Retained Earnings, December 31, Year 8
…………………..
€
16
9
, 63
9
3-13 Solutions
3.21
continued.
3.21 (COC; preparing a balance sheet and an income statement.)
(amounts in millions of US$)
a. China Oil Company
Income
Stat
e
m
en
t
For the Year Ended December 31,
Year 8
Revenues:
Net Operating Revenues
………………………………………
$ 835,037
Interest and Other
Revenues…………………………………
3
,
09
8
Total Revenues
$
Less Expenses:
Cost of Sales
……………………………………………………….
$
(487,112)
Selling Expe
ns
e
s
………………………………………………….
(41,345
)
General and Administrative Expe
ns
e
s
…………………..
(49,324
)
Other Operating Expenses
……………………………………
(64,600
)
Interest Expense
………………………………………………….
(2,869
)
Income
Taxes……………………………………………………….
(
4
9
, 33
1
Total
Expenses…………………………………………………
$
(
69
4
, 58
1
)
Net Income
……………………………………………………………..
$
14
3
, 55
4
Solutions 3-14
b. China Oil Company
Comparative Balance Sheet
Noncurrent
Assets:
Asset
s
Dec 31, Dec.
31, Year 8
Year 7
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
Intangible A
ss
et
s
………………………………….. $ 20,022
$ 16,127
Oil and Gas Properties ………………………….. 326,328
270,496
Property, Plant, and Equipment—Net ……. 247,803 231,590
Other Noncurrent Assets………………………..
16
3
, 71
1
13
2
, 21
4
Total Noncurrent
Assets
……………………. $
75
7
, 86
4 $
65
0
, 42
7
Current Assets:
Inventories …………………………………………… $ 88,467
$ 76,038
Other Current Assets ……………………………. 20,367 13,457
Advances to
Su
pp
liers
…………………………… 20,386 12,664
Accounts Receivable ………………………………
18,419 8,488
Cash …………………………………………………….
8
8
, 58
9
5
4
, 07
0
Total Current A
ss
et
s
…………………………. $
23
6
, 22
8 $
16
4
, 71
7
Total A
ss
et
s
……………………………………… $
99
4
, 09
2 $
81
5
, 14
4
Liabilities and Shareholders’ Equity
Noncurrent Liabilities:
Long-Term
D
ebt ……………………………………. $ 35,305
$ 30,401
Other Noncurrent Liabilities ………………….
4
2
, 06
2
3
6
, 68
3
Total Noncurrent
Li
ab
ili
t
i
e
s
………………. $ 7
7
, 36
7
$ 6
7
, 08
4
Current Liabilities:
Advances from Customers …………………….. $ 12,433
$ 11,590
Other Current
Liabilities
………………………. 84,761 90,939
Accounts Payable to Suppliers………………..
10
4
, 46
0 7
7
, 93
6
Total Current Liabilities …………………… $
20
1
, 65
4 $
18
0
, 46
5
Shareholders’ Equity:
Common
S
t
ock
……………………………………… $ 444,527
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
$ 354,340
Retained Ea
rnin
g
s
…………………………………
27
0
, 54
4
21
3
, 25
5
Total Shareholders’ Equity ………………… $
71
5
, 07
1 $
56
7
, 59
5
Total Liabilities and Shareholders’
Equity…………………………………………… $
99
4
, 09
2 $
81
5
, 14
4
3-15
c. Retained Earnings, December 31, Year 7
…………………………
$
213,255
Plus Net Income for Year Ending December 31, Year
8………
143,554
Subtract Dividends for Year Ending December 31,
Year 8
(
Plu
g) ………………………………………………………………
………..
(
8
6
, 26
5
Retained Earnings, December 31, Year 8
…………………………
$
27
0
, 54
4
3.22 (Moulton Corporation; analysis of transactions and preparation of
income statement and balance sheet.) (amounts in US$)
a. T-accounts.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
(
A)
√ 343,000 √ 0
(4) 1,400,000 950,000 (5) (2) 2,000,000 1,400,000(4)
625,000 (6)
82,400 (7)
√ 85,600 √ 600,000
I
n
v
e
n
t
o r
y
(
A)
P r
e
pa
i
d
I
n
s u r
a
n c
e
(
A)
√ 275,000 √ 12,000
(1) 1,100,000 1,200,000 (3) 12,000 (9)
√ 175,000 √ 0
L
a
n
d
(
A)
B
u
il
d
i
n
g
(
A)
√ 50,000 √ 450,000
√ 50,000 √ 450,000
E
q
u
ip
m
e
n
t
(
A)
A
c
c
u
m
u
l
a
t
ed
De
p
r
e
c
i
a
t
i
on
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
( X A)
√ 80,000 0 √
34,000 (10)
√ 80,000 34,000 √
Solutions 3-16
I
n
t
e
r e s
t
P
ay
a
b
l
e
(
L
)
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
(
L
)
0 √ 0 √
24,000 (8) 41,040
(11)
24,000 √ 41,040
√
L
o
a
n P
aya
b
l
e
(
L
)
C
o
m
m
on S
t
o c k
(
S
E
)
300,000 √ 800,000
√
300,000 √ 800,000 √
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
(
S
E)
S
a
l
e
s
Re
v
e
n u
e
(
S
E)
0 √ (12) 2,000,000 2,000,000(2)
61,560 (12)
61,560
√
Selling a
n
d
C
o
s
t
of
G
oo
d
s
S
o
l
d
(
S
E)
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
(
S E)
(3) 1,200,000 1,200,000(12)
(6) 625
,
000 625,000 (12)
I
n
te
res
t
Exp
e
n
s
e
(
S
E)
I
n
sur
a
nc
e
Exp
e
n
s
e
(
S
E)
(7) 2,400 (9) 12,000 12,000
(12)
(8) 24,000 26,400
(12
)
3-17Solutions
(10) 34,000 = 450,000/25 + 80,000/5.
b. MOULTON CORPORATION
Income Statement
For Year
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
13
Sales
Revenue…………………………………………………………
$
2
, 00
0
, 00
0
Expenses:
Cost of Goods
S
o
l
d
……………………………………………….
$
1,200,000
Selling and Administrative Expenses
……………………
625,000
Insurance……………………………………………………..
……..
12,000
Depreciation…………………………………………………
……..
34,000
Interest ($2,400 +
$24,000)
…………………………………..
2
6
,
40
0
Total
Expenses…………………………………………………
$
1
, 89
7
, 40
0
Net Income before Income
T
ax
es
……………………………….
$ 102,600
Income Tax Expense at 40%
……………………………………..
(
4
1
, 04
0
Net Income
……………………………………………………………..
$ 6
1
, 56
0
c. MOULTON CORPORATION
Comparative Balance
Sheet
Dec.
31,
Year
12
Dec.
31,
Year
13
A
sse
t
s
Cash ……………………………………………..
…….
$ 343,000 $ 85,600
Accounts Receivable
……………………………..
0 600,000
Inventories ……………………………………..
……
275,000 175,000
Prepaid
Insurance…………………………………
1
2
,
00
0
0
Total Current A
ss
et
s
…………………………
$
63
0
, 00
0
$
86
0
, 60
0
Land (at Co
s
t)
………………………………………
$ 50,000 $ 50,000
Building………………………………………….
……
450,000 450,000
Equipment ……………………………………..
……
80,000 $ 80,000
Less Accumulated
Depreciation……………..
0
(
3
4
, 00
0
Land, Building, and Equipment (Net)
…….
$
58
0
, 00
0
$
54
6
, 00
0
Total A
ss
et
s
……………………………………..
$
1
, 21
0
, 00
0
$
1
, 40
6
, 60
0
Solutions3-18
Accounts
P
ayab
l
e
………………………………….
$ 30,000 $ 180,
00
0
Notes
P
ayab
l
e
………………………………………
80,000 0
Interest
Payable……………………………………
0
24,00
0
Income Tax
P
ayab
l
e
………………………………
0
4
1
, 04
Total Current
Liabilities……………………
$ 110,000
$ 245,04
0
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
Loan Payable
……………………………………….
30
0
,
00
0
30
0
, 00
Total
Liabilities………………………………..
$
41
0
, 00
0
$
54
5
, 04
0
Common
S
t
ock
……………………………………..
$ 800,000
$ 800,00
0
Retained Ea
rnin
g
s
………………………………..
0
6
1
, 56
Total Shareholders’
Equity…………………
$
80
0
, 00
0
$
86
1
, 56
0
Total Liabilities and Shareholders’
Equity………………………………………….. $
1
,21
0
,00
0
$
1
,40
6
,60
0
3.23 (Patterson Corporation; analysis of transactions and preparation of
income statement and balance sheet.) (amounts in US$)
a. T-accounts.
C
a
s h
(
A)
M
a
r k
e
t
ab
l
e
S e c u r i
t
i
e
s
(
A)
√ 47,150 √ 95,00
0 (6) 1,206,000 2,400 (1)
235,000 (5)
710,000 (7)
√ 305,750 √ 95,000
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
(
A)
R
e c e i
va
b
l
e
f
r
om
S u
pp
li
er
(
A)
√ 0 √ 1,455
(3) 1,495,500 1,206,000 (6) 1,455 (2)
√ 289,500 √ 0
M
e r c h
a
n
d
i
s
e
I
n
v
e
n
t
o r
y
(
A)
P r
e
pa
i
d
R
e n
t
(
A)
√ 70,945 √ 1,400
(2) 1,050,000 950,000 (4) 1,400 (8)
√ 170,945 √ 0
3-19 Solutions
√ 280,000 √ 97,750
A
c c u
m
u
l
a
t
ed
D
e
p
r
e
c i
a
t
i
on
(
X
A)
P
a
t
e n
t
(
A)
0 √ √ 28,000
2,500 (9) 450 (10)
2,500 √ √ 27,550
A
cc
o
u n
t
s P
ay
a
b
l
e
(
L
)
A
dv
a
n c
e
f
r
om
C
u
s
t
o
m
er
(
L
)
14,200 √ 4,500
√
(7) 710,000 1,048,545 (2) (3) 4,500
352,745 √ 0
√
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
I
n
t
e
r e s
t
P
ay
a
b
l
e
(
L
)
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
(
L
)
0 √ 0 √
265 (12) 124,114 (13)
265 √ 124,114 √
M
o r
t
gag
e
P
a
ya
b
l
e
(
L
)
C
o
m
m
on S
t
o c k
(
S
E
)
53,000 √ 450,000
53,000 √ 450
,
000
√
A
dd
i
t
i
o n
a
l
P
a
i
d
–
i
n
C
a
p
i
t
a
l
(
S
E
)
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
(
S
E)
180,000 √ 0
√
186,171 (14)
180,000 √ 186
,
171
√
Solutions 3-20
Selling and
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
(
S
E)
Re
n
t
E
x
p
e
n
s
e
(
S
E)
(5) 235,000 235,000 (14) (8) 1,400 1,400 (14)
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
A
m
o
r
t
i
z
a
t
i
on
E
x
p
e
n
s
e
(
S
E)
(9) 2,500 2,500 (14) (10) 450 450 (14)
I
n
s
u
r
a
n
c
e
E
x
p
e
n
s
e
(
S
E)
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
(
S
E)
(11) 100 100 (14) (12) 265
265 (14)
I
n
c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(13) 124,114 124,114 (14)
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Cash …………………………………………………… € 30,536 €
2,559
Merchandise I
n
ve
n
t
or
y …………………………. 114,249 151,894
Other Current Assets ……………………………
10
9
,
99
2
13
4
, 91
6
Total Current A
ss
et
s
………………………… € 254,777 €
289,369
Property, Plant, and Equipment (Net)……. 98,130 149,990
Other Noncurrent Assets……………………….
5
6
,
45
9
8
8
, 95
5
Total A
ss
et
s
…………………………………….. €
40
9
,36
6
€
52
8
,31
4
3.20 a. continued.
Liabilities and Shareholders’ Equity
Accounts
P
ayab
l
e …………………………………. € 16,402 €
14,063
Notes Payable to
Banks
……………………….. 15,241 43,598
Other Current
Liabilities
………………………
8
4
,
33
4
10
9
, 33
5
Total Current Liabilities…………………… € 115,977 € 166,996
Long-Term
D
ebt …………………………………… 31,566 38,315
Other Noncurrent Liabilities …………………
1
9
,
85
9
2
7
, 94
7
Total Liabilities……………………………….. €
16
7
, 40
2
€
23
3
, 25
8
Common
S
t
ock
…………………………………….. € 72,325 €
72,325
Retained Ea
rnin
g
s
………………………………..
16
9
,
63
9
22
2
, 73
1
Total Shareholders’ Equity………………… €
24
1
, 96
4
€
29
5
, 05
6
Total Liabilities and Shareholders’
Equity………………………………………….. €
40
9
, 36
6 €
52
8
, 31
4
b. CALLEN INCORPORATED
Income Statement
For the Year Ended: Dec.
31, Year 8
S
a
l
e
s
……………………………………………………………………… €
695,623
Cost of Goods
S
o
l
d …………………………………………………..
(382,349) Selling Expe
ns
e
s
…………………………………………………….. (72,453)
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Administrative Expe
ns
e
s
…………………………………………
(141,183) Interest Expense
…………………………………………………….. (2,744) Income
Taxes…………………………………………………………..
(
2
4
, 32
4
)
Net Income …………………………………………………………….. €
7
2
, 57
0
c. Retained Earnings, December 31, Year 7
…………………..
€
222,731
Plus Net Income for Year 8
……………………………………….
72,570
Less Dividends Declared during Year 8
(Plug)
……………
(
12
5
, 66
2
)
Retained Earnings, December 31, Year 8
…………………..
€
16
9
, 63
9
3-13 Solutions
3.21
continued.
3.21 (COC; preparing a balance sheet and an income statement.)
(amounts in millions of US$)
a. China Oil Company
Income
Stat
e
m
en
t
For the Year Ended December 31,
Year 8
Revenues:
Net Operating Revenues
………………………………………
$ 835,037
Interest and Other
Revenues…………………………………
3
,
09
8
Total Revenues
$
Less Expenses:
Cost of Sales
……………………………………………………….
$
(487,112)
Selling Expe
ns
e
s
………………………………………………….
(41,345
)
General and Administrative Expe
ns
e
s
…………………..
(49,324
)
Other Operating Expenses
……………………………………
(64,600
)
Interest Expense
………………………………………………….
(2,869
)
Income
Taxes……………………………………………………….
(
4
9
, 33
1
Total
Expenses…………………………………………………
$
(
69
4
, 58
1
)
Net Income
……………………………………………………………..
$
14
3
, 55
4
Solutions 3-14
b. China Oil Company
Comparative Balance Sheet
Noncurrent
Assets:
Asset
s
Dec 31, Dec.
31, Year 8
Year 7
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
Intangible A
ss
et
s
………………………………….. $ 20,022
$ 16,127
Oil and Gas Properties ………………………….. 326,328
270,496
Property, Plant, and Equipment—Net ……. 247,803 231,590
Other Noncurrent Assets………………………..
16
3
, 71
1
13
2
, 21
4
Total Noncurrent
Assets
……………………. $
75
7
, 86
4 $
65
0
, 42
7
Current Assets:
Inventories …………………………………………… $ 88,467
$ 76,038
Other Current Assets ……………………………. 20,367 13,457
Advances to
Su
pp
liers
…………………………… 20,386 12,664
Accounts Receivable ………………………………
18,419 8,488
Cash …………………………………………………….
8
8
, 58
9
5
4
, 07
0
Total Current A
ss
et
s
…………………………. $
23
6
, 22
8 $
16
4
, 71
7
Total A
ss
et
s
……………………………………… $
99
4
, 09
2 $
81
5
, 14
4
Liabilities and Shareholders’ Equity
Noncurrent Liabilities:
Long-Term
D
ebt ……………………………………. $ 35,305
$ 30,401
Other Noncurrent Liabilities ………………….
4
2
, 06
2
3
6
, 68
3
Total Noncurrent
Li
ab
ili
t
i
e
s
………………. $ 7
7
, 36
7
$ 6
7
, 08
4
Current Liabilities:
Advances from Customers …………………….. $ 12,433
$ 11,590
Other Current
Liabilities
………………………. 84,761 90,939
Accounts Payable to Suppliers………………..
10
4
, 46
0 7
7
, 93
6
Total Current Liabilities …………………… $
20
1
, 65
4 $
18
0
, 46
5
Shareholders’ Equity:
Common
S
t
ock
……………………………………… $ 444,527
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
$ 354,340
Retained Ea
rnin
g
s
…………………………………
27
0
, 54
4
21
3
, 25
5
Total Shareholders’ Equity ………………… $
71
5
, 07
1 $
56
7
, 59
5
Total Liabilities and Shareholders’
Equity…………………………………………… $
99
4
, 09
2 $
81
5
, 14
4
3-15
c. Retained Earnings, December 31, Year 7
…………………………
$
213,255
Plus Net Income for Year Ending December 31, Year
8………
143,554
Subtract Dividends for Year Ending December 31,
Year 8
(
Plu
g) ………………………………………………………………
………..
(
8
6
, 26
5
Retained Earnings, December 31, Year 8
…………………………
$
27
0
, 54
4
3.22 (Moulton Corporation; analysis of transactions and preparation of
income statement and balance sheet.) (amounts in US$)
a. T-accounts.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
(
A)
√ 343,000 √ 0
(4) 1,400,000 950,000 (5) (2) 2,000,000 1,400,000(4)
625,000 (6)
82,400 (7)
√ 85,600 √ 600,000
I
n
v
e
n
t
o r
y
(
A)
P r
e
pa
i
d
I
n
s u r
a
n c
e
(
A)
√ 275,000 √ 12,000
(1) 1,100,000 1,200,000 (3) 12,000 (9)
√ 175,000 √ 0
L
a
n
d
(
A)
B
u
il
d
i
n
g
(
A)
√ 50,000 √ 450,000
√ 50,000 √ 450,000
E
q
u
ip
m
e
n
t
(
A)
A
c
c
u
m
u
l
a
t
ed
De
p
r
e
c
i
a
t
i
on
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
( X A)
√ 80,000 0 √
34,000 (10)
√ 80,000 34,000 √
Solutions 3-16
I
n
t
e
r e s
t
P
ay
a
b
l
e
(
L
)
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
(
L
)
0 √ 0 √
24,000 (8) 41,040
(11)
24,000 √ 41,040
√
L
o
a
n P
aya
b
l
e
(
L
)
C
o
m
m
on S
t
o c k
(
S
E
)
300,000 √ 800,000
√
300,000 √ 800,000 √
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
(
S
E)
S
a
l
e
s
Re
v
e
n u
e
(
S
E)
0 √ (12) 2,000,000 2,000,000(2)
61,560 (12)
61,560
√
Selling a
n
d
C
o
s
t
of
G
oo
d
s
S
o
l
d
(
S
E)
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
(
S E)
(3) 1,200,000 1,200,000(12)
(6) 625
,
000 625,000 (12)
I
n
te
res
t
Exp
e
n
s
e
(
S
E)
I
n
sur
a
nc
e
Exp
e
n
s
e
(
S
E)
(7) 2,400 (9) 12,000 12,000
(12)
(8) 24,000 26,400
(12
)
3-17Solutions
(10) 34,000 = 450,000/25 + 80,000/5.
b. MOULTON CORPORATION
Income Statement
For Year
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
13
Sales
Revenue…………………………………………………………
$
2
, 00
0
, 00
0
Expenses:
Cost of Goods
S
o
l
d
……………………………………………….
$
1,200,000
Selling and Administrative Expenses
……………………
625,000
Insurance……………………………………………………..
……..
12,000
Depreciation…………………………………………………
……..
34,000
Interest ($2,400 +
$24,000)
…………………………………..
2
6
,
40
0
Total
Expenses…………………………………………………
$
1
, 89
7
, 40
0
Net Income before Income
T
ax
es
……………………………….
$ 102,600
Income Tax Expense at 40%
……………………………………..
(
4
1
, 04
0
Net Income
……………………………………………………………..
$ 6
1
, 56
0
c. MOULTON CORPORATION
Comparative Balance
Sheet
Dec.
31,
Year
12
Dec.
31,
Year
13
A
sse
t
s
Cash ……………………………………………..
…….
$ 343,000 $ 85,600
Accounts Receivable
……………………………..
0 600,000
Inventories ……………………………………..
……
275,000 175,000
Prepaid
Insurance…………………………………
1
2
,
00
0
0
Total Current A
ss
et
s
…………………………
$
63
0
, 00
0
$
86
0
, 60
0
Land (at Co
s
t)
………………………………………
$ 50,000 $ 50,000
Building………………………………………….
……
450,000 450,000
Equipment ……………………………………..
……
80,000 $ 80,000
Less Accumulated
Depreciation……………..
0
(
3
4
, 00
0
Land, Building, and Equipment (Net)
…….
$
58
0
, 00
0
$
54
6
, 00
0
Total A
ss
et
s
……………………………………..
$
1
, 21
0
, 00
0
$
1
, 40
6
, 60
0
Solutions3-18
Accounts
P
ayab
l
e
………………………………….
$ 30,000 $ 180,
00
0
Notes
P
ayab
l
e
………………………………………
80,000 0
Interest
Payable……………………………………
0
24,00
0
Income Tax
P
ayab
l
e
………………………………
0
4
1
, 04
Total Current
Liabilities……………………
$ 110,000
$ 245,04
0
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
Loan Payable
……………………………………….
30
0
,
00
0
30
0
, 00
Total
Liabilities………………………………..
$
41
0
, 00
0
$
54
5
, 04
0
Common
S
t
ock
……………………………………..
$ 800,000
$ 800,00
0
Retained Ea
rnin
g
s
………………………………..
0
6
1
, 56
Total Shareholders’
Equity…………………
$
80
0
, 00
0
$
86
1
, 56
0
Total Liabilities and Shareholders’
Equity………………………………………….. $
1
,21
0
,00
0
$
1
,40
6
,60
0
3.23 (Patterson Corporation; analysis of transactions and preparation of
income statement and balance sheet.) (amounts in US$)
a. T-accounts.
C
a
s h
(
A)
M
a
r k
e
t
ab
l
e
S e c u r i
t
i
e
s
(
A)
√ 47,150 √ 95,00
0 (6) 1,206,000 2,400 (1)
235,000 (5)
710,000 (7)
√ 305,750 √ 95,000
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
(
A)
R
e c e i
va
b
l
e
f
r
om
S u
pp
li
er
(
A)
√ 0 √ 1,455
(3) 1,495,500 1,206,000 (6) 1,455 (2)
√ 289,500 √ 0
M
e r c h
a
n
d
i
s
e
I
n
v
e
n
t
o r
y
(
A)
P r
e
pa
i
d
R
e n
t
(
A)
√ 70,945 √ 1,400
(2) 1,050,000 950,000 (4) 1,400 (8)
√ 170,945 √ 0
3-19 Solutions
√ 280,000 √ 97,750
A
c c u
m
u
l
a
t
ed
D
e
p
r
e
c i
a
t
i
on
(
X
A)
P
a
t
e n
t
(
A)
0 √ √ 28,000
2,500 (9) 450 (10)
2,500 √ √ 27,550
A
cc
o
u n
t
s P
ay
a
b
l
e
(
L
)
A
dv
a
n c
e
f
r
om
C
u
s
t
o
m
er
(
L
)
14,200 √ 4,500
√
(7) 710,000 1,048,545 (2) (3) 4,500
352,745 √ 0
√
3.22 a.
continued.
D
e
p
r
e
c i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
I
n c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(10)
34,00
0
34,00
0
(12) (11)
41,04
0
41,040
(12)
I
n
t
e
r e s
t
P
ay
a
b
l
e
(
L
)
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
(
L
)
0 √ 0 √
265 (12) 124,114 (13)
265 √ 124,114 √
M
o r
t
gag
e
P
a
ya
b
l
e
(
L
)
C
o
m
m
on S
t
o c k
(
S
E
)
53,000 √ 450,000
53,000 √ 450
,
000
√
A
dd
i
t
i
o n
a
l
P
a
i
d
–
i
n
C
a
p
i
t
a
l
(
S
E
)
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
(
S
E)
180,000 √ 0
√
186,171 (14)
180,000 √ 186
,
171
√
Solutions 3-20
Selling and
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
(
S
E)
Re
n
t
E
x
p
e
n
s
e
(
S
E)
(5) 235,000 235,000 (14) (8) 1,400 1,400 (14)
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(
S
E
)
A
m
o
r
t
i
z
a
t
i
on
E
x
p
e
n
s
e
(
S
E)
(9) 2,500 2,500 (14) (10) 450 450 (14)
I
n
s
u
r
a
n
c
e
E
x
p
e
n
s
e
(
S
E)
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
(
S
E)
(11) 100 100 (14) (12) 265
265 (14)
I
n
c
o
m
e
T
a
x
E
x
p
e
n
s
e
(
S
E)
(13) 124,114 124,114 (14)