3.29
continued.
3-41Solutions
c. ZEALOCK BOOKSTORE
Comparative Balance
Sheet
December 31, Year 5 and Year 4
Current
Assets:
Asset
s
Year 5Yer 4
Cash ………………………………………………….. $ 85,230
$ 24,350
Accounts Receivable …………………………….
13,150 5,800
Merchandise
Inventories
……………………… 6,300 5,400
Prepaid R
en
t ……………………………………….10,000 10,000
Deposit with
Su
pp
liers
…………………………
—
8
, 00
0
Total Current A
ss
et
s
……………………….. $ 11
4
, 68
0
$
5
3
, 55
0
Noncurrent Assets:
Equipment …………………………………………. $ 14,000
$ 14,000
Less Accumulated Depreciation…………….
(
5
,
70
0
)
(
1
, 90
0
) Equipment
(
N
et) …………………………………. $
8
, 30
0 $
1
2
, 10
0
Total A
ss
et
s
……………………………………. $ 12
2
, 98
0
$
6
5
, 65
0
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts
P
ayab
l
e ………………………………… $ 11,800
$ 5,600
Note Payable……………………………………….75,000 30,000
Advances from Customers …………………… — 850
Interest Payable………………………………….. 3,000 900
Income Tax
P
ayab
l
e ……………………………..
4
,
08
0
1
, 32
0
Total Current Liabilities …………………. $
9
3
, 88
0
$
3
8
, 67
0
Shareholders’ Equity:
Common
S
t
ock
……………………………………. $ 25,000
$ 25,000
Retained Ea
rnin
g
s
……………………………….
4
,
10
0
1
, 98
0
3.29
continued.
Total Shareholders’ Equity ………………. $
2
9
, 10
0
$
2
6
, 98
0
Total Liabilities and Shareholders’
Equity…………………………………………. $
12
2
, 98
0 $
6
5
, 65
0
Solutions3-42
3.30
continued.
3.30 (Portobello Co.; reconstructing the income statement and balance
sheet.) (amounts in US$)
T-accounts to derive the amounts in the income statement and
balance sheet appear below.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
√ 18,600 √ 33,000
(4) 10,900 4,800 (3) (15) 228,000 210,000
(14) (14) 210,000 115,000 (5)
3,000 (10
)
85,000 (17
)
27,000 (19
)
√ 4,700 √ 51,000
N
o
t
e
s
R
e c e i
va
b
l
e
I
n
t
e
r e s
t
R
e c e i
va
b
l
e
√ 10,000 √ 600
10,000 (4) 600 (4)
√ 0 √ 0
M
e r c h
a
n
d
i
s
e
I
n
v
e
n
t
o r
y
P r
e
pa
i
d
I
n
s u r
a
n c
e
√ 22,000 √ 4,500
(6) 95,000 88,000 (8) 3,000 (1
) (7) 11,000
√ 40,000 √ 1,500
A
dv
a
n c es
t
o
E
m
p
l
o
y
ees
P r
e
pa
i
d
T
ax
es
√ 0 √
0 (17) 4,000 (19)
3,000
√ 4,000 √ 3,000
Accumulated Depreciation—
C
o
m
p
u
t
er S
y
s
t
e
m
(
a
t
C
o
s
t
)
C
o
m
p
u
t
er S
y
s
t
e
m
√ 78,000 26,000 √
13,000 (13)
√ 78,000 39,000 √
3-43Solutions
Accumulated Depreciation—
D e li
v
e
r
y
Tr u c k
s
D e li
v
e
r
y
Tr u c k
s
3.30
continued.
√ 00 √
(9) 60,000 4,500 (12)
√ 60,000 4,500 √
A
cc
o
u n
t
s P
ay
a
b
l
e
N
o
t
e
s P
ay
a
b
l
e
36,000 √ 0
√
(5) 115,000 95,000 (6) 60,000 (9)
16,000 √ 60,000
√
I
n
t
e
r e s
t
P
ay
a
b
l
e
D i
v
i
d
e
n
d
P
a
y
a
b
l
e
0 √ 1,800 √
2,000 (11) (3) 4,800 6,000 (2)
2,000 √ 3,000
√
S
a
l
a
r
i
e
s P
aya
b
l
e
T
a
x
es P
aya
b
l
e
6,500 √ 10,000
√
(17) 6,500 (19) 10,000 4,000
(20)
1,300 (18)
1,300 √ 4,000
√
C
o n
s u
l
t
i
n
g
F
ee
P
a
ya
b
l
e
A
dv
a
n c es
f
r
om
C
u
s
t
o
m
e r
s
0 √ 600 √
4,800 (21) (16) 600 1,400
(15)
4,800 √ 1,400
√
C
o
m
m
on S
t
o c k
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
40,000 √ 45,800
√
11,000 (7) (2) 6,000 15,400
(22)
51,000 √ 55,200
√
Solutions 3-44
S
a
l
e
s
Re
v
e
n u
e
I
n
t
e
r e s
t
Re
v
e
nu
e
226,600 (15) (22) 300 300 (4)
(22) 227,200 600 (16)
C
o
s
t
of
G
oo
d
s
S
o
l
d
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(8) 88,000 88,000 (22) (12) 4,500
3.30
continued.
(13) 13,000 17,500
(22)
S
al
a
r
y
E
x
p
e
n
s
e
T
a
x
E
x
p
e
n
s
e
(17) 74,500 (19) 14,000
(18) 1,300 75,800 (22) (
2
0
) 4,000 18,000
(22)
I
n
s
u
r
a
n
c
e
E
x
p
e
n
s
e
Co
n
s
u
l
t
i
n
g
E
x
p
e
n
s
e
(1) 3,000 3,000 (22) (21) 4,800 4,800
(22)
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
(10) 3,000
(11) 2,000 5,000 (22)
3-45Solutions
PORTOBELLO
C
O
.
Income
Stat
e
m
en
t
For the Year Ended December 31,
Year 18
Revenues:
Sales ………………………………………………………………………….. $
227,200
Interest ……………………………………………………………………….
30
0
Total
Revenues
………………………………………………………… $
22
7
, 50
0
Expenses:
Cost of Goods
Sold………………………………………………………..
$
88,000
Depreciation ………………………………………………………..
………
17,50
0
Salaries………………………………………………………………..
……..
75,80
0
T
ax
es
………………………………………………………………….
……….
18,00
0
Insurance …………………………………………………………….
………
3,00
0
Consulting ……………………………………………………………
……..
4,80
0
Interest ……………………………………………………………….
………
5
, 00
Total Expenses
…………………………………………………………
$
21
2
, 10
0
Net Income
………………………………………………………………….
$
1
5
, 40
0
3.30
continued.
PORTOBELLO
C
O
.
Balance
S
hee
t
December 31, Year
18
Current
Assets:
Assets
3.31
continued.
Cash ………………………………………………….. $ 4,700
Accounts Receivable ……………………………. 51,000
Merchandise
Inventories
……………………… 40,000
Prepaid Insurance……………………………….. 1,500
Advances to Employees ……………………….. 4,000
Prepaid Property
T
ax
es
………………………..
3
,
00
0
Total Current A
ss
et
s
……………………….. $ 10
4
, 20
0
Noncurrent Assets:
Computer System—at
Cost
………………….
$ 78,000
Less Accumulated
Depreciation…………….
(
3
9
,
00
0
)
$
39,000
Delivery
Trucks
……………………………………
$ 60,000
Less Accumulated
Depreciation…………….
(
4
,
50
0
)
5
5
, 50
Total Noncurrent
Assets
…………………..
$
9
4
, 50
0
Total A
ss
et
s
…………………………………….
$
19
8
, 70
0
Solutions 3-46
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts
P
ayab
l
e ………………………………… $ 16,000
Interest Payable………………………………….. 2,000
Dividend
P
ayab
l
e ………………………………… 3,000
Salaries Payable…………………………………. 1,300
Taxes
P
ayab
l
e …………………………………….. 4,000
Consulting Fee Payable……………………….. 4,800
Advances from Customers ……………………
1
,
40
0
Total Current Liabilities …………………. $ 32,500
Note Payable……………………………………….
6
0
,
00
0
Total Liabilities ……………………………… $
9
2
, 50
0
Shareholders’ Equity:
Common
S
t
ock
……………………………………. $ 51,000
Retained Ea
rnin
g
s
……………………………….
5
5
,
20
0
Total Shareholders’ Equity ………………. $ 10
6
, 20
0
Total Liabilities and Shareholders’
Equity…………………………………………. $
19
8
, 70
0
3.31 (Computer Needs, Inc.; reconstructing the income statement and
balance sheet.) (amounts in US$)
T-accounts.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
√ 15,600 √ 32,100
(1) 37,500 164,600 (4) (3) 159,700 151,500 (2)
(2) 151,500 21,000 (7)
3.31
continued.
3,388 (8)
4,800 (9)
6,000 (10)
√ 4,812 √ 40,300
I
n
v
e
n
t
o r
y
P r
e
p
a
y
m
e n
t
s
√ 46,700 √ 1,500
(5) 172,100 158,100 (6) (7) 300
√ 60,700 √ 1,800
3-47Solutions
P r
o
p
e
r
t
y
, P l
a
n
t
,
a
n
d
E
q
u
i
p
m
e n
t
A
c c u
m
u
l
a
t
ed
D
e
p
r
e
c i
a
t
i
on
√ 59,700 2,800 √
(10) 6,000 3,300 (11)
√ 65,700 6,100 √
A
cc
o
u n
t
s P
ay
a
b
l
e
—
M
e r c h
a
n
d
i
s
e
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
37,800 √ 3,388
√
(4) 164,600 172,100 (5) (8) 3,388 3,584 (12)
45,300 √ 3,584
√
O
t
h
e
r
C
u r r
e
n
t
L i
ab
i
li
t
i
e
s
M
o r
t
gag
e
P
a
ya
b
l
e
2,900 √ 50,000
√
(7) 1,700 (9) 800
1,200 √ 49,200
√
C
o
m
m
on S
t
o c k
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
50,000 √ 8,712
√
9,216 (13)
50,000 √ 17,928
√
S
a
l
e
s
C
o
s
t
of
G
oo
d
s S
o
l
d
37,500 (1) (6) 158,100 158,100
(13) (13) 197,200 159,700 (3)
Selling and
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(7) 19,000 19,000 (13) (11)
3,300 3,300 (13)
Solutions 3-48
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
I
n
c
o
m
e
T
a
x
E
x
p
e
n
s
e
(9) 4,000 4,000 (13) (12) 3,584 3,584
(13)
COMPUTER NEEDS,
I
N
C.
Income
Stat
e
m
en
t
For the Years Ended December 31, Year 8 and
3.31
continued.
Year 7
Year 8 Year 7
Sales …………………………………………………….
……..
$ 197,200
$
152,700
Cost of Goods
Sold…………………………………………
(158,100)
(116,400
)
Selling and Administrative Expe
ns
e
……………….
(19,000)
(17,400
)
Depreciation Expe
ns
e
…………………………………….
(3,300)
(2,800
)
Interest Expe
ns
e
……………………………………………
(4,000)
(4,000
)
Income Taxes
………………………………………………..
(
3
,
58
4
)
(
3
, 38
8
Net I
nc
ome …………………………………………………… $ 9
, 21
6
$ 8
, 71
2
COMPUTER NEEDS,
I
N
C.
Balance
S
hee
t
For the Years Ended December 31, Year 8 and
Year 7
A
sse
t
s
Year 8 Year 7
Ca
sh
……………………………………………………………. $ 4,812$
15,600
Accounts
Receivable
……………………………………… 40,300
32,100
Inventories
…………………………………………………… 60,700
46,700
Prepayments…………………………………………………
1
,
80
0
1
, 50
0
Total Current Assets …………………………….. $ 10
7
, 61
2
$
9
5
, 90
0
Property, Plant, and Equipment:
At Co
s
t
……………………………………………………..
$ 65,700 $
59,700
Less Accumulated
Depreciation
………………….
(
6
,
10
0
)
(
2
, 80
0
Net ……………………………………………………….
……..
$
5
9
, 60
0
$
5
6
, 90
0
Total Assets
………………………………………….
$ 16
7
, 21
2
$
15
2
, 80
0
3-49Solutions
Shareholders’
Shareholders’
3.29
continued.
Total Shareholders’ Equity ………………. $
2
9
, 10
0
$
2
6
, 98
0
Total Liabilities and Shareholders’
Equity…………………………………………. $
12
2
, 98
0 $
6
5
, 65
0
Solutions3-42
3.30
continued.
3.30 (Portobello Co.; reconstructing the income statement and balance
sheet.) (amounts in US$)
T-accounts to derive the amounts in the income statement and
balance sheet appear below.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
√ 18,600 √ 33,000
(4) 10,900 4,800 (3) (15) 228,000 210,000
(14) (14) 210,000 115,000 (5)
3,000 (10
)
85,000 (17
)
27,000 (19
)
√ 4,700 √ 51,000
N
o
t
e
s
R
e c e i
va
b
l
e
I
n
t
e
r e s
t
R
e c e i
va
b
l
e
√ 10,000 √ 600
10,000 (4) 600 (4)
√ 0 √ 0
M
e r c h
a
n
d
i
s
e
I
n
v
e
n
t
o r
y
P r
e
pa
i
d
I
n
s u r
a
n c
e
√ 22,000 √ 4,500
(6) 95,000 88,000 (8) 3,000 (1
) (7) 11,000
√ 40,000 √ 1,500
A
dv
a
n c es
t
o
E
m
p
l
o
y
ees
P r
e
pa
i
d
T
ax
es
√ 0 √
0 (17) 4,000 (19)
3,000
√ 4,000 √ 3,000
Accumulated Depreciation—
C
o
m
p
u
t
er S
y
s
t
e
m
(
a
t
C
o
s
t
)
C
o
m
p
u
t
er S
y
s
t
e
m
√ 78,000 26,000 √
13,000 (13)
√ 78,000 39,000 √
3-43Solutions
Accumulated Depreciation—
D e li
v
e
r
y
Tr u c k
s
D e li
v
e
r
y
Tr u c k
s
3.30
continued.
√ 00 √
(9) 60,000 4,500 (12)
√ 60,000 4,500 √
A
cc
o
u n
t
s P
ay
a
b
l
e
N
o
t
e
s P
ay
a
b
l
e
36,000 √ 0
√
(5) 115,000 95,000 (6) 60,000 (9)
16,000 √ 60,000
√
I
n
t
e
r e s
t
P
ay
a
b
l
e
D i
v
i
d
e
n
d
P
a
y
a
b
l
e
0 √ 1,800 √
2,000 (11) (3) 4,800 6,000 (2)
2,000 √ 3,000
√
S
a
l
a
r
i
e
s P
aya
b
l
e
T
a
x
es P
aya
b
l
e
6,500 √ 10,000
√
(17) 6,500 (19) 10,000 4,000
(20)
1,300 (18)
1,300 √ 4,000
√
C
o n
s u
l
t
i
n
g
F
ee
P
a
ya
b
l
e
A
dv
a
n c es
f
r
om
C
u
s
t
o
m
e r
s
0 √ 600 √
4,800 (21) (16) 600 1,400
(15)
4,800 √ 1,400
√
C
o
m
m
on S
t
o c k
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
40,000 √ 45,800
√
11,000 (7) (2) 6,000 15,400
(22)
51,000 √ 55,200
√
Solutions 3-44
S
a
l
e
s
Re
v
e
n u
e
I
n
t
e
r e s
t
Re
v
e
nu
e
226,600 (15) (22) 300 300 (4)
(22) 227,200 600 (16)
C
o
s
t
of
G
oo
d
s
S
o
l
d
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(8) 88,000 88,000 (22) (12) 4,500
3.30
continued.
(13) 13,000 17,500
(22)
S
al
a
r
y
E
x
p
e
n
s
e
T
a
x
E
x
p
e
n
s
e
(17) 74,500 (19) 14,000
(18) 1,300 75,800 (22) (
2
0
) 4,000 18,000
(22)
I
n
s
u
r
a
n
c
e
E
x
p
e
n
s
e
Co
n
s
u
l
t
i
n
g
E
x
p
e
n
s
e
(1) 3,000 3,000 (22) (21) 4,800 4,800
(22)
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
(10) 3,000
(11) 2,000 5,000 (22)
3-45Solutions
PORTOBELLO
C
O
.
Income
Stat
e
m
en
t
For the Year Ended December 31,
Year 18
Revenues:
Sales ………………………………………………………………………….. $
227,200
Interest ……………………………………………………………………….
30
0
Total
Revenues
………………………………………………………… $
22
7
, 50
0
Expenses:
Cost of Goods
Sold………………………………………………………..
$
88,000
Depreciation ………………………………………………………..
………
17,50
0
Salaries………………………………………………………………..
……..
75,80
0
T
ax
es
………………………………………………………………….
……….
18,00
0
Insurance …………………………………………………………….
………
3,00
0
Consulting ……………………………………………………………
……..
4,80
0
Interest ……………………………………………………………….
………
5
, 00
Total Expenses
…………………………………………………………
$
21
2
, 10
0
Net Income
………………………………………………………………….
$
1
5
, 40
0
3.30
continued.
PORTOBELLO
C
O
.
Balance
S
hee
t
December 31, Year
18
Current
Assets:
Assets
3.31
continued.
Cash ………………………………………………….. $ 4,700
Accounts Receivable ……………………………. 51,000
Merchandise
Inventories
……………………… 40,000
Prepaid Insurance……………………………….. 1,500
Advances to Employees ……………………….. 4,000
Prepaid Property
T
ax
es
………………………..
3
,
00
0
Total Current A
ss
et
s
……………………….. $ 10
4
, 20
0
Noncurrent Assets:
Computer System—at
Cost
………………….
$ 78,000
Less Accumulated
Depreciation…………….
(
3
9
,
00
0
)
$
39,000
Delivery
Trucks
……………………………………
$ 60,000
Less Accumulated
Depreciation…………….
(
4
,
50
0
)
5
5
, 50
Total Noncurrent
Assets
…………………..
$
9
4
, 50
0
Total A
ss
et
s
…………………………………….
$
19
8
, 70
0
Solutions 3-46
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts
P
ayab
l
e ………………………………… $ 16,000
Interest Payable………………………………….. 2,000
Dividend
P
ayab
l
e ………………………………… 3,000
Salaries Payable…………………………………. 1,300
Taxes
P
ayab
l
e …………………………………….. 4,000
Consulting Fee Payable……………………….. 4,800
Advances from Customers ……………………
1
,
40
0
Total Current Liabilities …………………. $ 32,500
Note Payable……………………………………….
6
0
,
00
0
Total Liabilities ……………………………… $
9
2
, 50
0
Shareholders’ Equity:
Common
S
t
ock
……………………………………. $ 51,000
Retained Ea
rnin
g
s
……………………………….
5
5
,
20
0
Total Shareholders’ Equity ………………. $ 10
6
, 20
0
Total Liabilities and Shareholders’
Equity…………………………………………. $
19
8
, 70
0
3.31 (Computer Needs, Inc.; reconstructing the income statement and
balance sheet.) (amounts in US$)
T-accounts.
C
a
s h
A
cc
o
u n
t
s
R
e c e i
va
b
l
e
√ 15,600 √ 32,100
(1) 37,500 164,600 (4) (3) 159,700 151,500 (2)
(2) 151,500 21,000 (7)
3.31
continued.
3,388 (8)
4,800 (9)
6,000 (10)
√ 4,812 √ 40,300
I
n
v
e
n
t
o r
y
P r
e
p
a
y
m
e n
t
s
√ 46,700 √ 1,500
(5) 172,100 158,100 (6) (7) 300
√ 60,700 √ 1,800
3-47Solutions
P r
o
p
e
r
t
y
, P l
a
n
t
,
a
n
d
E
q
u
i
p
m
e n
t
A
c c u
m
u
l
a
t
ed
D
e
p
r
e
c i
a
t
i
on
√ 59,700 2,800 √
(10) 6,000 3,300 (11)
√ 65,700 6,100 √
A
cc
o
u n
t
s P
ay
a
b
l
e
—
M
e r c h
a
n
d
i
s
e
I
n c
o
m
e
T
a
x
P
a
y
a
b
l
e
37,800 √ 3,388
√
(4) 164,600 172,100 (5) (8) 3,388 3,584 (12)
45,300 √ 3,584
√
O
t
h
e
r
C
u r r
e
n
t
L i
ab
i
li
t
i
e
s
M
o r
t
gag
e
P
a
ya
b
l
e
2,900 √ 50,000
√
(7) 1,700 (9) 800
1,200 √ 49,200
√
C
o
m
m
on S
t
o c k
R
e
t
a
i
n
ed
E
a
r n
i n
g
s
50,000 √ 8,712
√
9,216 (13)
50,000 √ 17,928
√
S
a
l
e
s
C
o
s
t
of
G
oo
d
s S
o
l
d
37,500 (1) (6) 158,100 158,100
(13) (13) 197,200 159,700 (3)
Selling and
A
d
m
i
n
i
s
t
r
a
t
iv
e
E
x
p
e
n
s
e
D
e
p
r
e
c
i
a
t
i
on
E
x
p
e
n
s
e
(7) 19,000 19,000 (13) (11)
3,300 3,300 (13)
Solutions 3-48
I
n
t
e
r
e
s
t
E
x
p
e
n
s
e
I
n
c
o
m
e
T
a
x
E
x
p
e
n
s
e
(9) 4,000 4,000 (13) (12) 3,584 3,584
(13)
COMPUTER NEEDS,
I
N
C.
Income
Stat
e
m
en
t
For the Years Ended December 31, Year 8 and
3.31
continued.
Year 7
Year 8 Year 7
Sales …………………………………………………….
……..
$ 197,200
$
152,700
Cost of Goods
Sold…………………………………………
(158,100)
(116,400
)
Selling and Administrative Expe
ns
e
……………….
(19,000)
(17,400
)
Depreciation Expe
ns
e
…………………………………….
(3,300)
(2,800
)
Interest Expe
ns
e
……………………………………………
(4,000)
(4,000
)
Income Taxes
………………………………………………..
(
3
,
58
4
)
(
3
, 38
8
Net I
nc
ome …………………………………………………… $ 9
, 21
6
$ 8
, 71
2
COMPUTER NEEDS,
I
N
C.
Balance
S
hee
t
For the Years Ended December 31, Year 8 and
Year 7
A
sse
t
s
Year 8 Year 7
Ca
sh
……………………………………………………………. $ 4,812$
15,600
Accounts
Receivable
……………………………………… 40,300
32,100
Inventories
…………………………………………………… 60,700
46,700
Prepayments…………………………………………………
1
,
80
0
1
, 50
0
Total Current Assets …………………………….. $ 10
7
, 61
2
$
9
5
, 90
0
Property, Plant, and Equipment:
At Co
s
t
……………………………………………………..
$ 65,700 $
59,700
Less Accumulated
Depreciation
………………….
(
6
,
10
0
)
(
2
, 80
0
Net ……………………………………………………….
……..
$
5
9
, 60
0
$
5
6
, 90
0
Total Assets
………………………………………….
$ 16
7
, 21
2
$
15
2
, 80
0
3-49Solutions
Shareholders’
Shareholders’